In the draft Decree on mechanisms to encourage the development of self-produced and self-consumed rooftop solar power, currently under public consultation before being submitted to the Government, the Ministry of Industry and Trade proposes that rooftop solar power installations at residences and public offices for self-use and grid connection will either not be permitted to sell excess power or will sell it for zero dong. This policy is receiving mixed reactions from experts and businesses in the energy sector.
Policy profiteering prevention
According to the draft Decree developed by the Ministry of Industry and Trade, the development of off-grid rooftop solar power will be unrestricted. Organizations and individuals are encouraged to install storage systems for autonomous use in production and business activities. If these systems are connected to the grid and excess electricity is fed into the system, the State will record the output but will not make any payments.
In the revisions of the draft decree, despite differing opinions on the proposal to sell excess rooftop solar power for zero dong, the Ministry of Industry and Trade has retained this proposal in the latest draft. According to Minister of Industry and Trade Nguyen Hong Dien, considering the current conditions of the transmission and distribution system, the balance of the energy mix, and measures to prevent reverse power flow, the solution to purchase at zero dong (in cases where power is fed into the national grid) is appropriate, ensuring the prevention of policy exploitation.
At the regular press conference of the Ministry of Industry and Trade in May 2024, Deputy Minister Nguyen Sinh Nhat Tan shared that the policy to encourage the installation of rooftop solar power in residential houses, public offices, and industrial zones aligns with the development direction of the National Power Development Plan for the period 2021-2030, with a vision to 2050 (Power Plan 8). This plan aims for 50 percent of public office buildings and 50 percent of residential houses nationwide to use self-produced, self-consumed rooftop solar power by 2030.
However, the encouragement of self-produced, self-consumed rooftop solar power development is solely intended for self-use and self-sufficiency to meet local demand, reduce electricity purchases from the national grid, and alleviate pressure on the power system. It is explicitly stated that this is not for commercial electricity trading. Therefore, in drafting the decree, the Ministry of Industry and Trade proposed mechanisms and policies to simplify procedures and facilitate the development of rooftop solar power for residents and businesses, such as exemptions from electricity operation licenses. Additionally, construction projects with self-produced, self-consumed rooftop solar power installations are not necessary to adjust or supplement land use and functionality according to regulations with simplified procedures.
If rooftop solar power is developed for commercial purposes, organizations and individuals must comply with the regulations in the Law on Planning, the Electricity Law, the Investment Law, the Construction Law, and many other specialized regulations.
Evaluating benefits
An energy expert remarked that the Ministry of Industry and Trade's proposal of zero dong is a corrective action for some previous proposals that were either incorrect or violated previous planning. The Vietnam Electricity Group (EVN) had previously suggested against investing in solar projects at all costs because investment encouragement must be synchronized with the transmission and distribution grid. However, the Ministry of Industry and Trade did not heed this recommendation. However, in terms of policy-making, purchasing excess electricity from investors at zero dong is a safer approach for regulatory agencies. Nonetheless, this policy will result in a significant waste of opportunities for renewable energy development in the context of a significant risk of electricity shortage that requires electricity import from abroad and power purchase at high prices to supplement the shortage.
From a different viewpoint, Mr. Pham Dang An, Deputy General Director of Vu Phong Energy Group, noted that after the Covid-19 pandemic, the green transformation tendency had swiftly expanded, with a competition for "green suppliers" now underway worldwide. Numerous multinational corporations worldwide have pledged to transition to 100 percent renewable energy, demanding the same commitment from their suppliers. To meet the criteria of being a "green supplier," companies must address three key areas in emissions reporting: their direct business operations, the energy sources they procure and utilize, and their entire supply chain. Consequently, energy has emerged as a vital cornerstone, mandating the development of green energy sources.
"In the proposed decree outlining mechanisms and policies to encourage the development of self-produced and self-consumed rooftop solar power, we have noticed the proactive stance of the Ministry of Industry and Trade. Furthermore, looking ahead to 2030 with a vision to 2050, Vietnam aims to refrain from building additional coal-fired power plants and gradually transition existing ones to cleaner and more sustainable energy sources," An remarked.
However, according to Mr. Pham Dang An, the desired outcome in the draft decree is for the Ministry of Industry and Trade to introduce practical policies regarding rooftop solar power, supporting businesses in development and enhancing competitiveness in goods production in Vietnam. The initial investment cost for solar panels on factory roofs is substantial, and not all the electricity generated is utilized at all times. Therefore, businesses hope for the Government to establish flexible mechanisms, allowing them to sell excess electricity to neighboring businesses or other partners to quickly recoup their rooftop solar power investment.
Meanwhile, Mr. Nguyen Anh Tuan, Vice Chairman of the Vietnam Energy Association, believes that the development of rooftop solar power has both pros and cons. On the positive side, feeding surplus electricity into the grid can increase social resources, reduce the need for new energy sources, lower transmission and distribution costs, decrease greenhouse gas emissions, and, most importantly, alleviate pressure on electricity supply. However, on the downside, increasing mobilization from renewable energy sources (including solar power) may necessitate the curtailment or shutdown of economically efficient power plants, increasing dispatch costs and on-load tap change due to surplus generation during low-demand periods and limited generation during peak-demand periods.
Therefore, given our lack of practical application experience, the initial proposal of a "zero-dong price" seems appropriate. Firstly, EVN would still monitor production levels. Secondly, this policy is intended as a temporary and cautious measure to prevent policy exploitation. However, to ensure equitable benefits for all stakeholders, there should be clear guidelines on the duration of implementing this zero-dong pricing, such as applying it for only 3 or 5 years or by specific phases, like the period from 2024 to 2027. The Ministry of Industry and Trade should thoroughly evaluate the benefits, technical costs, legal implications, and socio-economic impacts so that subsequent regulations can be based on a well-rounded understanding. Subsequently, the Government can adjust prices accordingly—whether higher, lower, or even negative—based on timing and geographical considerations.
Addressing concerns about the feasibility of attracting investments in rooftop solar power with a zero-dong-price tag, the Electricity Regulatory Authority of Vietnam (ERAV) emphasized that such development should align with National Power Development Plan 8. Accordingly, rooftop solar installations at residential houses, construction sites, and production establishments are encouraged for on-site consumption without grid connection or selling excess power to the national grid. ERAV emphasized that investors acknowledge the advantages of rooftop solar, particularly its one-time investment nature, which leads to monthly savings on electricity purchases from utility providers.
However, for the electricity supply to remain stable for users with rooftop solar power investments, the operation of rooftop solar power must be considered within the overall functioning of the entire power system. While acknowledging the gradual investment in power grid infrastructure over the years, ERAV emphasizes that this does not guarantee the ability to fully accommodate all power sources with varying capacity levels. Encouraging the development of self-produced and self-consumed rooftop solar power and permitting grid connections without capacity limitations will pose numerous challenges to EVN's power grid operation, significantly elevating the risk of unsafety in the national power system.
