Vietnam is now the leader in Southeast Asia’s solar photovoltaic (PV) market with the largest installed capacity in the region. According to research by Wood Mackenzie, Vietnam’s cumulative solar PV installation will hit 5.5 gigawatts (GW) this year, making up 44% of Southeast Asia’s total capacity, compared to just 134 megawatts (0.134 GW) in 2018.
Under the feed-in tariff (FIT) programme, Vietnam awarded projects at US$93.50 per megawatt hour (MWh) for solar PV projects connected before end of June 2019. While bankability concerns existed, the project economics were attractive, delivering equity internal rate of returns in the mid-teens.
Speaking at the Asia Clean Energy Summit today, Wood Mackenzie solar analyst Rishab Shrestha said: “Regional and local IPPs and developers felt comfortable taking on the risk, and the projects received financing from regional and local banks. FITs have proven to be an effective policy tool to induce rapid growth in renewables, and Vietnam’s build is another example of that.”
Vietnam’s next FIT is expected to be applied through 2021. Wood Mackenzie expects grid connection activity to peak at around the end of that year .
“The latest draft submitted for government approval reveals a FIT of US$70.90/MWh for ground mount projects. Correspondingly, we estimate the levelised cost of electricity to range from US$59/MWh to US$96/MWh for 2021, depending on the region. Project economics will continue to remain attractive in large parts of Vietnam,” Shrestha added.
With massive installations also come curtailment problems. The installed capacity in Vietnam’s key provinces has already exceeded the grid capacity by 18%. The approved capacity for the Ninh Thuan and Binh Thuan provinces amounts to 5 GW, more than double the grid usable capacity.
Grid expansion is expected to increase grid capacity for solar in key southern provinces by about 25% in 2020 compared to 2019. However, more investment is needed to address curtailment concerns.
Another interesting solar PV market is Malaysia whose renewable policy target is backed by a sound policy framework and offers sizable opportunities. The country is targeting a 20% renewable capacity mix by 2025. It has a cadenced auction, like many European countries, and supports distributed solar through net-metering.
“Malaysia’s third solar auction programme for 500 MW was released earlier this year. The auction received overwhelming interest, with 6,691 MW of bids for the 500 MW on offer. We expect Malaysia’s cumulative solar PV capacity to hit 1,139 MW in 2019, compared to 736 MW last year,” Shrestha added.
Back in Singapore, distributed solar is gaining momentum. The national target of 350 MW by 2020 is expected to be met. The country installed 56.7 MW in the first half of this year, exceeding the 2018 full year solar addition of 55.1 MW.
Shrestha said: “98% of the capacity was installed in the non-residential sector, particularly through private sector procurement. Simplification of the installation process has also helped increase the adoption rate. With high commercial and industrial electricity tariff rates at US$155/MWh in the context of Southeast Asia, the distributed solar economics make sense.”
While still an emerging region in solar PV installations, Southeast Asia’s cumulative solar PV capacity is expected to reach 12.6 GW this year, and is expected to grow almost threefold to 35.8 GW in 2024. Large-scale solar will dominate the installation capacity for the next five years. As project economics start to become more attractive, distributed solar installations will also pick up. Wood Mackenzie expects small-scale solar to account for 32% of the capacity additions in 2024.