Speaker 1: I'm Dana Perkins, and this is Switched on the BENF Podcast.
Speaker 1: For those of you who haven't yet read the book Factfulness,
Speaker 1: one of the things this book does is get you
Speaker 1: to question your assumptions about the world and ensure that
Speaker 1: they are not frozen in time. Perhaps your perception is
Speaker 1: from data that is dated. And one thing we know
Speaker 1: for certain is that change doesn't always happen at a consistent,
Speaker 1: gradual pace. Sometimes it's fast. Sometimes the data makes you
Speaker 1: do a double take, and that is just what happened
Speaker 1: this past year in Vietnam. Today I'm speaking with Jenny Chase,
Speaker 1: head of our solar team, and Caroline Chua, who is
Speaker 1: an analyst focused on Southeast Asia, and we're going to
Speaker 1: discuss a solar boom that happened over a period of
Speaker 1: just a couple of months in Vietnam and what this
Speaker 1: could mean for other countries looking to grow their rooftop
Speaker 1: solar industry. Following today's podcast, if you want to dig
Speaker 1: a bit deeper, BENF subscribers can take a look at
Speaker 1: the Southeast Asia Market out Look or at another note
Speaker 1: titled Vietnam gets Ambitious on Clean Energy. They're both available
Speaker 1: at b NF dot Com on our mobile app or
Speaker 1: via b NF go on the terminal. B NF does
Speaker 1: not provide investment or strategy advice, and you can hear
Speaker 1: our full disclaimer at the end of the podcast. But
Speaker 1: now let's get started talking about Vietnam. Caroline and Jenny,
Speaker 1: thank you for joining us today. So now, Caroline, where
Speaker 1: are you located because I'm located into the Singapore office
Speaker 1: And Jenny, where are you located? I am in the
Speaker 1: countryside in Switzerland and I am i am in London.
Speaker 1: Now we're here to talk about solar. You guys are
Speaker 1: solar experts. Is any of your electricity powered by solar?
Speaker 1: Do you think right now? No? Because although I have
Speaker 1: a massive solar power system is covered with fifteen centways,
Speaker 1: it's a snow right now. This is a good question
Speaker 1: to ask in the middle of winter. It's more of
Speaker 1: a summer question. Yeah, how about you, Caroline, do you
Speaker 1: think a name of yours is powered by solar only?
Speaker 1: Probably a very small portion from the national grid. You
Speaker 1: don't have much space in Singapore to install the little panels. Unfortunately,
Speaker 1: it makes a lot of sense. I'm here in London.
Speaker 1: I don't have it my own residential solar. And I'm
Speaker 1: pretty pretty convinced that the renewable's electricity I'm getting is
Speaker 1: probably win today. But well, we'll leave it at that, Okay,
Speaker 1: So let's talk about where a lot of people probably
Speaker 1: do have their electricity powered by solar in their homes,
Speaker 1: and that is Vietnam. To start, what has happened in
Speaker 1: the solar industry in Vietnam in twenty nineteen, because this
Speaker 1: is quite a big deal. Twenty Sorry, okay, it also happened.
Speaker 1: So it also happened in Okay, so give yeah, give
Speaker 1: me both years. Actually that's more relevance since we're now
Speaker 1: in one. What happened in the solar industry in twenty nineteen,
Speaker 1: and so we first witnessed the first solar boom in
Speaker 1: Vietnam in twenty nineteen and the fust off of nineteen
Speaker 1: with we saw about five gig awards a solar built
Speaker 1: in just a few months to meet June that year,
Speaker 1: fit and tire of deadline at the time, just a
Speaker 1: few months, like one month, two months. When I spoke
Speaker 1: to developers on the ground, we understood that most of
Speaker 1: the construction actually took place just over two months. And
Speaker 1: again they've managed to surprise US in twenty twenty. The
Speaker 1: latest boom that we saw actually happened in the rooftop
Speaker 1: solar space. They have reportedly built almost nine gig awards
Speaker 1: fotop solar in twenty twenty alone, out of which more
Speaker 1: than six gil to build in December. About four point
Speaker 1: seven gig awards came online in the last week of
Speaker 1: the year alone. Just to give some sense of how
Speaker 1: quick the ramp up was, the official numbers that we
Speaker 1: got from the state utility was dead. At the end
Speaker 1: of November, there was just two point nine gig awards
Speaker 1: connected to the grid, and on Christmas date itself only
Speaker 1: four point seven gig awards. So that's a very very
Speaker 1: significant ramp up in the last week of the year
Speaker 1: that before. And this is just absolutely staggering. I mean
Speaker 1: I found out about this last week when Caroline got
Speaker 1: in touch with me and said, we need to increase
Speaker 1: our forecast or our estimate for solder in Vietnam from
Speaker 1: three or four gig of what's in twenty two eleven
Speaker 1: to thirteen giving what's in twenty twenty, which actually makes
Speaker 1: it the third possibly even the second. If the US
Speaker 1: was on the very very low end of the forecast
Speaker 1: and the Vietnam was in the very high end largest
Speaker 1: market in the world. Well, that's incredible. So what caused
Speaker 1: this to happen in such a short period of time. Well, so,
Speaker 1: first has been mostly incentive driven commission rush that we saw,
Speaker 1: so Specifi twenty twenty roofs up sold broom that we saw.
Speaker 1: There was a second solofin INTERI scheme that was expiring
Speaker 1: on play first, December twent tween d and in order
Speaker 1: to be eligible for this in interifttops have to be
Speaker 1: connected to the grip by then. That really a bit
Speaker 1: pressure to develop is to speed up the build of
Speaker 1: their projects, especially when there's very little certainty about what's
Speaker 1: to come x. Also on December twenty fifth itself, the
Speaker 1: State Utility actually made quite an interesting announcement edit some
Speaker 1: pushed in the last week where they came up to
Speaker 1: say that they would actually stop signing any more power
Speaker 1: purchase agreements or record any electricity that's generated integrate from
Speaker 1: new rooftop solar systems for any future potential back paying
Speaker 1: off of finit terris when the new steamers announced. So
Speaker 1: that's something new in Vietnam historically in the past when
Speaker 1: the Finnit terror scheme expired. What the State Utility did
Speaker 1: was they actually recorded how much was being generated integrate
Speaker 1: and when the scheme was finally finalized, they back pay
Speaker 1: all the owners for the generation of the last few months.
Speaker 1: The fact that they have came up to say that
Speaker 1: they will not do so probably caused a bit of
Speaker 1: panic among the developers and owners. So this is something
Speaker 1: that the State Utility pretty much made happen through the incentives.
Speaker 1: Was this the desired result? So? I think the incentives
Speaker 1: itselves issued by the government and the Ministry of Industry
Speaker 1: and Trade. It's just that the State Utility, as the
Speaker 1: state owned entity who now have some monopoly power sector,
Speaker 1: they are the destinated off takers for any electricity that's
Speaker 1: generated into the grid and for any powerfulty segrement that
Speaker 1: has to be signed. Definitely, I think the results for
Speaker 1: exceeded the expectations and it's something that took them by
Speaker 1: the price as well. I think it's like to say
Speaker 1: they wanted some solar under this scheme, but maybe not
Speaker 1: nine gig of what's under the rooftop scheme, which they
Speaker 1: now have to pay eighty something dollars for every exported
Speaker 1: metal hour. This is important that you note that it's
Speaker 1: rooftop solar specifically, so it's people powering their homes, but
Speaker 1: I would say predominantly or is it industry? Is it
Speaker 1: rooftop for kind of I guess retailers? Where where is
Speaker 1: it all sitting? So we have seen most of the
Speaker 1: adoption being driven by the industrial aftim this the account
Speaker 1: for slightly more than half. Residential actually take quite a
Speaker 1: fair bit as well, but one third of all installations
Speaker 1: as of the end of November, so it's it's quite
Speaker 1: a good mix between commercial and residential, but mostly still
Speaker 1: the the businesses, the industrial estates, manufacturing plants, they have
Speaker 1: a lot of power consumptions. You noted that there was
Speaker 1: a deadline to connect it to the grid in order
Speaker 1: to take advantage of the FAD and tariff and additionally,
Speaker 1: you know this was something that was very beneficial. All
Speaker 1: of this is grid connected, None of this is micro grid,
Speaker 1: mini grid and is there any opportunity for that there
Speaker 1: Most of them are grid connected in order to be
Speaker 1: eligible for the fit INTERI if they have to be
Speaker 1: connected to the grid. Unlike other neighboring countries in southas Asia,
Speaker 1: like Indonesia or Philippines, where rural electrification is still more
Speaker 1: a fab in gender for for the government, Vietnam actually
Speaker 1: has quite a high electrification of almost a hundred percent
Speaker 1: at the moment. They also have the advantage way, you know,
Speaker 1: the geography of the country is that it's one joined
Speaker 1: the piece of land where they can actually run the
Speaker 1: transmission line all the way from the north to the south,
Speaker 1: So there is very little discussions about you know, offerate
Speaker 1: microgrips and electrification. This is a lot of solar being
Speaker 1: at it in a short period of time, but is
Speaker 1: it also very concentrated within a few areas would it
Speaker 1: be considered distributed solar across the country? So it would
Speaker 1: be considered distributed solar because there is sexually capacity limit
Speaker 1: for each rooftop PV system size that is one mag
Speaker 1: asy or about one point to make a peak in
Speaker 1: order to be eligible for the fit entire scheme. However,
Speaker 1: there is no rule against having multiple systems installed in
Speaker 1: the same location as long as they have different connection
Speaker 1: points and are signed under different power producer. So, in
Speaker 1: terms of the distribution that we see throughout Vietnam, because
Speaker 1: of the resources and where the monarch we have seen
Speaker 1: a lot of these solar developments being concentrated in the south,
Speaker 1: in the southern provinces. That's really interesting to think that
Speaker 1: people might be setting up lots of these units and
Speaker 1: then maybe connecting them all in separately just to kind
Speaker 1: of work around what looks like a loophole. That bigs
Speaker 1: the question, then, how is the grid handling all of
Speaker 1: this with it coming online so incredibly quickly. Yeah, I
Speaker 1: think congestion and grid operations will definitely be major challenges
Speaker 1: for the getting a nice passes the moving forward. Preliminary
Speaker 1: reports now suggest that total solar capacity spends it approximately
Speaker 1: about eighteen to nineteen gigo. It's not from both utility
Speaker 1: skill and rooftop solar systems, and at a sixteen percent
Speaker 1: capacity effect that this would roughly translate about twenty five
Speaker 1: to twenty seven terra what hours of solar generation in
Speaker 1: a year, all about ten to eleven percent of Vietnam's
Speaker 1: twenty nineteen total total power DEMA. So, the Aennunce power
Speaker 1: system has historically been dominated by a lot of coal,
Speaker 1: a lot of hydro and gas generations, so plants and
Speaker 1: technologies that generate at fairly constant levels or fluctuate within
Speaker 1: the very narrow range from hour to hour. So moving
Speaker 1: from that to regret that now has a sizable amount
Speaker 1: of solar which generates during certain hours of the day
Speaker 1: will really require the operators to rethink how the grid
Speaker 1: needs to be managed, what the optimal dispatch portfolio would be,
Speaker 1: and how they should be meeting meeting pipe monster outside
Speaker 1: of the solar generation hours. I think moving forward, totomin
Speaker 1: would really be a feature of the system as well
Speaker 1: until sufficient storage solutions are being deployed, and we have
Speaker 1: not heard much discussis or see much development of it
Speaker 1: from so the grit offering, the have actually now indicated
Speaker 1: that potentially up to one point three ARRA what hours
Speaker 1: of renewable energy, which is mainly solo, could be cultilled
Speaker 1: in twent one alone due to congestion, access generation during
Speaker 1: the solo peak generation hours and a mismanched in the month.
Speaker 1: That's a lot of solo power that potentially will be
Speaker 1: cultill and will challenge the financials for the projective policy.
Speaker 1: Now for a very short break stay with us. The
Speaker 1: solar has gone in, but the storage hasn't. For presumably,
Speaker 1: if there's more storage in the future, that would provide
Speaker 1: additional capacity going forward. So my question is what is
Speaker 1: the projection for increased demand going forward and is this
Speaker 1: a country that we anticipate will have pretty rapidly increasing
Speaker 1: demand for power Over the last second put in twenty
Speaker 1: ten and twenty nineteen, Vietnam actually saw their power the
Speaker 1: month growth at a compounty and your growth rate of
Speaker 1: about ten percent every year, and moving forward, the government
Speaker 1: actually expect growth rate to maintain about eight per enem
Speaker 1: for for the next few years, so that is a
Speaker 1: lot of power the month that they're expecting to come online.
Speaker 1: Of cost. COVIDS nineteen has saken its a hit on
Speaker 1: power the mond growth, but still they have seen a
Speaker 1: growth in their economy and in terms of power the month,
Speaker 1: they will need a lot of additional generation capacities in
Speaker 1: terms of storage discussions that we're seeing on the ground.
Speaker 1: We have seen indicative visibility studies being awarded to g
Speaker 1: International to to look at the technologies that they could
Speaker 1: potentially incorporate into the Vietnamese PO rate, but we have
Speaker 1: not seen the upcome of its study as of now.
Speaker 1: So what might this mean for other countries either neighboring
Speaker 1: or actually globally that are looking at increasing the volume
Speaker 1: of solar that they have within their grid, because I
Speaker 1: think there are a lot of countries right now that
Speaker 1: are looking decarbonization and a climate change quite seriously, and
Speaker 1: their electricity makes as a potential way to tackle that.
Speaker 1: The first thing is that this does actually explain where
Speaker 1: all the solar panels were going in the fourth quarter
Speaker 1: of last year, so I manage our global forecasts and
Speaker 1: try and make sure that the numbers kind of add up.
Speaker 1: And to be honest, we could see that there was
Speaker 1: a shortage of raw materials that wouldn't particularly the glass
Speaker 1: of the right shape and size, that wouldn't be happening
Speaker 1: if there wasn't a big demand sinc somewhere, and now
Speaker 1: it turns out it was Vietnam. We did actually have
Speaker 1: a buffer for that. So that explains that I think
Speaker 1: this is actually the same lesson as we should have
Speaker 1: learned from other solar booms and busts, which is that
Speaker 1: it's probably not a great idea just to write solar
Speaker 1: develop as a blank check, because they are quite good
Speaker 1: at building a lot of solo in a very short
Speaker 1: period of time, and it might be more sensible to
Speaker 1: have a more sustainable long term building which people didn't
Speaker 1: just stick a lot of solar and particularly congested those
Speaker 1: of the grid. How would you define that by a
Speaker 1: long time? I mean maybe building eleven to twelve gig
Speaker 1: what's over a couple of years if you're a count
Speaker 1: through the size of Vietnam, which has a population of
Speaker 1: just under a hundred million people, and so still pretty fast.
Speaker 1: To three years is still quick. It's just not too much.
Speaker 1: You had build solar really fast. That's the great thing
Speaker 1: about solar. It's also the problem with solar if you
Speaker 1: just tell developers, hey, build it and we'll pay you
Speaker 1: over eighty dollars and mega hour for every megal hour exported,
Speaker 1: because solar these days is really quite cheap. I think
Speaker 1: that a logic question that yet them was trying to
Speaker 1: balance was that they actually had quite a big concern
Speaker 1: on supply short teach that they expected to happen or
Speaker 1: to start as soon as the end of twet twet
Speaker 1: or one. So for them there was a bit concern
Speaker 1: that they're trying to rapidly fill the supply gap and
Speaker 1: get as much fast the online is possible. And then
Speaker 1: weather which from him for them it came in the
Speaker 1: form of solar, But still I agree that you know,
Speaker 1: the planning for the GRIP has not been been organized
Speaker 1: in a systematic meilo to metch the piece at which
Speaker 1: development has happened, and now they are stuck paying. I
Speaker 1: think it's a three point six dollars per mega wart
Speaker 1: hour in u S dollars for twenty years for these systems.
Speaker 1: So how could this be done better in in order
Speaker 1: to slow down the process and kind of even and
Speaker 1: out over a quick to three year period. The office
Speaker 1: one is auctions, but it's very difficult to build small
Speaker 1: scale solar by which I mean less than about ted
Speaker 1: megawatts with auctions. One possibility would have been to have
Speaker 1: a sort of queue in which systems have to register
Speaker 1: and you could cut the feed in tariff, or that
Speaker 1: the exports tariff more frequently. When Germany had a boom,
Speaker 1: it had a massive above expected boom which was only
Speaker 1: seven whats so Germany in twenty eleven had a boom
Speaker 1: that was smaller than Vietnam. In twenty twenty, Germany moved
Speaker 1: to changing its exports tariff once a quarter and then
Speaker 1: once a month, which basically meant that it could adjust
Speaker 1: the incentive more quickly to the actual cost of systems
Speaker 1: going in and that meant it didn't quite didn't overpay
Speaker 1: quite as much. And also because developers had a bit
Speaker 1: of long term certainty that it wasn't going to drop
Speaker 1: too much, they built projects in a slightly more organized
Speaker 1: way rather than trying to just shove them all on roofs.
Speaker 1: In December, with this excess that's being curtailed, do you
Speaker 1: think that there's any potential for Vietnam to export some
Speaker 1: of this electricity to other neighboring countries or is that
Speaker 1: not how the grid system is set up? There probably is.
Speaker 1: The congestions likely to be local, so you literally cannot
Speaker 1: get the solar onto the wires for a few hours
Speaker 1: a day because there's too much shoulder in particular locations,
Speaker 1: so exporting it is not going to be an option
Speaker 1: unless the grid is significantly built out. Local grid congestion
Speaker 1: is becoming a massive issue with solar, and part of
Speaker 1: it is that, generally speaking, developers are building multiple systems
Speaker 1: in the same part of the grid at the same time,
Speaker 1: which means that the grid doesn't have a congestion problem
Speaker 1: one week and then the next week potentially if three
Speaker 1: systems have connected, it does have a massive congestion problem.
Speaker 1: And also it's just for a few hours a day.
Speaker 1: That's the other frustrating thing because if you're only generating
Speaker 1: peak output for say eleven am to two pm, then
Speaker 1: that's just three hours a day that you have curtailed electricity.
Speaker 1: So you don't want to build a massive factory there
Speaker 1: because you don't need be able to use it on
Speaker 1: this free electricity for three hours a day, and that
Speaker 1: that would not work. So is the expectation that solar
Speaker 1: development will completely drop off because they've already built so much,
Speaker 1: or do you think that they'll roll out something that's
Speaker 1: a little bit more controlled like what Jenny you were
Speaker 1: suggesting before. So the discussions that are happening right now,
Speaker 1: actually they started after the solar boom that we saw.
Speaker 1: Is that for large skills solar developments, what they're trying
Speaker 1: to do is to have it in a more systematic memo.
Speaker 1: So they're looking at auctions and be a substation capacity
Speaker 1: auctions or building solar parts. Is that, as we've seen
Speaker 1: in other countries like Cambodio, India, that's what they actually
Speaker 1: planned to do. We don't have an idea of what's
Speaker 1: the capacity that they're looking to auction out, but they
Speaker 1: are set to be potentially launching a pilot, hopefully within
Speaker 1: one each of this year. Was this something that really well?
Speaker 1: I think we didn't see coming and then nobody saw coming,
Speaker 1: and which then leads me to another follow on question
Speaker 1: to that, which is, do we see another boom like
Speaker 1: this happening somewhere in the world and do we have
Speaker 1: an idea of where it might be. Trouble is, we
Speaker 1: don't see this until they happen. I have my suspicions
Speaker 1: about Brazil personally. Brazil also has a program it's basically
Speaker 1: net metering for projects up to five megawats and they
Speaker 1: don't have to be on the same site as the
Speaker 1: power demand that they're net metering for, and power is
Speaker 1: relatively expensive in Brazil, so the economics are good. Brazil
Speaker 1: is importing a lot of a lot of stuff from China,
Speaker 1: which is not showing up on the official installation CHAP
Speaker 1: statistics yet. So I think Brazil, which we currently have
Speaker 1: it's about about two point seven to three point five
Speaker 1: gigawatts built in twenty twenty, I think it might turn
Speaker 1: out to be more than that. So one to watch
Speaker 1: Caroline So in a lot of countries people are considering
Speaker 1: co locating photobo taps with agriculture or at least not
Speaker 1: using solar to take agricultural land out of production, and
Speaker 1: sometimes that works better than others. Particularly some of this
Speaker 1: case studies in China suggest that PV and agriculture, it's
Speaker 1: actually just PV subsidizing some really bad agriculture. These systems
Speaker 1: in Vietnam, do you think they are located with agriculture?
Speaker 1: So that's a really good costume to me. So I
Speaker 1: think there are some projects that are co located with
Speaker 1: agriculture or shrimp farming. That's happening. And interestingly, there are
Speaker 1: also discussions now and reportedly investigations into systems that are
Speaker 1: installed on mountain structures situated on agricultural lend. But what
Speaker 1: they have found as many of these systems or lends
Speaker 1: are not actually growing any crops or wearing any animals
Speaker 1: as they claim to be doing. So what they're really
Speaker 1: doing is just using the the free land, putting up
Speaker 1: mounting structures, putting the panels on and disguising them as
Speaker 1: rooftop solar um interesting roof topic agricultural solar. So they're
Speaker 1: they're supposed to have big growing crops underneath or raising animals,
Speaker 1: and they're not they're farming somewhere. Yes they are, from
Speaker 1: what some of the reports news reports that we see
Speaker 1: coming out is that when they make a visit to
Speaker 1: the site, for example, it's meant to be a mushroom.
Speaker 1: From what they actually found backs of mushrooms being tied
Speaker 1: to the mounting structures, but not grown on the land
Speaker 1: moldy perhaps from sitting there forever. And actually just last
Speaker 1: year the Ministry of Industry and Trade issue guidelines to
Speaker 1: clarify that in order to be eligible for the roof
Speaker 1: tousle of interiffs, the system has to be on a
Speaker 1: on a roof that has an independent function as a
Speaker 1: roof apart from just holding the panels. But it remains
Speaker 1: to be seen what or if any action will be
Speaker 1: taken against these agrige cultural PEP systems, because presumably the
Speaker 1: consequences that the feeding tariff is taken away from you, Yes,
Speaker 1: if it's standing correctly, but then that also begs the
Speaker 1: question is how often are these being audited? So it
Speaker 1: is a ongoing discussions now in Vietnam, there have been
Speaker 1: some concerns are called for investigation into these previous systems,
Speaker 1: especially in the last week. I've seen a lot of
Speaker 1: that come out, but the final outcome remains to be
Speaker 1: seen what they wor actually do. It is tough to
Speaker 1: to audit every roof top system, I guess, especially to
Speaker 1: do it regularly. If times and bangs and mushrooms under
Speaker 1: the solar panels means they passed the order at once,
Speaker 1: that might mean they get away for it with it
Speaker 1: for the project lifetime sort of developed as a sneaky
Speaker 1: we'll call them enterprising. They're getting they're getting it done.
Speaker 1: This is really really interesting. So now, Jenny, you asked
Speaker 1: the last question, Jenny, do you have any more questions?
Speaker 1: Will you be my co host today? So Vietnam is
Speaker 1: not the last boom we will see, but it's a
Speaker 1: bit a very interesting one. Indeed, thank you very much
Speaker 1: for coming on the show today and explaining that to
Speaker 1: all of us. Definitely one to watch and I will
Speaker 1: be keeping my eyes on Brazil, Caroline, Jenny, thanks for joining,
Speaker 1: Thanks for having us. Thank you, Dada, Thank you Caroline.
Speaker 1: Today's episode of Switched On was edited by Rex Warner
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