Vietnam rooftop solar regulations: A barrier to entry?

The country recently launched a draft PPA that contains ‘difficult clauses’ limiting the bankability of solar projects, said a Vietnam-based firm.

Private investors want a greater hearing from Vietnam’s energy regulator on the development of regulations for rooftop solar shortly after the country released the first draft of power-purchase agreement for grid-connected projects. 

“The draft of solar PPA offers a basic outline for ground-mounted, grid-connected solar, but the regulations for rooftop solar with export to the grid now need to be created, drafted and implemented,” Gavin Smith, director of clean development at Vietnam-based Dragon Capital, told Infrastructure Investor.

The Electricity Regulatory Authority of Vietnam (ERAV) has commissioned a consultant to develop regulations applicable to grid-connected rooftop solar, with funding support from the EU Energy Initiative Partnership Dialogue Facility. However, the private sector has not been invited to the discussion. 

“Power consumers, private investors, banks and solar developer should be invited to join the policy group as partners, since they are intimately involved in financing, building and consuming the solar energy,” said Smith. 

The Vietnamese government last month released the first draft of solar PPA, which will see state-run utility Vietnam Electricity purchase the output of grid-connected solar projects across the country at 2,084 Vietnamese dong ($0.092; €0.085) per kWh. 

“The draft has a number of difficult clauses that will deter banks from providing project finance to new solar developments. These could be repaired without compromising the off-takers’ reasonable rights and duties,” Smith added. 

A major barrier to entry is the difficulty to secure project financing for large-scale solar projects, partly due to the low quality of PPAs and the credit profile of contract offtakers. There are also potential regulatory and licensing barriers for rooftop exports to the grid which have yet to be clearly explained, said Smith. 

Dragon Capital invests in renewable energy, energy efficiency, water and waste treatment projects across South and Southeast Asia through the $40 million Mekong Brahmaputra Clean Development Fund. Its investments in Vietnam include a 29MW hydropower plant near Buon Me Thuot.