SolarPower Europe has published a report titled “Global Market Outlook for Solar Power 2022-2026”, according to which, if it took 10 years to upscale the world’s total grid-connected solar capacity from 100 GW in 2012 to 1 TW in 2022, it will take only a little more than three and a half years to double it by the end of 2025. At the end of the forecasting period, the report expects 2.3 TW of solar to be installed worldwide. According to the report, despite the global market growth, the number of markets in the GW range has remained 17 in 2021, although sustained growth is expected on this front too; it forecasts 21 GW-scale markets in 2022, 29 in 2023 and 34 in 2024. Southeast Asia Infrastructure provides an extract from the report covering the solar markets in Vietnam and Taiwan…
Overview of PV developments Following a spectacular 2020, resulting in 11.9 GW of added solar capacity and catapulting the country into the top three solar markets globally, the PV (photovoltaic) sector in Vietnam saw a dramatic collapse in 2021. With the termination of the feed-in tariff 2 (FiT2) system at the end of December 2020, the support framework has become much less favourable for solar projects. As a result, slightly less than 2 GW of PV capacity was installed in 2021, an 83 per cent annual decrease from the previous year. Adding to the legislative vacuum that followed the termination of the FiT2 regime, Vietnam’s National Load Dispatch Centre (NLDC) stopped approving any future solar and wind energy projects in January 2022, citing grid constraints arising from the installation of high capacities of renewable sources in recent years. This move is expected to last at least until the end of the year. The country has a solar fleet of more than 18 GW in operation.
The solar installation boom in recent years has given the country a significant lead towards achieving its PV targets, which are currently under revision.
Solar and renewable energy targets
At the COP26 in November 2021, Vietnam’s Prime Minister Pham Minh Chính announced a net zero emission target by 2050 and a coal phaseout by 2040. Renewables and solar PV, in particular, will play a key role in decarbonising the Vietnamese economy. Under the draft Power Development Plan VIII (PDP VIII), which is still being revised, PV capacity needs to reach about 18-20 GW by 2030 and about 55-72 GW by 2045, representing respectively a base and a high scenario outlined for PV power contributions. Under PDP VIII, only centralised PV parks with a capacity over 1 MW are taken into account, while rooftop solar and renewable capacity for green hydrogen production are not included in this strategy. In either scenario, the growth of large-scale solar capacity is minimal until 2030.
Drivers for solar growth
The major drivers behind the impressive growth of solar power in recent years have been attractive fiscal and economic incentives. In particular, the FiT2 set very favourable rates for rooftop, floating and ground-mounted solar in 2020. The FiT2 rate for rooftop solar was higher than the average retail electricity tariff, while the rate for utilityscale plants also made the financially viable projects attractive to investors. The feed-in contracts signed under the FiT regulation have a duration of 20 years with the annual payment being determined based on the actual VND/USD exchange rate. FiT2 was valid from May 22, 2020 to December 31, 2020 and created a rush to develop as many projects as possible before the deadline. New solar capacity installations continued to grow steadily in the third quarter, before experiencing an incredible jump in the last quarter; December, in particular, had record rooftop solar capacity deployments. At present, not only has a new mechanism promoting a shift towards self-consumption not been introduced, the grid operator has also temporarily stopped the authorisation procedure for wind and solar projects due to grid constraints following the recent high PV installation levels. The grid operator cited challenges in stabilising the power system in real time.
Challenges Considering the current solar PV installed capacity of over 18 GW as of December 2021, the target solar PV capacity for the next 10 years will be negligible, according to the PDP VIII draft. This raises questions about the government’s renewable energy development ambitions in the future, despite the COP26 commitment towards net-zero emissions by 2050. Additionally, there are no clearly defined targets specifically for ground-mounted, floating, and rooftop solar categories. These concerns have been raised by various parties and the government has been asked to adjust the solar target in the PDP VIII. Among various challenges that young solar markets such as Vietnam face, two key barriers affecting development are notable: z Very short-term policy that lacks clarity. The short duration of FiT2 with a validity of only seven months led to a pressing demand for products, services, delivery, and grid connection.
In December 2020, the high demand resulted in a 30 per cent increase in the solar PV system price. Since the expiration of FiT2 on December 31, 2020, no new support policy has been introduced. In the worst case, this gap in policy might cause a medium- to longterm market distortion in the coming years or, even in the best-case scenario, a temporary short-term market collapse. z Asynchronous developments of solar PV and grid projects lead to PV power curtailment. Indeed, the development of solar PV projects outpaced the transmission grid projects, which are financed, operated and managed exclusively by Vietnam Electricity (EVN) National Transmission Corporation. This has led to the decision to stop new variable renewable projects for 2022 and might affect the sector negatively if not urgently addressed.
Despite the unexpected effects both on investment as well as on grid operation due to the short-term policy, the Vietnamese solar market could still give some positive surprises in the medium term. Indeed, keeping national energy security and independence in view, the opportunity for further development of solar PV is still acknowledged, especially decentralised rooftop solar. This can also be attributed to the lengthy negotiation process and limited financial access for big coal-fired and gas turbine power plants. In brief, installed solar capacity, both utility scale and rooftop PV, is expected to be very low in 2022, but could experience another uptick, if well-designed mechanisms that promote a sustainable long-term market are developed and announced in time.
Overview of PV developments Taiwan reached the GW level for the first time in 2019, adding 1.41 GW, which is equal to an annual growth of 45 per cent and resulted in a total cumulative capacity above 4 GW. While 2020 was expected to follow a similar trend, COVID-19 took its toll and only 1.67 GW was installed, missing the 2.2 GW annual target by 24 per cent – a target set up by the Bureau of Energy, Ministry of Economic Affairs (MOEA). When looking at the cumulative capacity target, the shortfall was a little lower. The 5.8 GW of total PV capacity installed in Taiwan at the end of 2020 fell 10 per cent short of the 6.5 GW target. For 2021, the MOEA had reiterated its annual target ofadding 2.2 GW capacity, which would lead the country to a cumulative capacity of 8.75 GW by the end of 2021. Unfortunately, with 1.9 GW of solar PV added last year, the target was again missed – by 14 per cent, which is still 10 per cent closer to the target than it was in 2020. Solar PV targets and drivers Despite the COVID-19 blip, the government maintains its 20 GW solar target by 2025, with 3 GW of rooftop and 17 GW of ground-mounted capacity. Considering the 7.7 GW installed at the end of 2021, Taiwan will have to deploy 12.3 GW in the next 4 years, with average annual installations of 3.1 GW – significantly higher than the installation level in 2021.
On the one hand, Taiwan tried to support its PV industry by extending PV project completion deadlines, granting a three-month grace period in response to the pandemic and the sustained rise in component prices. On the other hand, the Council of Agriculture implemented restrictions on land-use, which made the job much more difficult for PV project developers. As of July 2020, the new regime specifies that solar projects covering 2-30 hectares of agricultural land must be approved by the council rather than the local government. Moreover, PV projects cannot be built on agricultural and hillside land smaller than 2 hectares. In June 2021, the Taiwanese Ministry of Economic Affairs decided to leave the feed-in tariffs for PV installations unchanged, despite the initial plans for the tariffs to be lowered from 3.79- 5.67 TWD (11.98-17.94 EUR cents) to 3.73- 5.63 TWD (11.80-17.81 EUR cents) per kWh.
The decision was taken to help the solar sector recover from the delays caused by COVID-19. Later, in December 2021, the ministry also announced that PV projects that received approval in the period 2019- 2021 and would be completed between October and December 2021 will benefit from an additional rate of 0.2245 TWD (0.69 EUR cents) per kWh. Earlier this year, the MOEA set the new feedin tariffs for 2022, which range from 3.8680 TWD (12.25 EUR cents) for ground-mounted projects over 1 MW to 5.8952 TWD (18.66 EUR cents) for residential installations lower than 10 kW. The FiT scheme comprises tariffs for floating arrays larger than 1 MW, solar installations from 1-10 kW, 20-100 kW, 100-500 kW, 500-1000 kW, and for systems over 1 MW. These FiT levels remain the highest in the world and are a major tool that policymakers are counting on to support renewable development on the island.
Challenges and perspectives for solar growth
Land availability remains the primary limiting factor to solar deployment in Taiwan. It is one of the most densely populated countries in the world, with two-thirds of the island’s land being mountainous. Therefore, solar developers are facing growing challenges in finding suitable locations for their projects. Moreover, the deployment of ground-mounted projects is hindered by hurdles in purchasing land. Often, largescale projects span across several landowners, which makes negotiations for land acquisition very challenging and lengthy. There is also some resistance from the agricultural sector.
The rules introduced in July 2020 by the Council of Agriculture are stricter than in the past. This limits land availability further and risks slowing down the deployment of solar PV. The situation has been worsened by the November 2020 decision of the Ministry of Finance to stop giving permits for solar system development in ecologically sensitive areas in the county of Chiayi and the city of Tainan. Nevertheless, project developers in Taiwan have taken interest in setting up large-scale ground-mounted solar power plants. The local solar cell and module player URE was among the first such players, when it secured two big deals in the country, one for a 193 MW project in 2019 and another for 120 MW of bifacial capacity in 2020.
However, one of the largest systems so far is a 150 MW system that went online in March 2021 in Tainan. In early 2022, Thailand’s BCPG, the power generation unit of energy conglomerate Bangchak Corporation, announced plans to build 357 MW of solar power plants in Taiwan by 2024, increasing its capacity on the island to 469 MW. Several agencies are looking into ways and technologies to address the land issue – for example, through innovative PV installations such as rooftop installation, floating PV (FPV), using heavily polluted lands, etc. In terms of FPV, Taiwan is operating one of the world’s largest FPV plants, the 180 MW Changhua floating project, composed of two systems – 88 and 92 MW. Agri-PV is also very high on the agenda.
The island is also under pressure from international peers to accelerate its climate transition. With carbon footprint considerations increasingly taken up by stakeholders in the European Union and other countries, Taiwanese products need to lower their overall footprint to remain competitive internationally. Rooftop solar is also a focus point in the Taiwan government’s agenda. The 2021 edition of the Renewable Energy Law requires large power users to source some share of their power from renewables. This legislation is expected to result in many corporates starting to opt either for onsite solar systems or off-site solar PPAs. Major companies active in the RE100 initiative are also pushing the demand for green electricity.
Finally, the country also needs to overcome its interconnection capacity issues. This will help the country assure the stability of its electricity market and avoid a new power outage after the one that occurred in March 2022.