Introduction

A rooftop solar system involves the installation of solar panels on a building's roof with a power capacity that does not exceed one megawatt. As per Vietnam Electricity Group's guidelines (decision 13),⁽¹⁾ feed-in tariff (FiT) prices are only specified for projects with a commercial operation period of up to 24 hours on 31 December 2020. Consequently, power companies will cease accepting and processing connection requests, as well as signing power purchase contracts, for rooftop solar systems initiated after 31 December 2020, until further directives are provided by the relevant government authority. For rooftop solar projects commenced after 31 December 2020, electricity units will not log generated electricity on the grid, and new electricity purchases will not occur until a new decision is issued by the prime minister.

As of now, the Ministry of Industry and Trade has submitted a proposal for feedback on the draft decree regulating the development of rooftop solar power. The draft proposal is considered by the Ministry of Industry and Trade as a solution to overcome difficulties for projects operating after 31 December 2020. The proposal aims to complete the decree by August 2024 and present it to the government for approval. However, in case the draft proposal becomes effective, it can have negative impact on the investors.

In a recent announcement, the Vietnam Electricity (EVN) disclosed the FiT pricing for a rooftop solar power system in 2024.

Selling electricity from rooftop solar system

According to decision 13, the rooftop solar system is allowed to sell a part or the entire generated electricity to the buyer (either the Vietnam Electricity Group, or another organisation or individual) in case they do not use the electricity grid of the Vietnam Electricity Group. However, according to the policy impact assessment report, the state:

• encourages the development of rooftop solar power for on-site use;
• discourages the installation of rooftop solar power to sell electricity, generate electricity into the power system; and
• discourages selling electricity to other organisations and individuals.

Thus, according to the draft proposal outlined in article 5.1, rooftop solar systems connected to the national grid for self-use are only permitted for on-site consumption and cannot sell excess electricity to organisations, individuals or even to EVN.

In cases where surplus electricity is generated and fed into the national grid, the state will acknowledge the excess production at zero cost, implying that investors will not be compensated for the additional electricity contributed to the national grid.

This proposed regulation fails to incentivise investments in rooftop solar systems. Enterprises investing in rooftop solar systems may lose a portion of their generated electricity that is not recorded or compensated for, creating a disincentive for such investments. Additionally, if a business decides not to feed electricity into the grid, it must incur extra costs to install equipment limiting excess electricity production.

Compulsory installation of backflow prevention devices

For systems not linked to the national grid, they must ensure that both the power source and load are not connected to the national grid, adding an extra layer of complexity and potential financial burden.

This content is currently being implemented in practice. The recommended technical solution is to install a zero export device, which acts as a one-way valve, preventing electricity from being sent back to the grid.

Approval required for rooftop solar system capacity

According to the provisions of decision 13, only rooftop solar systems directly or indirectly connected to the national grid will be developed after registering for connection with the Vietnam Electricity Corporation or units authorised by the Vietnam Electricity Corporation are eligible. This regulation is understood to apply to all rooftop solar systems, including grid or non-grid. However, according to article 6 of the draft proposal, individuals and organisations are required to submit applications for the development of rooftop solar power to the electricity unit, regardless of whether the rooftop solar system is connected to the national grid or not.

In comparison to previous regulations, the draft proposal requires the electricity unit to seek the opinion of the competent state authority before approving the development capacity. This may extend the connection process for individuals and organisations seeking to put solar power into operation. This regulation adds administrative procedures for rooftop solar systems, almost like an additional permit for the development of rooftop solar systems, whether they are connected to the national grid or not.

New Feed-in tariff solar pricing is higher than in 2023

It is important to note that there are currently two FiT pricing systems for rooftop solar systems. The FiT for project begin to operate from 1 June 2017 to 30 June 2019 (FiT 1) and the FiT for systems with confirmed operations and meter readings from 1 July 2019 to 31 December 2020 (FiT 2).

In 2024, FiT 1 is established at 2,231 dong (approximately £0.072) per kilowatt hour.⁽²⁾ FiT 2 is set at 1,999 dong (approximately £0.064) per kilowatt hour.⁽³⁾

The Vietnamese pricing undergoes annual adjustments based on exchange rate fluctuations, as announced by the State Bank of Vietnam on the last rate publication day of the preceding year. Therefore, compared to 2024, the FiT 1 and FiT 2 rates in 2023 are respectively 2,206 dong (approximately £0.071) per kilowatt hour and 1,978 dong (approximately £0.064) per kilowatt hour which is lower than in 2024.

Comment

According to decision 13, after registering for connection with the Vietnam Electricity Corporation or its authorised member units, rooftop solar systems connects directly or indirectly to the national power grid and invests in development, selling excess electricity to EVN, organisations and individuals. Due to the simple administrative procedures, especially without the need for adding in any power planning and no requirement for an electricity operating license, saving energy, and being able to sell the surplus electricity that is not used, this type has been a priority for investors in recent times.

However, the new proposed regulations in the draft decree will almost completely shut down the consideration of rooftop solar systems as a business form because investors are not allowed to sell any surplus electricity to any other organisation or individual. If sold to EVN, the price is zero dong.

Significantly, even though Vietnam is encouraging the development of renewable energy in line with the spirit of COP 26 and COP 27 to achieve the goal of raising the renewable energy ratio to over 30%, the increase in administrative procedures for approving the capacity of rooftop solar systems is also a barrier to the implementation of commitments to cope with climate change.

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Endnotes

(1) Under decision No. 13/2020/QĐ-TTg.

(2) As stipulated in decision No. 11/2017/QĐ-TTg.

(3) In accordance with decision No. 13/2020/QĐ-TTg.

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* Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For legal advice, please contact our Partners.