Viet Nam is doubling down on a major policy blunder

The great 20th Century economist John Maynard Keynes famously said, in response to the allegation that he had changed his mind on a particular policy issue, “When the facts change, I change my mind. What do you do, sir?”

Decision-makers in Viet Nam would do well to follow his lead.

Instead, recent developments suggest that the Government is choosing to double down on a major policy blunder, with negative consequences for its economy, the competitiveness of its businesses and manufacturers, and its own energy security.

The policy decision I’m referring to is the country’s “zero exports” policy for rooftop solar in the country: since 2021, customers adding solar panels on their rooftop are not allowed to export any of their surplus electricity to the power grid; any surplus is either curtailed directly or compensated at 0. Recent developments suggest that the country’s policymakers are looking to lock this policy in, and prolong it further.

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Strategically, the decision is hard to understand for four main reasons:

First, Viet Nam needs the electricity, particularly in the north, as recent power shortages that upset major manufacturers in the country have shown.

Second, the country is trying to attract more manufacturers to its own solar sector, building up its own supply chains as companies seek to diversify away from China. The presence of strong local demand helps de-risk manufacturing business cases by providing a local market for their products.

Third, the national electricity supplier, EVN, is under financial pressure to raise electricity rates to recover losses from the surge in coal import prices last year: low cost solar could reduce the need to increase rates, and help maintain Viet Nam’s competitiveness.

Fourth, through its policies, Viet Nam is effectively shutting the door to the cheapest source of new power supply in the world.

Solar power can be generated for between USD $0.01 and USD $0.05/kWh anywhere in the world, making it the lowest cost source of electricity in history according to the International Energy Agency.

From these already record lows, solar modules prices have declined a further 40% since January of this year alone.

Currently, the pipeline of large-scale solar projects in the country is virtually non-existent, as the country’s recently adopted Power Development Plan envisions only a few GW between now and 2030 (Viet Nam currently has about 20GW installed).

Combined with its zero exports policy for rooftop systems, the message is effectively that Viet Nam’s solar sector is closed for business.

Meanwhile, other countries around the world are advancing full steam ahead, deploying solar power at an unprecedented pace:

Neighboring China has been installing 16GW per month this year, and now has over 500GW of solar PV installed. ?

Germany has installed over 12GW so far this year making this Germany’s largest ever year for solar deployment (now at roughly 80GW in total).

The US is also breaking records, with over 30GW expected this year, bringing the total up to roughly 160 GW.

Both India and Brazil are adding 1/GW month, with India reaching over 70GW, and Brazil over 24GW.

Against this backdrop, it is becoming clear that Viet Nam’s current policies on solar PV are misguided, and deeply out of sync with economic and market realities.

Like John Maynard Keynes, it is time for the Government of Viet Nam to assess the facts, and change course.

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Toby D. Couture is Founder and Director of E3 Analytics, an independent renewable energy consultancy based in Berlin, Germany. He has worked in Viet Nam for almost a decade on the country’s renewable energy market development.