Promoting locally manufactured products and services is expected to be a potential next move for Vietnam’s renewable energy supply chain. Will this be the right call?
The introduction of the Feed-in-tariff (FIT) mechanism for solar and wind energy projects has contributed to the remarkable uptake in Vietnam since 2017. After the last FIT rollout on 31 December 2020, multiple discussions on transitioning to the public-private partnership under the auction scheme have arisen among the government and experts to foster market competitiveness. In February 2023, the Prime Minister’s latest Decision 165/QD-TTg emphasised the need to expand the major industries’ local supply chain and establish a national energy development plan from 2021 – 2050. As a leading ASEAN country with the highest renewable energy (RE) growth rate, is it time for Vietnam to establish local content requirements (LCRs) to strengthen the domestic industry?
In some ASEAN countries, the minimum local content was introduced to boost the local RE supply chain; however, the outcomes are not as intended.
For Indonesia, the LCRs for products and services are prioritised in the general manufacturing industry and infrastructure projects, including electricity. For example, in on-grid solar photovoltaic (PV) projects, the local content is set at 40 per cent for solar modules, 34 per cent for goods, and 100 per cent for services. Such a requirement is perceived as a significant bottleneck for solar development due to the limited manufacturing capacity of 500 megawatt peak (MWp) per year, a far cry from the existing solar potential of 532.5 gigawatt peak (GWp) per year and the aspirational target of 90 per cent domestic content of solar panels by 2025. Indonesia’s LCRs have become counter-productive as it is not on par with the local industry maturity.
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