In 2020 Vietnam Put Solar Panels on Everything

gradual pace. Sometimes it's fast. Sometimes the data makes you do a double take, and that is just what happened this past year in Vietnam. Today I'm speaking with Jenny Chase, head of our solar team, and Caroline Chua, who is an analyst focused on Southeast Asia, and we're going to discuss a solar boom that happened over a period of just a couple of months in Vietnam and what this could mean for other countries looking to grow their rooftop

solar industry. Following today's podcast, if you want to dig a bit deeper, BENF subscribers can take a look at the Southeast Asia Market out Look or at another note titled Vietnam gets Ambitious on Clean Energy. They're both available at b NF dot Com on our mobile app or via b NF go on the terminal. B NF does not provide investment or strategy advice, and you can hear our full disclaimer at the end of the podcast. But now let's get started talking about Vietnam. Caroline and Jenny,

thank you for joining us today. So now, Caroline, where are you located because I'm located into the Singapore office And Jenny, where are you located? I am in the countryside in Switzerland and I am i am in London. Now we're here to talk about solar. You guys are solar experts. Is any of your electricity powered by solar? Do you think right now? No? Because although I have a massive solar power system is covered with fifteen centways, it's a snow right now. This is a good question

to ask in the middle of winter. It's more of a summer question. Yeah, how about you, Caroline, do you think a name of yours is powered by solar only? Probably a very small portion from the national grid. You don't have much space in Singapore to install the little panels. Unfortunately, it makes a lot of sense. I'm here in London. I don't have it my own residential solar. And I'm pretty pretty convinced that the renewable's electricity I'm getting is

probably win today. But well, we'll leave it at that, Okay, So let's talk about where a lot of people probably do have their electricity powered by solar in their homes, and that is Vietnam. To start, what has happened in the solar industry in Vietnam in twenty nineteen, because this is quite a big deal. Twenty Sorry, okay, it also happened. So it also happened in Okay, so give yeah, give me both years. Actually that's more relevance since we're now

in one. What happened in the solar industry in twenty nineteen, and so we first witnessed the first solar boom in Vietnam in twenty nineteen and the fust off of nineteen with we saw about five gig awards a solar built in just a few months to meet June that year, fit and tire of deadline at the time, just a few months, like one month, two months. When I spoke to developers on the ground, we understood that most of the construction actually took place just over two months. And

again they've managed to surprise US in twenty twenty. The latest boom that we saw actually happened in the rooftop solar space. They have reportedly built almost nine gig awards fotop solar in twenty twenty alone, out of which more than six gil to build in December. About four point seven gig awards came online in the last week of the year alone. Just to give some sense of how quick the ramp up was, the official numbers that we

got from the state utility was dead. At the end of November, there was just two point nine gig awards connected to the grid, and on Christmas date itself only four point seven gig awards. So that's a very very significant ramp up in the last week of the year

that before. And this is just absolutely staggering. I mean I found out about this last week when Caroline got in touch with me and said, we need to increase our forecast or our estimate for solder in Vietnam from three or four gig of what's in twenty two eleven to thirteen giving what's in twenty twenty, which actually makes it the third possibly even the second. If the US was on the very very low end of the forecast and the Vietnam was in the very high end largest

market in the world. Well, that's incredible. So what caused this to happen in such a short period of time. Well, so, first has been mostly incentive driven commission rush that we saw, so Specifi twenty twenty roofs up sold broom that we saw. There was a second solofin INTERI scheme that was expiring on play first, December twent tween d and in order to be eligible for this in interifttops have to be

connected to the grip by then. That really a bit pressure to develop is to speed up the build of their projects, especially when there's very little certainty about what's to come x. Also on December twenty fifth itself, the State Utility actually made quite an interesting announcement edit some pushed in the last week where they came up to say that they would actually stop signing any more power purchase agreements or record any electricity that's generated integrate from

new rooftop solar systems for any future potential back paying off of finit terris when the new steamers announced. So that's something new in Vietnam historically in the past when the Finnit terror scheme expired. What the State Utility did was they actually recorded how much was being generated integrate and when the scheme was finally finalized, they back pay all the owners for the generation of the last few months.

The fact that they have came up to say that they will not do so probably caused a bit of panic among the developers and owners. So this is something that the State Utility pretty much made happen through the incentives. Was this the desired result? So? I think the incentives itselves issued by the government and the Ministry of Industry

and Trade. It's just that the State Utility, as the state owned entity who now have some monopoly power sector, they are the destinated off takers for any electricity that's generated into the grid and for any powerfulty segrement that has to be signed. Definitely, I think the results for exceeded the expectations and it's something that took them by

the price as well. I think it's like to say they wanted some solar under this scheme, but maybe not nine gig of what's under the rooftop scheme, which they now have to pay eighty something dollars for every exported metal hour. This is important that you note that it's rooftop solar specifically, so it's people powering their homes, but I would say predominantly or is it industry? Is it rooftop for kind of I guess retailers? Where where is

it all sitting? So we have seen most of the adoption being driven by the industrial aftim this the account for slightly more than half. Residential actually take quite a fair bit as well, but one third of all installations as of the end of November, so it's it's quite a good mix between commercial and residential, but mostly still the the businesses, the industrial estates, manufacturing plants, they have

a lot of power consumptions. You noted that there was a deadline to connect it to the grid in order to take advantage of the FAD and tariff and additionally, you know this was something that was very beneficial. All of this is grid connected, None of this is micro grid, mini grid and is there any opportunity for that there Most of them are grid connected in order to be eligible for the fit INTERI if they have to be

connected to the grid. Unlike other neighboring countries in southas Asia, like Indonesia or Philippines, where rural electrification is still more a fab in gender for for the government, Vietnam actually has quite a high electrification of almost a hundred percent

at the moment. They also have the advantage way, you know, the geography of the country is that it's one joined the piece of land where they can actually run the transmission line all the way from the north to the south, So there is very little discussions about you know, offerate microgrips and electrification. This is a lot of solar being at it in a short period of time, but is it also very concentrated within a few areas would it

be considered distributed solar across the country? So it would be considered distributed solar because there is sexually capacity limit for each rooftop PV system size that is one mag asy or about one point to make a peak in order to be eligible for the fit entire scheme. However, there is no rule against having multiple systems installed in the same location as long as they have different connection

points and are signed under different power producer. So, in terms of the distribution that we see throughout Vietnam, because of the resources and where the monarch we have seen a lot of these solar developments being concentrated in the south, in the southern provinces. That's really interesting to think that people might be setting up lots of these units and then maybe connecting them all in separately just to kind

of work around what looks like a loophole. That bigs the question, then, how is the grid handling all of this with it coming online so incredibly quickly. Yeah, I think congestion and grid operations will definitely be major challenges for the getting a nice passes the moving forward. Preliminary reports now suggest that total solar capacity spends it approximately

about eighteen to nineteen gigo. It's not from both utility skill and rooftop solar systems, and at a sixteen percent capacity effect that this would roughly translate about twenty five to twenty seven terra what hours of solar generation in a year, all about ten to eleven percent of Vietnam's

twenty nineteen total total power DEMA. So, the Aennunce power system has historically been dominated by a lot of coal, a lot of hydro and gas generations, so plants and technologies that generate at fairly constant levels or fluctuate within

the very narrow range from hour to hour. So moving from that to regret that now has a sizable amount of solar which generates during certain hours of the day will really require the operators to rethink how the grid needs to be managed, what the optimal dispatch portfolio would be, and how they should be meeting meeting pipe monster outside

of the solar generation hours. I think moving forward, totomin would really be a feature of the system as well until sufficient storage solutions are being deployed, and we have not heard much discussis or see much development of it from so the grit offering, the have actually now indicated that potentially up to one point three ARRA what hours of renewable energy, which is mainly solo, could be cultilled in twent one alone due to congestion, access generation during

the solo peak generation hours and a mismanched in the month. That's a lot of solo power that potentially will be cultill and will challenge the financials for the projective policy. Now for a very short break stay with us. The solar has gone in, but the storage hasn't. For presumably, if there's more storage in the future, that would provide

additional capacity going forward. So my question is what is the projection for increased demand going forward and is this a country that we anticipate will have pretty rapidly increasing demand for power Over the last second put in twenty ten and twenty nineteen, Vietnam actually saw their power the month growth at a compounty and your growth rate of about ten percent every year, and moving forward, the government actually expect growth rate to maintain about eight per enem

for for the next few years, so that is a lot of power the month that they're expecting to come online. Of cost. COVIDS nineteen has saken its a hit on power the mond growth, but still they have seen a growth in their economy and in terms of power the month, they will need a lot of additional generation capacities in terms of storage discussions that we're seeing on the ground.

We have seen indicative visibility studies being awarded to g International to to look at the technologies that they could potentially incorporate into the Vietnamese PO rate, but we have not seen the upcome of its study as of now.

So what might this mean for other countries either neighboring or actually globally that are looking at increasing the volume of solar that they have within their grid, because I think there are a lot of countries right now that are looking decarbonization and a climate change quite seriously, and their electricity makes as a potential way to tackle that.

The first thing is that this does actually explain where all the solar panels were going in the fourth quarter of last year, so I manage our global forecasts and try and make sure that the numbers kind of add up. And to be honest, we could see that there was a shortage of raw materials that wouldn't particularly the glass of the right shape and size, that wouldn't be happening if there wasn't a big demand sinc somewhere, and now it turns out it was Vietnam. We did actually have

a buffer for that. So that explains that I think this is actually the same lesson as we should have learned from other solar booms and busts, which is that it's probably not a great idea just to write solar develop as a blank check, because they are quite good at building a lot of solo in a very short period of time, and it might be more sensible to have a more sustainable long term building which people didn't just stick a lot of solar and particularly congested those

of the grid. How would you define that by a long time? I mean maybe building eleven to twelve gig what's over a couple of years if you're a count through the size of Vietnam, which has a population of just under a hundred million people, and so still pretty fast. To three years is still quick. It's just not too much. You had build solar really fast. That's the great thing

about solar. It's also the problem with solar if you just tell developers, hey, build it and we'll pay you over eighty dollars and mega hour for every megal hour exported, because solar these days is really quite cheap. I think that a logic question that yet them was trying to balance was that they actually had quite a big concern on supply short teach that they expected to happen or to start as soon as the end of twet twet

or one. So for them there was a bit concern that they're trying to rapidly fill the supply gap and get as much fast the online is possible. And then weather which from him for them it came in the form of solar, But still I agree that you know, the planning for the GRIP has not been been organized in a systematic meilo to metch the piece at which

development has happened, and now they are stuck paying. I think it's a three point six dollars per mega wart hour in u S dollars for twenty years for these systems. So how could this be done better in in order to slow down the process and kind of even and out over a quick to three year period. The office one is auctions, but it's very difficult to build small scale solar by which I mean less than about ted

megawatts with auctions. One possibility would have been to have a sort of queue in which systems have to register and you could cut the feed in tariff, or that the exports tariff more frequently. When Germany had a boom, it had a massive above expected boom which was only seven whats so Germany in twenty eleven had a boom

that was smaller than Vietnam. In twenty twenty, Germany moved to changing its exports tariff once a quarter and then once a month, which basically meant that it could adjust the incentive more quickly to the actual cost of systems going in and that meant it didn't quite didn't overpay

quite as much. And also because developers had a bit of long term certainty that it wasn't going to drop too much, they built projects in a slightly more organized way rather than trying to just shove them all on roofs. In December, with this excess that's being curtailed, do you think that there's any potential for Vietnam to export some of this electricity to other neighboring countries or is that not how the grid system is set up? There probably is.

The congestions likely to be local, so you literally cannot get the solar onto the wires for a few hours a day because there's too much shoulder in particular locations, so exporting it is not going to be an option

unless the grid is significantly built out. Local grid congestion is becoming a massive issue with solar, and part of it is that, generally speaking, developers are building multiple systems in the same part of the grid at the same time, which means that the grid doesn't have a congestion problem one week and then the next week potentially if three systems have connected, it does have a massive congestion problem. And also it's just for a few hours a day.

That's the other frustrating thing because if you're only generating peak output for say eleven am to two pm, then that's just three hours a day that you have curtailed electricity. So you don't want to build a massive factory there because you don't need be able to use it on this free electricity for three hours a day, and that

that would not work. So is the expectation that solar development will completely drop off because they've already built so much, or do you think that they'll roll out something that's a little bit more controlled like what Jenny you were suggesting before. So the discussions that are happening right now, actually they started after the solar boom that we saw. Is that for large skills solar developments, what they're trying to do is to have it in a more systematic memo.

So they're looking at auctions and be a substation capacity auctions or building solar parts. Is that, as we've seen in other countries like Cambodio, India, that's what they actually planned to do. We don't have an idea of what's the capacity that they're looking to auction out, but they are set to be potentially launching a pilot, hopefully within one each of this year. Was this something that really well?

I think we didn't see coming and then nobody saw coming, and which then leads me to another follow on question to that, which is, do we see another boom like this happening somewhere in the world and do we have an idea of where it might be. Trouble is, we don't see this until they happen. I have my suspicions

about Brazil personally. Brazil also has a program it's basically net metering for projects up to five megawats and they don't have to be on the same site as the power demand that they're net metering for, and power is relatively expensive in Brazil, so the economics are good. Brazil is importing a lot of a lot of stuff from China, which is not showing up on the official installation CHAP

statistics yet. So I think Brazil, which we currently have it's about about two point seven to three point five gigawatts built in twenty twenty, I think it might turn out to be more than that. So one to watch Caroline So in a lot of countries people are considering co locating photobo taps with agriculture or at least not using solar to take agricultural land out of production, and

sometimes that works better than others. Particularly some of this case studies in China suggest that PV and agriculture, it's actually just PV subsidizing some really bad agriculture. These systems in Vietnam, do you think they are located with agriculture? So that's a really good costume to me. So I think there are some projects that are co located with

agriculture or shrimp farming. That's happening. And interestingly, there are also discussions now and reportedly investigations into systems that are installed on mountain structures situated on agricultural lend. But what they have found as many of these systems or lends are not actually growing any crops or wearing any animals as they claim to be doing. So what they're really doing is just using the the free land, putting up mounting structures, putting the panels on and disguising them as

rooftop solar um interesting roof topic agricultural solar. So they're they're supposed to have big growing crops underneath or raising animals, and they're not they're farming somewhere. Yes they are, from what some of the reports news reports that we see coming out is that when they make a visit to the site, for example, it's meant to be a mushroom. From what they actually found backs of mushrooms being tied to the mounting structures, but not grown on the land

moldy perhaps from sitting there forever. And actually just last year the Ministry of Industry and Trade issue guidelines to clarify that in order to be eligible for the roof tousle of interiffs, the system has to be on a on a roof that has an independent function as a

roof apart from just holding the panels. But it remains to be seen what or if any action will be taken against these agrige cultural PEP systems, because presumably the consequences that the feeding tariff is taken away from you, Yes, if it's standing correctly, but then that also begs the question is how often are these being audited? So it is a ongoing discussions now in Vietnam, there have been some concerns are called for investigation into these previous systems,

especially in the last week. I've seen a lot of that come out, but the final outcome remains to be seen what they wor actually do. It is tough to to audit every roof top system, I guess, especially to do it regularly. If times and bangs and mushrooms under the solar panels means they passed the order at once, that might mean they get away for it with it for the project lifetime sort of developed as a sneaky we'll call them enterprising. They're getting they're getting it done.

This is really really interesting. So now, Jenny, you asked the last question, Jenny, do you have any more questions? Will you be my co host today? So Vietnam is not the last boom we will see, but it's a bit a very interesting one. Indeed, thank you very much for coming on the show today and explaining that to all of us. Definitely one to watch and I will be keeping my eyes on Brazil, Caroline, Jenny, thanks for joining, Thanks for having us. Thank you, Dada, Thank you Caroline.

Today's episode of Switched On was edited by Rex Warner of grace Stoke Media. Bloomberginia is a service provided by Bloomberg Finance LP And its affiliates. This recording does not constitute, nor should it be construed as investment advice, investment recommendations, or a recommendation as to an investment or other strategy. Bloomberginia should not be considered as information sufficient upon which

to base an investment decision. Neither Bloomberg Finance LP. Nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the information contained in this recording, and any liability as a result of this recording. Did express the disclip