Renewable and Sustainable Energy Reviews 145 (2021) 110820

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Renewable and Sustainable Energy Reviews

journal homepage: http://www.elsevier.com/locate/rser

A cross-country comparison of compensation mechanisms for distributed

photovoltaics in the Philippines, Thailand, and Vietnam
Siripha Junlakarn a, Noah Kittner b, c, *, Sopitsuda Tongsopit d, e, Supawan Saelim e
a
Energy Research Institute, Chulalongkorn University, Thailand
b
Department of Environmental Sciences and Engineering, Gillings School of Global Public Health, University of North Carolina at Chapel Hill, USA
c
Department of City and Regional Planning, University of North Carolina at Chapel Hill, USA
d
Formerly at the Policy Institute for Energy, Environment, and the Economy, University of California Davis, USA
e
USAID Clean Power Asia Implemented By Abt Associates Inc., USA

A R T I C L E I N F O A B S T R A C T

Keywords: Globally, policies designed for high penetration of distributed photovoltaics (DPV) primarily have shifted from
Distributed photovoltaics mainly encouraging investment through subsidies to addressing equity and stakeholder concerns on retail tariffs
Southeast Asia and utility revenue impacts. Net metering and feed-in tariffs now serve as the main policy mechanisms to support
Solar policy
distributed PV in the U.S. and Europe, although modifications are ongoing to alleviate concerns over consumer
Compensation mechanisms
inequity and the financial health of utilities. Retail tariff design and utility revenue impacts are now at the
Equity
forefront of the debate for ASEAN countries formulating new policies and incentives for PV deployment. This
paper discusses experiences of DPV development in the Philippines, Thailand, and Vietnam. These countries have
ongoing efforts to adjust their DPV programs to match a rapidly dynamic and evolving DPV market and
incorporate new technology capabilities such as blockchain-based peer-to-peer solar energy trading platforms.
The paper also presents a quantitative analysis of customer economics under various competing compensation
mechanisms and analyzes the remaining barriers to DPV market expansion in these three countries. Net billing
could achieve more economically equitable policy design for other Southeast Asian countries looking to make
solar electricity broadly accessible for all.

1. Introduction sustainable development. However, the transition toward more decen­

Deployments of solar PV are growing faster than any other energy
technology, with increasing investment and installations adding almost
115 GW in 2020 [1]. As solar photovoltaics continue to decline in cost,
new business models and innovations are emerging to allow for private
individuals, communities, and firms to generate their own electricity
using distributed photovoltaics and take a part in the energy transition.
Distributed solar photovoltaics (DPV) are defined by the U.S. Energy
Information Administration (EIA) as having installed capacity less than
1 MW, located behind the meter, and often used to offset grid electricity
consumption (EIA, 2015). DPV can be sited at a residential home, office
building, or industrial plant and is often used to self-generate power,
which helps reduce the end-user’s electricity bills. The trend toward
DPV is happening rapidly in Southeast Asia, where an increasing num­
ber of countries are dealing with rising demand for electricity and
advancing new technologies that promote economic growth and
tralized electricity generation has encountered multiple hiccups along
the way, as technological advances in DPV now require a new set of
policies and regulations to enable their equitable and fair use of the grid.
Southeast Asian countries that are now increasing their installed DPV
capacity have integrated lessons from their own experiences and other
countries around the world related to prosumers and impact of DPV
market growth on utilities. It is no secret that for all the
behind-the-meter solar technologies Germany and the United States
have installed, there have been massive shifts in learning about the types
of policies that enable adoption and diffusion of solar PV technologies.
Furthermore, considerations on retail tariff design and utility revenue
impacts have surfaced as key issues to ensure equitable and fair inte­
gration of DPV into the electric grid for customer groups and the utility
companies.
The deployment of DPV across the world has increased rapidly from
16.1 GW in 2011 to 19.5 GW in 2016 [2], notably in China, India, and

* Corresponding author. Department of Environmental Sciences and Engineering, University of North Carolina at Chapel Hill, USA.
E-mail address: kittner@unc.edu (N. Kittner).

https://doi.org/10.1016/j.rser.2021.110820
Received 8 July 2020; Received in revised form 8 February 2021; Accepted 10 February 2021
Available online 23 March 2021
1364-0321/© 2021 Elsevier Ltd. All rights reserved.
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

Europe. Outside of China and India, Southeast Asia represents an Southeast Asia, early-stage markets began with feed-in tariffs (the
aggregated bloc of countries where a high potential for solar PV is Philippines, Thailand, Malaysia) and net metering (Indonesia and
coupled with high economic growth and energy demand. Electricity Vietnam) [14]. Currently, the state of the art policy design is to transi­
demand across Southeast Asia increased at an annual average rate of tion either feed-in tariffs (with highly subsidized rate) or net metering
6.1% since 2000, twice the world’s average [3]. In addition, the trends policies into net billing or feed-in tariffs with lower rates to equitably
in urbanization in Southeast Asian cities and potential climate change and fairly reflect the true value of solar on the grid. For example, across
impacts in the form of rising temperatures point to heightened chal­ all U.S. states, net billing has been the most commonly adopted alter­
lenges in terms of the need for air-conditioning load and electricity. native to net metering [15]. Also, due to the declining cost of solar PV
Scenario studies show continued dominance of coal in this region [4,5]. modules, the economics of DPV investment under net billing is favorable
Fiscal pressure and declining cost of alternative energy could accelerate for DPV customers across many countries [11,16,17]. Net billing assigns
an energy transition, since many coal projects are motivated by political more precise values to DPV electricity by time and location [9],
considerations [6]. The power sector in Southeast Asia faces the chal­ reflecting the values to the power grid and/or society, and reducing the
lenge of ensuring adequate electricity supplies, while curbing air need for full retail rate compensation required by net metering schemes.
pollution and carbon emissions [7]. While distributed photovoltaics Net billing can simultaneously encourage adoption and diffusion of a
offer a financially attractive alternative to meet rising electricity de­ technology without inducing unfair cross-subsidization by the rate­
mand, rapid and effective deployment of solar photovoltaics (solar PV) payers or bankrupting utility companies.
should be one of the key strategies to mitigate climate change.
This paper offers a comparative analysis of distributed solar PV 3. Policy history and outlook
policies in three Southeast Asian countries: the Philippines, Thailand,
and Vietnam, which offers a contrasting view of distributed solar PV This section provides a brief overview of the history of DPV policy in
policies in emerging and more mature DPV markets. Additionally, the the Philippines, Thailand, and Vietnam during the past decade. Histor­
selected cases represent three emerging economies with increasing ically, net metering and feed-in tariffs (FIT) were the main policy
electricity demand, albeit widely different policy-enabling environ­ mechanisms to induce investment in DPV systems worldwide. Likewise,
ments for DPV. All three countries are located at approximately the same the three countries evolved their original forms of compensation
latitudes and share an abundance of solar PV potential. The history of mechanisms away from FIT to new forms in response to changing market
emerging net billing policies in the Philippines, Thailand, and Vietnam conditions and the attempt to balance stakeholders’ concerns.
is discussed, and lessons learned for other ASEAN countries and Table 1 provides key economic and electricity indicators of the three
emerging markets are compared. These countries are all in the initial countries, including the solar target and installed capacity of DPV.
phase of policy development to implement solar rooftop strategies and Because the three countries share the same latitude, solar irradiation
policy regulations. Faced with evolving technology and cost dynamics remains at about the same levels as shown in Fig. 1 and are among the
and emerging concerns by stakeholders, each country is also at a critical top 50% for all countries. Vietnam and the Philippines both share high
juncture. Past DPV policies are being evaluated for their efficacy and
numerous competing and complementary support schemes are under
consideration by the individual governments. Table 1
As many Southeast Asian and other developing countries face a key Key economic and electricity indicators of three countries.
question of which compensation mechanism is the best for DPV devel­ The Philippines Thailand Vietnam
opment, the analysis demonstrates that in the three reviewed countries Average GDP from 6.6 3.1 6.4
net billing is a better approach than classical net metering due to the 2014 to 2018a
current stage of the markets and net billing’s flexibility to adapt to (%)
Total installed 23,815 [19] 43,374 [20] 47,750 [21]
changes in market conditions. Compared to classical net metering and
generation
feed-in tariffs, net billing can also build-in designs that balance the in­ capacity as 2018
terests of the DPV customer and other ratepayers. The customer eco­ (MW)
nomic analysis demonstrates that net billing enables economically Total solar installed 896 [19] 2962 [22] 8 [21]
feasible investments for residential and commercial-scale DPV in all capacity as 2018
(MW)
three countries. However, net billing needs a transparent pricing
Average annual 5.1 [19] 3.0 [20] 11.44
methodology and clear pathway to fairly compensate system owners. power demand [23–26]
growth rate from
2. Evolution of compensation mechanisms for DPV 2008 to 2018 (%)
Solar Target (MW) 1528 MW by 10,000 MW by 2037b 1000 MW by
2030 (no (DPV only) 2025 (DPV
The comparative analyses across the three countries will focus on the specific target only)
policy development and implementation of the compensation mecha­ for DPV)
nisms for grid-connected DPV systems. There are three broad categories Grid-connected 25 MW (net 129.68 MW (FIT) in 378 MWp in
of DPV compensation mechanisms: 1) Buy all, sell all, 2) net metering, DPV (MW) billing) in 2013 December
December 2019 5.63 MW (Pilot 2019 [28]
and 3) net billing [8–11]. A buy all, sell all scheme, also known as feed-in project of self-
tariff or gross feed-in tariff, purchases all the electricity generated by the consumption) in 2016
DPV system at a pre-determined rate or market rate. Net metering and 463.55 MW (Private
net billing schemes are varied as detailed in previous works such as [8, rooftop of self-
consumption) in 2018
11]. However, one common element among different types of net
[22]
metering schemes is compensation for excess DPV electricity calculated 3 MW (net billing) in
in units of electricity (per kWh) and at the end of each billing period. 2019 [27]
This electricity can either be forfeited, paid, or banked to offset future a
GDP Growth Rate, Asian Development Outlook 2019 (ADB, 2019). htt
consumption. Under different net billing schemes, compensation for ps://data.adb.org/dataset/gdp-growth-asia-and-pacific-asian-development-out
excess DPV electricity typically occurs at a set rate, often less than the look).
underlying retail rate for electricity [11]. b
The government plans to reduce this DPV target to about 9290 MW, real­
Initial DPV compensation mechanisms for early-stage markets were locating some target to Energy for All scheme (hybrid from solar and waste)
feed-in tariffs in Europe and net metering in U.S. states [13]. In under the revision to PDP 2018 Revision 1 [40].

2
S. Junlakarn et al.
Fig. 1. Southeast Asia irradiance profile.
Source: NREL with solar resource data from World Bank [18].
economic growth rates and face similar challenges to meet the need for
power supplies, while ensuring cleaner development. Therefore, DPV is
often viewed as a source of power generation that will meet growing
demand in these two countries. Thailand, on the other hand, has expe­
rienced low GDP growth and faces a high reserve margin situation,
therefore more DPV could be adopted from other societal, environ­
mental, or financial considerations, rather than explicitly driven by the
need for more electricity.
3.1. The Philippines
3.1.1. Policy history
In the Philippines, DPV is viewed as a power source that can
contribute to energy security, particularly because the Philippines have
experienced inadequate power supplies in recent years. In 2019, for
example, the Luzon grid experienced frequent “red alerts” on its trans­
mission system, signaling that expected peak demand was higher than
available generation capacity.
The Philippines’ policy framework for supporting solar PV and other
renewable energy is rooted in the 2008 Renewable Energy Act, which
laid out support mechanisms including feed-in tariffs (FIT), net meter­
ing, renewable portfolio standards (RPS), and green energy certificates.
Implementation of the net-metering scheme was launched in 2013 by
ERC’s Resolution No. 9 Series of 2013. Though the official name of the
program is net metering, this paper refers to the program as net billing
due to the compensation of excess generation at a rate below retail rate,
as classified in Tongsopit et al. [11]. The net billing program compen­
sates surplus electricity at a blended generation rate and imposes a cap
on the individual system size at 100 kW.
Since its implementation in 2013, the net billing program in the
Philippines has induced a continuous growth rate, from 5.4 kW in 2013
to 25 MW by 2019, constituting over 3000 net-metered systems [29].
However, this growth is still minuscule compared to the economic po­
tential of 168 GW, which is only an estimate for DPV potential in urban
areas in the Philippines whose cost is less than 15 US cents/kWh [18].
This limited growth of DPV is due to many barriers, such as complicated
interconnection and permitting processes, the lack of financing options
3
Renewable and Sustainable Energy Reviews 145 (2021) 110820
(especially for small-scale DPV systems), and requirements of distribu­
tion impact studies (DIS) on all DPV systems.
3.1.2. Outlook
The ERC proposed amended net-metering rules in September 2019 to
simplify permitting procedures, reduce installation soft costs, address
the rate impact and cross-subsidy concerns, and remove the DIS fee
imposed on end-users [30,31]. The amended rules also revised inter­
connection standards and standardized net-metering agreements.
Perhaps due to this effort, the installation of DPV started to increase
significantly in the last quarter of 2019.
In addition to amended ERC rules, the Philippines Department of
Energy (PDOE) released the draft of the first Department Circular (DC)
on enhancing the participation in the net-metering program in
September 2019 [32] and a revised version in March 2020.1 This revised
DC proposed the option to adopt classical net-metering for residential
customers and supplement the existing ERC’s rules on net-billing
scheme such as uniform permitting process by local government units
and imposing the 1-year banking period to avoid oversizing of the DPV
installations. In addition, the revised draft DC proposed lifting the
installation size cap of 100 kW and allow systems larger than 100 kW.
Larger systems encourage the use of DPV to provide emergency supply
and ensure electricity supply security.
In summary, the overall net metering program reform since 2018 is
systematic, attempting to address those aforementioned barriers that are
not limited only to the compensation mechanism. Continuous growth of
prosumers is expected in the Philippines as a result of the upcoming
PDOE’s Department Circular (DC).
3.2. Thailand
3.2.1. Policy history
Thailand’s DPV market was jump started in 2013 by the country’s
1
Draft Circular ‘Prescribing the policies to enhance and facilitate demand side
participation to augment energy supply security using renewable energy’ [82].
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

rooftop FIT program, which offered premium prices when generating The industry’s structural changes have been foreseen by the ERC. The
DPV electricity and exporting it to the grid [33]. The rooftop FIT pro­ innovative “ERC sandbox” program was launched in 2019 to allow
gram established a total quota of 200 MW, implemented between 2013 participants from both the private and public sectors to test emerging
and 2015. This FIT program was followed by a pilot project to study energy innovations, such as peer-to-peer energy trading, energy storage,
different self-consumption policy schemes but there was no policy sup­ and electric vehicle charging stations [41,42]. Thailand’s two distribu­
port until May 2019 when the government launched a new net billing tion utilities both have expressed strong interest in peer-to-peer energy
program. Though a previous government-commissioned study recom­ trading at the distribution level [43,44] as they expect a deep trans­
mended the applicability of net billing for all customer groups [34], formation of utility businesses catalyzed by widespread proliferation of
recent policies limit DPV support to residential customers (no com­ distributed energy resources such as DPV and electricity storage. In the
mercial or industrial programs) and limits the size of DPV systems to no future, digital energy market platforms tend to change Thailand’s
more than 10 kW per system [35]. The recently launched net billing electricity industry to be more inclusive of diverse players.
program assigns a very low export rate for excess generation (around 5
US cents/kWh), much less than the average wholesale electricity rate in 3.3. Vietnam
Thailand.
If DPV system owners do not wish to join the net billing programs, 3.3.1. Policy history
rooftop solar systems can be designed for self-consumption only. Grid Vietnam’s history of solar power development began with financial
injection of excess PV electricity is blocked under self-consumption. Due mechanisms for solar power projects launched in April 2017 through
to the attractive economics, such an arrangement has become increas­ Decision No.11/2017 that promotes the development of utility-scale
ingly popular as an option for commercial buildings and factories to solar and DPV (referred to as rooftop solar or RTS) projects at an FIT
reduce their electricity bills using solar power without relying on gov­ of VND 2.086/kWh or USD cents 9.35/kWh2 [45]. This policy enabled
ernment subsidies. The continued reduction in PV system prices and grid-connected DPV to benefit from net-metering, where DPV electricity
emergence of innovative financing options for DPV in Thailand [36] first serves the local load. Excess generation from each month can then
have made the self-consumption-only arrangement widespread with no be used to deduct from the following month’s electricity consumption.
quota limit. The DPV programs with government support came with At the end of the year, any remaining excess generation can be sold to
quotas summarized in Table 2. As discussed in Ref. [37], in early-stage the utility at the FIT rate. Since 2017, Vietnam’s Ministry of Industry and
PV markets, a quota that is too low prevents economies of scale required Trade proposed several revisions to the scheme, as summarized in
for cost reduction and limits deployment. Table 3. The overall direction shifts the focus from classical net-metering
to net billing as the main support mechanism, as well as addressing
3.2.2. Outlook multi-faceted barriers to the investment in RTS [46].
Due to the unsuccessful household solar rooftop program in 2019, as Following the launch of the first support mechanisms for solar
shown in Table 2, the program has been revised with a lower quota of 47 development in 2017 and a number of subsequent policy actions, solar
MW [27] while the remaining quota capacity would be allocated to PV development in Vietnam grew at an impressively fast pace–
community-owned power projects [40]. Community-owned power exceeding expectations. In 2018, the installed capacity of DPV in Viet­
projects are foreseen as one major support scheme for investment in nam was 18 MWp, installations increased to 42 MWp in May 2019 and
Thailand’s utility-scale solar systems. then more than fourfold by July 2019 to 193 MWp [55]. Solar rooftop
Self-consumption schemes are key mechanisms that allow Thailand’s installations continued to almost double the capacity to 378 MWp as of
electricity industry to increase the number of prosumers in spite of un­ December 2019 [28]. The residential sector had the largest number of
certain and discontinuous support schemes to purchase DPV electricity. DPV systems with 19,105 household installations, while most of the DPV
capacity was concentrated in the industrial sector. The average system
size was 150 kWp for the industrial sector, 30 kWp for commercial in­
Table 2
stallations, and 6.5 kWp for residential systems [28].
DPV programs in Thailand with implemented year, quota, and achieved
Overall, the additional installed solar PV (i.e., both utility-scale and
capacity.
DPV projects) capacity in Vietnam from June 2018 to June 2019, was
Year DPV program Quota of customer Achieved
4.45 GW, exceeding the 1 GW target set by 2020 [56]. Vietnam became
implemented target group (MW)
(status) the solar market leader in Southeast Asia with 5.5 GW of cumulative
installed solar or about 44% of Southeast Asia’ s total capacity by 2019
2013–2015 Feed-in Tariffs Residential: 100 MW 129.68
(completed) Commercial &
[56].
Industrial: 100 MW
2017 Self-Consumption Residential: 20 MW 5.63 3.3.2. Outlook
(completed) only (Pilot Project) Commercial & In efforts to provide new mechanisms applicable for solar projects
Industrial: 80 MW
from July 1, 2019, the Government of Vietnam released several pro­
2018 (on Self-Consumption Residential, 463.55 (as
going) only (No export) Commercial & Dec 2018) posed drafts on new rooftop solar models and tariff mechanisms during
Industrial: No quota January 2019. In April 2020, the government released PM Decision 13/
but depending on grid 2020/QĐ-TTg which stated that rooftop solar systems are eligible to sell
availability all power or part of power to EVN, or to a third-party purchaser in case
2019 Net billing with Residential: 100 MW 3 (as Dec
the EVN’s grid is not used [54]. If the solar power is sold to EVN, the
(completed) buyback rate of 1.68 2019)
THB/kWh purchasing rate will be 1943 VND/kWh (approximately 8.38 US
2020 Net billing with Residential: 47 MW in – cents/kWh). If solar power is sold to a third party, the purchasing rate
(completed) buyback rate of 1.68 2020 [27] will be negotiated between the investors and the third-party owners.
THB/kWh [27]
Continuous policy development has enabled the emergence of pro­
2021 (ongoing) Net billing with Residential: 50 MW in –
buyback rate of 2.2 2021 sumers in Vietnam and opened up opportunities for new business
THB/kWh as of Jan 1, Others (i.e., hospitals, models, such as third-party financing and peer-to-peer energy trading. In
2021 [38] schools and
agriculture): 50 MW in
2021 [38] 2
Exclusive of VAT and subject to the fluctuation of the exchange rate
Source [22,39]. announced by the State Bank of Vietnam.

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S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

Table 3 Table 4
Summary of changes in Vietnam’s policy for the support of DPV. Key elements of 2020 DPV compensation mechanisms in the Philippines,
Date Decision, Measures for Supporting DPV
Thailand, and Vietnam (as of June 2020).
Circular, or Draft Elements The Philippines Thailand Vietnam
April 2017 Decision No.11/ • Net metering with one-year banking period Types of scheme Net Billing (in the Net Billing Net Billing
2017 • 9.35 US cents/kWh for any remaining end- process of (transition from net
of-year credits modification) metering) and
September Circular No.16/ • Required the development of provincial potentially Buy All,
2017 2017 solar power development plan Sell All
• Application requirements for rooftop solar Is self- Yes Yes Yes
systems sized <1 MW and ≥ 1 MW, consumption
including permitting, licensing, and allowed?
interconnection requirements. Netting frequency Hourly Monthly Monthly
• Standardized power purchase agreements Compensation for Blended generation Below FIT rate [58]
January Decision No. • Replaced net metering by net billing, excess rate (approximately wholesale (approximately the
2019 February 2019 whereby electricity imports and exports are generation (as an average of prices (approx. same as the
measured separately and valued at different of December wholesale prices) 5 US cent/ wholesale
rates. Purchasing rate is the specified FIT 2019) kWh) electricity prices)
rate in this decision. Rolling credit Yes in Peso No (For No (For months
• Driven by key concerns on tax collection by months with with excess
the Ministry of Finance and EVN’s claim excess electricity, the
that they were unable to do proper electricity, the monetary value is
accounting [47]. monetary credited)
March 2019 Circular No.05/ • Resolved the tax issues by providing value is
2019 guidelines for the energy payment credited)
mechanisms and the implications of value- Banking period 1 year N/A N/A
added tax for RTS projects [48]. Buyback rate at Blended generation N/A N/A
• Additional documents were issued by the end of rate
Vietnam Electricity Corporation (EVN) to banking period
provide clear technical guidance and Capacity Cap per 100 kW 10 kW 1 MW
instructions for implementation. system
July 2019 Decision No. • Set target to achieve 1 GW rooftop solar by Program Cap No 2019: 100 MW No
2023/2019 the end of 2025 [49]. 2020: 47 MW
• Outlined five program components aimed Outlooks Under revision N/A Under revision
to remove barriers: 1) technical, policy, and
regulatory research, 2) RTS standards,
inspection, and testing, 3) market research at 10,000 MW by 2037 and 1000 MW by 2025, respectively, whereas no
and pilot programs, 4) certification
solar target specific to DPV was set by the Philippines. Comparing DPV
program, and 5) information management
and communication plan. market growth in these countries, Vietnam experienced the most
February Decision 612/QD- Financial support for households’ RTS impressive expansion of installed DPV, from only 18 MWp in 2018 to
2020 TTg investment in the form of subsidy at a rate of 3 378 MWp in 2019, and became the country with the largest installed
million VND/1 kW, up to 6 million VND per DPV capacity in Southeast Asia. This was mainly a result of the net-
household, Using grant from the government
of Germany through kfW Development Bank,
metering scheme announced in 2017 and feed-in-tariffs issued in 2019
applicable to 50,000–70,000 households [50]. to incentivize the solar rooftop market. Although Thailand led the
April 2020 Decision No. 13/ • Rooftop power systems are allowed to sell a Southeast Asian DPV market since 2013 as a result of feed-in tariffs,
2020/QD-TTg part or whole of the energy generated to Thailand grew relatively slower than Vietnam in recent years partly
EVN or other third parties.
because of unsuccessful policy implementation. In particular, Thailand
• If EVN is the buyer, the rate or purchasing is
the FIT rate prescribed in this decision experienced a low participation rate of the pilot self-consumption
(1943 VND/kWh or 8.38 US cents/kWh). scheme implemented in 2016 and net billing for households in 2019.
• If a third-party is the buyer, then the pur­ Policy discontinuity is a major barrier that decreased DPV market
chasing rate is negotiated between the growth in Thailand. The DPV market in the Philippines grew signifi­
parties.
cantly in 2019, from less than 1 MW in 2018 to 25 MW in 2019 as a
Source [47–54]. result of amended net-metering rules enforced by September 2019. It is
not surprising that a large share of DPV growth in Thailand comes from
addition, Vietnam expects to liberalize the electricity sector with a fully self-consumption systems, which are not allowed to export power. The
competitive retail market by 2023 [57]. Philippines, on the other hand, has faced a low DPV market growth rate
with net-metering due to a complicated and non-unified permitting
3.4. Cross-country comparison: observations on policy history and process. It took several years for the Philippines to launch their amended
outlooks of these three countries rules that remove permitting barriers after their first round of
implementation.
By December 2019, all three countries adopted net-billing as their The trends in the Philippines and Thailand also show that feed-in
primary compensation mechanism to expand DPV installations, tariffs have entirely lost ground in recent years, shifting towards auc­
providing compensation for excess power generation exported to the tion mechanisms for utility-scale solar projects and net-billing scheme
grid in monetary values at certain rates per kWh determined by their for DPV projects. Classical net metering is not the current choice of
governments. compensation mechanism to support DPV. Instead net billing emerged
Table 4 summarizes the key elements of net-billing programs for all as more popular. This trend corresponds with policies in the U.S. where
three countries. All three countries set a threshold on individual DPV classical net metering is being modified, either through rate reforms,
system size eligibility for net-billing. However, only Thailand imposed a shifts to net billing, or other methods [59]. The overall impact of net
program cap in total. Revision of the existing compensation mechanisms billing reduces the economic attractiveness for prosumers.
is expected to continue for all three countries. In addition to trends moving toward a net-billing scheme, third-party
In 2019, Thailand and Vietnam announced ambitious targets for DPV financing business models (solar PPA and solar leasing) and peer-to-peer

5
S. Junlakarn et al.
energy trading are emerging. Vietnam has already launched a policy
that lays the foundation to enable these businesses. Thailand has wit­
nessed third-party financing grow continuously, focusing on solar PV
investment for self-consumption due to limited policy support under the
current net billing scheme. With growing numbers of prosumers ex­
pected in these three countries, peer-to-peer energy trading is gaining
attention. The two Thai distribution utilities have already started pilot
projects for peer-to-peer energy trading.
4. Quantitative analysis
4.1. Customer economics of DPV investment in the Philippines, Thailand,
and Vietnam
4.1.1. Analysis framework
The quantitative analysis here compares the economics of DPV in­
vestment at the residential scale for the three countries under three
possible compensation mechanisms: self-consumption, net metering,
and net billing outlined in Schemes 1–3. Three compensation mecha­
nisms are considered because decision-makers in all three countries
have evaluated these policy designs and will very likely select one of the
following compensation mechanisms for national-scale implementation.
This analysis also compares the economics of DPV investment at the
commercial scale in the three countries under self-consumption scheme.
Most commercial customers consume electricity during the day. Avail­
able space to install a PV system can sometimes be limited. Commercial
customers tend to install PV systems even when there are no policy in­
centives since they can obtain benefits from bill savings, for instance, by
using most generated electricity from the PV system to offset grid con­
sumption and sometimes exporting a small amount of excess electricity
to the grid.
In this analysis, customers under a self-consumption scheme do not
receive any paid compensation for excess electricity generated. Cus­
tomers under a self-consumption program will install DPV systems that
attempt to match their typical load profile. Under the net metering
scheme, excess electricity in each billing cycle is stored as a credit (in
kWh) to offset electricity consumption in the current or upcoming billing
cycle. Under the net billing scheme, electricity imported from the grid
and electricity exported to the grid due to excess DPV generation are
recorded on an hourly basis in separate accounts. Excess electricity
during each hour is directly compensated in a pre-determined monetary
credit that will be used to reduce the monthly bill but is typically less
than the retail electricity rate.
A key distinction across the three schemes is the value of excess
generation. Self-consumption schemes do not provide any credits for
excess generation, while net metering credits the retail rate for elec­
tricity in the form of a kWh and net billing often credits excess gener­
ation below the retail electricity rate. Essentially one can think of self-
consumption receiving no credit, net metering credits equal the retail
electricity rate, and net billing provide a reduced credit. Further ex­
amples of self-consumption, net metering, and net billing schemes can
be found with nuanced adaptations [11].
Description of the three compensation mechanisms used in this
analysis.
The three choices for compensation mechanisms used in the
customer economics analysis are described in the schematic diagrams
below (Fig. 2).
Key features of three schemes are summarized in Table 5.
The value of self-consumed electricity is a key factor that affects the
economics of DPV investments, which directly depend on retail elec­
tricity tariff structures and the magnitude of the tariffs. The three
countries share block rates and time-of-use (TOU) rates as common tariff
structures for residential and commercial customers, respectively, as
shown in Table 6. These tariff structures are explained in more detail in
Appendix 1.
The economic analysis compares a set of block rates for residential
6
Renewable and Sustainable Energy Reviews 145 (2021) 110820
customers and TOU rates for commercial customers for each country to
understand the impacts of retail tariff structures on customer economics.
The same load profile representative of each customer class is used for
the three countries, due to potential uncertainty that can be introduced
when varying the load profile. The selection of representative load
profiles is summarized in Appendix 2. Load growth is assumed to equal
the GDP growth rate.
DPV system costs vary by country depending on components such as
modules, inverters, installation costs, soft costs (e.g. permitting), and
interconnection costs. According to a survey of 10 engineering, pro­
curement, and construction (EPC) companies in Thailand in 2016, the
costs of modules, inverters and interconnection made up the largest
share, accounting for 41%, 18%, and 16% of the total costs, respectively.
On the other hand, in the Philippines, a survey of 5 EPC companies was
conducted, the module, inverter, and interconnection costs account for
70%, 11%, and 14% of the total costs, respectively. Since data on cost
components in other Southeast Asia countries differ by country and
remain difficult to find, this study only considers total installation costs
and neglects any other more specific components.
Sensitivity analysis is conducted to capture the effect of different
local parameters such as tariffs, investment costs, and economic situa­
tions. Under the sensitivity analysis, values for one country are fixed and
then tariff rates change for the remaining countries.
4.1.2. Methodology and data
For each customer type, the PV system size was fixed equally across
each country. The default values in the System Advisor Model (SAM) are
used to determine module characteristics. The location of the systems is
in the capital city of the country. Orientation, tilt and azimuth maximize
electricity generation in accordance with previous work [62]. Methods
build upon previous analyses for Thailand and are expanded for
Philippines and Vietnam [11].
Other financial assumptions, such as the installation costs of PV
systems, electricity rate structure, inflation rate and discount rate,
reflect market conditions and are given in Table 7. The PV systems were
purchased using customer equity as alternative financing options are not
yet widely available across the Philippines, Thailand, and Vietnam.
SAM was developed by the National Renewable Energy Laboratory
(NREL). SAM is a simulation tool used to evaluate the technical and
economic performance of renewable energy systems, such as solar (with
and without battery storage systems), wind, biomass, and geothermal.
This simulation tool is comprised of two main input models: (1) a per­
formance model representing the physical characteristics of the renew­
able energy system and generating 8760 h of electrical output
representing a one-year period and (2) a financial model representing
the financial structure of the renewable energy project and generating
annual cash flows over a multi-year period based on the electrical output
of the performance model and the inputs of electricity consumption
profile and financial parameter such as, installation and operating costs,
electricity price, taxes and incentives [63,64]. In SAM, there are
different performance and financial models that are often applied for
renewable energy projects on customer or utility sides. For this study,
SAM is deployed to simulate PV production and cash flows to determine
the economic feasibility of DPV investment, which is measured by lev­
elized cost of energy (LCOE), the net present value (NPV), internal rate
of return (IRR), and the payback period (PB). These financial indicators
are calculated as shown in Eqs. (1)–(4).
∑
N
Cn
C0 = (1)
1
(1 + IRR)n
∑
N
Cn
NPV = − C0 (2)
1
(1 + i)n
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

Fig. 2. Analytical framework for three compensation mechanisms compared in this study [11,60,61].

7
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

{ }
Table 5 ∑
m

Comparison of key features of self-consumption, net metering, and net billing PB = min C0 = Cn (3)
m
schemes. 1

Self- Net Net Billinga ∑

consumption Metering
C0 + N1 (1−Cni)n
LCOE = ∑N Qn (4)
Value of self-consumed Retail rate Retail Retail rate 1 (1− i)n
PV electricity rate
Value of excess DPV None Retail Assigned rate (In this where C0 is the initial capital cost (USD), Cn is the annual cash flow in
electricity rate study: wholesale rate of year n (USD) for Eqs. (1)–(3) and annual cost for Eq. (4); i is the discount
each countryb)
Netting frequency N/A 1 month 1h
rate (%), N is the analysis period (year) and Qn is the energy generated
Billing period 1 month 1 month 1 month by the system in year n (kWh).
Rolling credits No Yes No
Banking period N/A 1 year 1 month 4.1.3. Results and discussion
Value of excess DPV N/A zero N/A
electricity at the end
of banking period 4.1.3.1. Residential customers. Table 8 compares the economics of
a residential-scale PV investment in the three countries under three
Net billing with monthly settlement.
b compensation schemes. Based on these assumptions, the LCOEs for a 3-
A wholesale rate in each country is defined differently. The wholesale rate is
defined as the blended generation cost for the Philippines, the wholesale rate
kW residential PV system are 0.1025 USD/kWh for Thailand, 0.0982
that the Electricity Generation Authority of Thailand sells only electricity to USD/kWh for the Philippines, and 0.0729 USD/kWh for Vietnam. These
distribution utilities for Thailand, and the wholesale rate classified by customer LCOEs are at grid parity compared to each country’s electricity block
group for Vietnam. rates used in the analysis. The average electricity rates are 0.1123 USD/
kWh for Thailand, 0.1771 USD/kWh for the Philippines and 0.1193
USD/kWh for Vietnam.
Table 6 The economics of residential customers in Thailand under the three
Comparison of retail tariffs in The Philippines, Thailand and Vietnam. consumption schemes are the least attractive among three countries as
The Philippines Thailand Vietnam shown in Table 8. Although the capacity factor of Thailand is highest
Residential Inclining block rate Inclining block Inclining block
among the countries studied, the main factor that causes the lowest
(adjusted every month) rate and TOU rate rate (No benefit for this customer group is the combination of relatively low
residential TOU electricity rates, higher system costs and low growth rates of electricity
rate) consumption. Compared to the system cost of Thailand at 1.64 USD/W,
Commerciala Flat rate (adjusted Flat rate and TOU TOU Rate
the system costs in the Philippines and Vietnam are much lower – as the
every month) with rate where both
demand charge and include demand cost of solar in the Philippines is 1.42 USD/W and that of Vietnam is 1.0
optional TOU Rate charge USD/W. Customer electricity consumption growth rates are 3.1% for
a Thailand, 6.6% for the Philippines and 6.4% for Vietnam. Since the
There are no demand charges for the commercial TOU rates in the
Philippines and Vietnam. These rates are based on the data found on the web­ benefits of installing a PV system are estimated from bill savings, a lower
sites (https://corporatepartners.meralco.com.ph/products-services-and-pro electricity rate leads to less potential bill savings. Also, the combination
grams/peak-peak-program and https://en.evn.com.vn/d6/gioi-thieu-d/RET of low electricity rates and low load growth leads to a decrease of overall
AIL-ELECTRICITY-TARIFF-9-28-252.aspx). bill savings during the lifetime of a PV system. When load growth is
high, electricity consumption increases, and this electricity is valued at

Table 7 Table 8
Different parameters used for analysis. Economics comparison of three different compensation schemes for residential
Philippines Thailand Vietnam Average
customers across three countries with the 3-kW PV system under the inclining
block rate.
System cost at residential scale 1.42 1.64 1.00 1.35
(USD/W) Philippines Thailand Vietnam
O&M cost at residential scale (% 0.5 0.5 0.5 0.5 Capacity factor (%) 13.6 15.5 (15.5) 12.9
of the system cost) LCOE (USD/kWh) 0.0982 0.1025 (0.1025) 0.0729
Discount rate at residential scale 4 4 4 4 PV/Load Ratio (%) 65.6 74.7 (74.7) 61.8
(%/year) Self-consumption
System cost at commercial scale 1.13 1.42 1.00 1.18 NPV (USD) 2751 − 1842 (− 1680) 1474
(USD/W) IRR (%) 11.3 1.0 (1.3) 10.5
O&M cost at commercial scale 1 1 1 1 PB (Years) 10.1 21.6 (21.0) 10.8
(% of the system cost) Net Metering
Discount rate at commercial 7 7 7 7 NPV (USD) 5478 1781 (1992) 3749
scale (%/year) IRR (%) 17.0 7.9 (8.1) 16.9
Inverter replacement cost at 15 15 15 15 PB (Years) 6.3 10.5 (10.4) 6.4
year 11 and 21 (% of Net Billing
investment cost) NPV (USD) 4050 377 (620) 3235
Inflation rate (%/year) 2.7 0.6 2.9 2.1 IRR (%) 13.9 5.5 (5.8) 15.5
Load growth rate (%/year)) 6.6 3.1 6.4 5.4 PB (Years) 8.0 14.5 (14.2) 7.0

Note: For Thailand, the value in the parenthesis is for the case of TOU rate.

8
S. Junlakarn et al.
the retail rate. In addition to fewer benefits, the investment cost is high.
As a result, the overall benefits decrease.
In the Philippines and Vietnam, the economics for residential DPV
customers are viable for all three compensation schemes. Residential
customers in the Philippines benefit more than those in Vietnam under
self-consumption and net metering, while customers in Vietnam obtain
greater benefits than those in the Philippines under net billing, due to
the higher buyback rate in Vietnam (0.1031 USD/kWh) than in the
Philippines (0.0865 USD/kWh). Thailand experiences the least favor­
able economics. While both the net metering and the net billing schemes
for residential customers offer positive NPVs, self-consumption offers a
negative NPV combined with a longer payback period. In addition, for
Thailand, residential customers under TOU rates benefit more than
those under increasing block rates.
Fig. 3 presents the sensitivity analysis of the annual PV generation to
annual load ratio (PV/L ratio) and IRRs. When the PV/L ratio increases
(more excess generation from PV), IRRs for each scheme decrease,
where IRRs are most sensitive under self-consumption, net billing, and
net metering, respectively. These patterns of IRRs are similar across all
countries. However, for Vietnam, net metering and net billing have
almost the same degree of sensitivity to the PV/L ratio since the buyback
rate for the net billing scheme is close to the monetary value of the net
metering scheme. In addition, when the PV/L ratio varied for self-
consumption, overall IRRs of the Philippines fare better than those of
Thailand and Vietnam, respectively. This implies that the Philippines’
tariff rates better support PV investments than tariffs in Thailand and
Vietnam, respectively.
In Table 9, the sensitivity analysis is conducted by changing the
electricity rate structure for different market conditions, where the
values of PV system installation costs, load growth rates, inflation rates,
and discount rates are fixed for that country. The results demonstrate
that the tariff rate of the Philippines better supports PV investments than
the tariff rate in Vietnam and Thailand. This implies that the financial
parameters mentioned above have a high degree of impact on the eco­
nomic viability of DPV investments.
4.1.3.2. Commercial customers. Table 10 compares the economics of
solar PV self-consumption at the commercial scale. Based on the as­
sumptions, the LCOE of a 100-kW PV system for commercial is are
0.1190 USD/kWh for Thailand, 0.1051 USD/kWh for the Philippines,
and 0.0989 USD/kWh for Vietnam. However, average TOU rates are
0.0885 USD/kWh for Thailand, 0.1061 USD/kWh for the Philippines
Fig. 3. Sensitivity analysis of IRR of residential customers in three countries for different annual PV generation to annual load ratios.
9
Renewable and Sustainable Energy Reviews 145 (2021) 110820
and 0.1316 USD/kWh for Vietnam. As a result, the commercial PV
system LCOE in Thailand has not reached grid parity, while LCOEs of the
Philippines and Vietnam are already at grid parity. In addition, com­
mercial scale LCOEs are higher than residential scale LCOEs due to the
higher operation and maintenance costs for commercial systems.
The economics for commercial solar are viable in all countries when
they invest in a 100-kW PV system for self-consumption without any
compensation under TOU electricity rates. Similar to the residential
sector, overall trends show Thailand lagging in solar PV competitiveness
despite having the highest capacity factor across countries. Again, this is
due to a combination of the greatest PV investment cost, lowest retail
electricity price, and lowest retail electricity tariff. For the Philippines,
the benefits of customers under increasing block rates are slightly higher
than those under TOU rates.
Fig. 4 presents a sensitivity analysis of annual PV generation to
annual load ratio (PV/L ratio) and IRRs for commercial customers.
When the PV/L ratio increases (more excess generation from PV), the
IRR for self-consumption decreases. These patterns of IRRs are similar
among all countries where the overall IRR in Vietnam is higher than in
the Philippines and Thailand, respectively. Additionally, after sensitivity
analysis – when varying the PV/L ratio for self-consumption, the IRR in
Vietnam is slightly greater than in the Philippines and Thailand. This
implies that Vietnam’s current electricity tariff structure better supports
commercial PV customers than other countries. Similar results appear in
Tabl2e 11. The financial parameters previously mentioned have little
impact on overall PV investment profitability.
From these results, several critical best practices to achieve the best
economics for DPV customers can be identified. These include sizing PV
to match with the existing policy or compensation mechanism. If PV is
oversized for the compensation mechanism, solar PV electricity can
potentially be curtailed, and the value of solar is lost by the customer.
However, the compensation mechanism is the limiting factor when
determining the economically optimal size for DPV deployment.
4.2. Remaining barriers
4.2.1. Policy uncertainties and unclear regulations
All three countries experienced policy uncertainty toward DPV
support and unclear regulations for the implementation of support
mechanisms. While policy changes influence investor activity for solar
photovoltaics, unclear regulations increase soft costs and delay DPV
project development.
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

Table 9
Sensitivity analysis of residential customers across three countries with the 3-kW PV system under the inclining block rate.
Parameter Scheme Self-consumption Net Metering Net Billing

Tariff PH TH VN PH TH VN PH TH VN
Rate

The Philippines (PH) NPV (USD) 2751 − 63 659 5478 1724 2639 4050 1051 2200
IRR (%) 11.3 6.7 8 17 10.4 12.1 13.9 9 11.2
PB (Years) 10.1 14.9 13.6 6.3 9.3 8.4 8 10.8 9.1
Thailand (TH) NPV (USD) 554 ¡1842 − 1223 5881 1781 2714 3114 377 1956
IRR (%) 5.5 1 2.3 14 7.9 9.3 9.7 5.5 8.1
PB (Years) 15.3 21.6 19.5 7 10.5 9.6 9.5 14.5 10.4
Vietnam (VN) NPV (USD) 3272 841 1474 6204 2888 3749 4673 2116 3235
IRR (%) 14.1 9.1 10.5 22.4 14.9 16.9 17.9 12.7 15.5
PB (Years) 8.6 12.9 10.8 4.9 7.1 6.4 6.3 8.5 7

Bold numbers to distinguish results of the sensitivity analysis.

Policy uncertainties have remained constant since 2013 as a major

Table 10 barrier for solar PV development in Thailand [66]. Thailand imple­
Economics comparison of three different compensation schemes of commercial mented a pilot self-consumption scheme in 2016 and discontinued its
customer across three countries with the 100-kW PV system under the TOU rate. support for DPV until the recent launch of a solar program for house­
Philippines Thailand Vietnam holds with net-billing in 2019. Even with the recent policy change, net
billing does not apply to all scales of installations and the Thai gov­
Capacity factor (%) 13.7 (13.7) 15.5 12.9
LCOE (USD/kWh) 0.1051 (0.1051) 0.1190 0.0989 ernment announced a plan to reduce the quota by 2020 to only 47 MW
PV/Load Ratio (%) 10.1 (10.1) 11.5 9.5 from 100 MW due to a lack of participation in the program and failure to
Self-consumption achieve the target in 2019.
NPV (USD) 51,308 (53,109) 6720 75,066
Vietnam’s net metering policy, launched in 2017, generated signif­
IRR (%) 14.7 (14.8) 8.2 17.8
PB (Years) 7.1 (7.1) 10.2 6.0
icant interest from households, buildings, and factories to benefit from
the policy. However, policy uncertainty and unclear regulations were
Note: For the Philippines, the value in the parentheses is for the block rate. underlying reasons that delayed signing of any utility contracts. Up until
early 2019, DPV projects were not able to connect to the distribution
One of the predominant regulatory barriers for investment in DPV
remains an uncertain policy environment. Investors struggle to reconcile
the dramatic changes in policies that significantly affect the return on Table 11
their investment. These factors affect revenue, electricity generation, Sensitivity analysis of commercial customers across three countries with the
and net energy metrics [65]. For instance, the conditions for feed-in 100-kW PV system under the TOU rate.
tariffs, elimination of subsidies, and the guarantee of specific buyback Parameter Tariff Rate PH TH VN
rates all factor into investor decision-making on a project. However, all
Philippines (PH) NPV (USD) 51,308 22,324 73,022
of these aspects have undergone multiple changes in policy as they vary IRR (%) 14.7 12.0 16.6
by individual country. Within each country, policies are subjected to PB (Years) 7.1 8.4 6.3
different governmental or political interests. Therefore, the stability of Thailand (TH) NPV (USD) 44,665 6720 66,819
existing DPV policies and the extent to which investors believe a policy IRR (%) 11.0 8.2 12.6
PB (Years) 8.3 10.2 7.5
will survive its intended lifetime remains important to sustain invest­
Vietnam (VN) NPV (USD) 54,071 18,414 75,066
ment. Regional instability is one of the biggest roadblocks and barriers IRR (%) 15.8 12.1 17.8
to DPV adoption. Unstable policy mechanisms have evolved in all three PB (Years) 6.7 8.3 6.0
countries.

Fig. 4. Sensitivity analysis of IRRs of commercial customers in three countries for different annual PV generation to annual load ratios.

10
S. Junlakarn et al.
grid. Net-metering customers had not received payments for excess
electricity injected to the grid due to uncertain tax implications between
MOIT and the Ministry of Finance [67]. As a result, the DPV projects
were delayed until mid-2019. Details of new compensation mechanisms
applicable for projects operating after July 1, 2019 have not yet been
finalized as of March 2020.
There are fewer policy barriers in the Philippines, since the gov­
ernment established policy and regulatory processes that are guided by
Renewable Energy Act of 2008 [68]. The law codified net metering,
green energy options, and feed-in tariff systems as mechanisms to sup­
port renewable energy investment. This legal foundation has provided
some degree of policy continuity absent in other countries. However,
since its initial implementation, applications for net-metering partici­
pation remained low due to several uncertainties. After unsuccessful
DPV adoption in early years, the ERC proposed a draft revision to net
metering in 2016 that resolved the treatment of a lifeline subsidy,
non-uniform net metering agreements, and a lack of interconnection
standards. It remains unclear whether the Philippines will provide
future support for DPV installations larger than 100 kW. Philippines is
the only country studied in this paper that has not set a DPV target. At
the same time, it does not have a program cap or quota that could bring
solar market growth to a halt.
4.2.2. Retail rate impacts and cross-subsidization concerns
The concerns over the negative impacts of DPV on electricity rates
and equity issues over cross-subsidization between DPV and non-DPV
adopters could affect the design of elements under net-billing in
Thailand and the Philippines.
In particular, these concerns were given a high priority for policy
considerations of the net-metering rules in the Philippines [16]. As a
result, amended rules do not allow prosumers to exempt themselves
from fixed charges– such as payments of the lifeline subsidy, senior
citizen subsidy, and other legally mandated subsidies [30]. Following
feedback received from stakeholders and ERC concerns over rate im­
pacts, the PDOE changed the draft DC to only provide the opportunity
for the ERC to consider the adoption of a classical net-metering scheme
instead of earlier proposals mandating net metering. The fact that the
Philippines has the highest retail electricity rates in Southeast Asia at
around 20 cent/kWh [69] could also raise the importance of rate im­
pacts in the Philippines.
Similarly, concerns over utility revenue losses and increases in
electricity rates were identified from relevant stakeholders in the
workshop on Distributed Solar Photovoltaic Policy Analysis Review for
Thailand as a major barrier for DPV in Thailand [70]. Compensation of
net-billing for export of excess electricity in Thailand was even less than
the wholesale rates. Concerns of DPV on rates have not been emphasized
in Vietnam. Vietnam provided the highest relative compensation rate to
export electricity to the grid (e.g., higher than wholesale rates for some
segments).
It is common that the concerns over electricity rate impacts could be
addressed through lower compensation rates for the export of excess
electricity to the grid as in the case of the Philippines and Thailand,
while some consider imposing non-bypassable charges on prosumers as
is the case in California. In addition, the adoption of location-varying
rates could also be considered to address cross-subsidy effects and in­
crease incentives for deployment of DPV in locations that minimize
system-level costs [71].
4.2.3. Soft costs (permitting)
With the global decline of overall hardware costs for solar PV sys­
tems, an increasing share of the total project cost are soft costs due to
permitting. Even when considering overall lower project costs, permit­
ting remains a large challenge and obstacles to legitimize DPV in the
mainstream with both rate-paying customers and utility operators.
Additionally, non-module and inverter costs have not fallen as dramat­
ically as the solar PV panels and hardware, adding to project
11
Renewable and Sustainable Energy Reviews 145 (2021) 110820
considerations. For instance, the new solar rooftop program in Thailand,
residential customers are required to pay for an interconnection
including system testing at 8500 THB or 242.86 USD, which accounts for
approximately 4% of the capital investment cost.3 In addition, the
permitting process is one of hurdles for an implementation as it is
categorized into different types and sizes of PV system [72,73]. High soft
costs related to permitting and interconnection processes have been
widely cited as a major barrier in the Philippines [74], Thailand [75],
and Vietnam [76,77]. To date there have been no systematic analysis
that would identify the types, the extent, and the trends of soft costs for
DPV investment in Southeast Asian countries, but such a study can
inform the governments on how best to tackle this persistent problem.
4.2.4. Interconnection rules and standards
Government policy often influences the rate at which applications to
connect distributed PV systems to the grid are processed or accepted. For
instance, in 2013, the Thai government paused the process of consid­
ering new utility-scale renewable power projects for interconnection,
citing the inability of EGAT’s transmission lines to interconnect more
projects and suggesting that the new projects had to wait until EGAT’s
transmission upgrade was expected to be completed four years later (in
2017) [78].
Distribution utilities have set a capacity cap for each PV system at the
low voltage level and the total PV capacity must not exceed 15% of the
transformer capacity for both low and medium voltage level,4 which was
estimated based on an average light load of a feeder to avoid reverse
power flow [79]. If the capacity reaches 15%, new customers are
required to interconnect at the higher voltage level with more system
protection requirements. The capacity cap can be removed by consid­
ering the locations of PV system and penetration level [80] and con­
trolling reactive power through tap changer of existing transformers
[81].
In the Philippines, a number of interconnection barriers have been
addressed in a study conducted by USAID and NREL [16] and these
barriers are now being resolved in the Philippines Department of Energy
(PH DOE) policy proposals [82]. The PH DOE is proposing that all dis­
tribution impact studies are conducted at “a feeder-specific level to
expedite approvals of the Net-Metering and Own-Use RE System appli­
cations and to ensure the technical viability and safety of integrating the
RE System into the grid” [82]. This corresponds to international best
practices. In addition, PH DOE will provide guidelines and training for
distribution utilities to reduce the cost of conducting distribution impact
studies via process such as screening criteria and hosting capacity
analysis instead of conducting distribution impact studies for every
application.
Previously, the net metering program limited installed capacity to
100 kW. This means that DPV systems with installed capacity greater
than 100 kW could not get compensated for excess generation flowing
into the power grid. However, the PH DOE is proposing that these larger
sized systems should now be able to export power and receive a price
determined by the ERC [82].
The skyrocketing PV penetration levels in Vietnam expose the lack of
stable grid infrastructure. There are insufficient and unified guidelines
for the design, construction, connection, operation, and management
process [83]. To overcome these challenges, grid assessment is necessary
to determine the grid capacity and capability to plan an infrastructure
development. Optimizing the location of new PV in the distribution
3
The interconnection cost was taken from the attachment 5 of the procla­
mation of the energy regulatory commission on the purchase of electricity from
residential solar PV rooftop electricity generation. The percentage was esti­
mated based on the capital investment cost of 200,000 THB
4
For the medium voltage, the capacity cap is also applied for each feeder
(MEA: 4 MW/feeder for 12 kV and 8 MW/feeder for 24 kV, PEA: 8 MW/feeder
for 22 kV and 10 MW/feeder for 33 kV).
S. Junlakarn et al.
system could establish priority zones for grid integration and minimize
technical difficulties [84]. Vietnam can also review experiences
including technical standards in successful counties of implementing
solar PV and adjust them to fit in the local context.
5. Discussion & policy implications
A clear policy on compensation mechanisms for DPV could promote
deployment of DPV in households, businesses, and industries across
Southeast Asia. This paper concludes that the levels of tariffs and in­
vestment costs of DPV in the Philippines and Vietnam offer the best
investment climate for DPV even with the compensation mechanisms
that offer the least value for excess DPV generation, i.e., self-
consumption and net billing.
There is a hesitation by governments in Southeast Asia to compen­
sate excess generation at a “fair rate.” In Thailand, the rate of purchase
for excess generation is below the wholesale rate. In the Philippines, it is
roughly the wholesale rate (blended generation cost). In Vietnam, dur­
ing the implementing the self-consumption scheme, excess generation is
also very low. Under-valuing PV electricity prevents the increase of DPV
deployment sizes to go beyond self-consumption needs in a household,
business, or industry.
Most Southeast Asian countries encourage “self-consumption” of
DPV resources. They are not supporting customers who wish to build
DPV capacity beyond their own utilization of electricity. From a utility-
management perspective, this is sub-optimal because if different
households had incentives to generate electricity outside of their own
consumption – they could potentially feed the grid, providing electricity
for neighbors who may not be able to produce solar PV, or reduce the
need for peak generation capacity such as diesel and natural gas to run
for longer hours, improving the emissions profile of the utility company.
In countries with potentially severe electricity shortages such as the
Philippines and Vietnam, disincentivizing large PV sizing also results in
lost opportunities to tap into cheaper and cleaner sources of power that
increase reliability.
Considering the planned power supply expansion in the countries’
power development plans, the high installed capacity of less flexible
power plants could be considered “locked-in.” In the future, if DPV ex­
pands rapidly, the demand for centralized power plants also signifi­
cantly declines and could create stranded assets [85]. Over projections
of power demand lead to increased projections of new utility-scale
projects, often overlooking the potential for DPV to contribute to elec­
tricity supply security. In Vietnam, the revised PDP (PDP VII-revised)
approved in 2016 reduced electricity demand projections from 695
TWh/yr to 572 TWh/yr [86]. Customers must pay for stranded assets in
some way. This is largely unexplored in research and international
agencies’ reports, and could influence retail rates and customer eco­
nomic decisions.
The value of solar remains a contentious topic and changes over time
based on existing market conditions. Developing new approaches to
quantify the value of solar in emerging economies specific to the
Southeast Asian policy landscape will help improve DPV compensation
mechanisms and incentivize adoption. For instance, similar to FIT rates
that are set to decline when certain levels of megawatts of PV is reached
or decline at the end of each year, the export rate can initially be set high
and decline to match market conditions. Typically, the value of solar
Appendix 1. Electricity Tariffs in the Philippines, Thailand, and Vietnam
The Philippines: Electricity rate components are clearly defined for all types of customers and adjusted every month. Residential customers’
default tariff is an inclining block rate where the electricity rates are divided into 4 blocks (1-200 kWh, 201-300 kWh, 301-400 kWh, and more than
400 kWh) and the rates are higher for the higher blocks. In this study, the commercial customers refer to the customers in the General Power rate class
whose maximum monthly consumed energy is above 40 kW. These customers typically pay a flat electricity rate, but can choose the TOU rate as an
option. For the flat rate, a fixed monthly charge, energy and demand charges are included. For the optional TOU rate, the demand charge is not
12
Renewable and Sustainable Energy Reviews 145 (2021) 110820
decreases with increasing volume. States in the US such as Nevada have
demonstrated innovative policies to decrease the credit of exported
electricity by 7% for every 80 MW of DPV until the credit reaches 75% of
the retail rate to promote faster diffusion [87].
This type of dynamic export rate design could be a useful policy tool
in Southeast Asia. Since demand for electricity is rising so quickly, it
could feed the initial investment and early adopters into the market
causing some positive feedback. To manage a surge in DPV connections,
utility companies could then cap the credits for exported electricity at
different capacities. This analysis, in addition to clear net billing, and
time-of-use rate setting policies could alleviate the burden on the utili­
ties and avoid problems associated with feed-in tariffs. Japan experi­
enced increases in electricity bills and higher social costs as a negative
impact of feed-in tariffs [88]. Clear net billing policies can provide
revenue to the utilities, avoid unnecessary grid expansion, and increase
the share of low-carbon electricity generation resources in Southeast
Asia. Without alternative policy support, a number of proposed
large-scale centralized power plants may threaten the livelihood and
environment of millions of households across Southeast Asia [4].
Therefore, it is critical to advance policy mechanisms that can enable
a clean energy transition in Southeast Asia and beyond. Advancing DPV
enables innovative sectors to flourish and a possibility to grow the
economy and balancing stakeholder demands. Despite barriers
regarding unstable policy conditions, it remains clear that the significant
interest for customers to adopt DPV in the Philippines, Thailand, and
Vietnam could provide multiple lessons for other contexts across sub-
Saharan Africa, the United States, and Latin America where DPV pol­
icies are also being formed. The equity implications found in pilot pro­
jects here using economic modeling tools are important considerations
for a just and more sustainable future across the world.
Credit statement
Siripha Junlakarn: Conceptualization, Methodology, Analysis,
Writing, Editing. Noah Kittner: Conceptualization, Methodology, Anal­
ysis, Writing, Editing. Sopitsuda Tongsopit: Conceptualization, Meth­
odology, Analysis, Writing, Editing. Supawan Saelim: Analysis, Writing,
Editing.
Declaration of competing interest
The authors declare the following financial interests/personal re­
lationships which may be considered as potential competing interests:
The authors worked with Abt Associates/USAID Clean Power Asia to
assemble data included in this analysis. There are no competing finan­
cial interests.
Acknowledgements
The authors thank Abt Associates/USAID Clean Power Asia for
enabling research in three countries. Special thanks go to the following
individuals for their facilitation of data access: Mylene Capongcol (Di­
rector of Renewable Energy Management Bureau (REMB), the
Philippines Department of Energy), Edward Neri (REMB), and Nguyen
Hai Duc from USAID Vietnam Low Emission Energy Program.
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

included. The off-peak period starts from 9pm to 8am on Monday to Saturday and from 8pm to 6pm on Sunday and on-peak period covers all other
hours5. The electricity tariffs in the Philippines used in this study are shown in Tables 12–14.

Table 12
Residential electricity block rates with fixed monthly charge of 0.4592 USD/kWh and buyback rates for NB

Month Block Energy Charge (USD/kWh) Buyback Rate (USD/kWh) Month Block Energy Charge (USD/kWh) Buyback Rate (USD/kWh)

1 1 0.1480 0.069219 7 1 0.1522 0.084723

2 0.1547 0.069219 2 0.1589 0.084723
3 0.1610 0.069219 3 0.1652 0.084723
4 0.1720 0.069219 4 0.1762 0.084723
2 1 0.1647 0.081026 8 1 0.1539 0.085068
2 0.1714 0.081026 2 0.1606 0.085068
3 0.1777 0.081026 3 0.1670 0.085068
4 0.1888 0.081026 4 0.1780 0.085068
3 1 0.1772 0.092066 9 1 0.1697 0.087651
2 0.1839 0.092066 2 0.1764 0.087651
3 0.1902 0.092066 3 0.1828 0.087651
4 0.2012 0.092066 4 0.1938 0.087651
4 1 0.1811 0.095634 10 1 0.1704 0.088636
2 0.1878 0.095634 2 0.1771 0.088636
3 0.1941 0.095634 3 0.1834 0.088636
4 0.2051 0.095634 4 0.1944 0.088636
5 1 0.1764 0.091589 11 1 0.1767 0.092708
2 0.1831 0.091589 2 0.1834 0.092708
3 0.1894 0.091589 3 0.1897 0.092708
4 0.2005 0.091589 4 0.2007 0.092708
6 1 0.1504 0.082383 12 1 0.1695 0.086755
2 0.1571 0.082383 2 0.1762 0.086755
3 0.1634 0.082383 3 0.1825 0.086755
4 0.1744 0.082383 4 0.1935 0.086755

Table 13
Commercial electricity flat rates with fixed monthly charge of 35.8106 USD/kW and buyback rates for NB

Month Energy Charge (USD/kWh) Demand Charge (USD/kW) Buyback Rate(USD/kWh)

1 0.0975 9.9570 0.069219

2 0.1114 10.250 0.081026
3 0.1242 10.542 0.092066
4 0.1292 10.411 0.095634
5 0.1239 10.553 0.091589
6 0.1000 9.9096 0.082383
7 0.1018 9.8689 0.084723
8 0.1028 10.155 0.085068
9 0.1197 9.8735 0.087651
10 0.1216 9.3020 0.088636
11 0.1260 10.008 0.092708
12 0.1193 9.6727 0.086755

Table 14
Commercial TOU rates with fixed monthly charge of 35.8106 USD/kW6 and buyback rates for NB

Month Period Energy Charge (USD/kWh) Buyback Rate(USD/kWh)

1–6 Peak 0.141132 0.08645

1–6 Off-Peak 0.066981 0.08645
7–12 Peak 0.137358 0.08645
7–12 Off-Peak 0.066981 0.08645

Thailand: Electricity rates are adjusted every four months through fuel adjustment charge or known as Ft charge. Residential customers can
choose between inclining block and TOU rate. For the inclining block rate, the electricity rates are divided into 3 blocks (1–150 kWh, 151–400 kW, and

5
Information from Meralco website: https://biz.meralco.com.ph/products-services-and-programs/peak-peak-program-2 (accessed February 2021).
6
Fixed monthly charges of TOU rates were not found and are assumed to equal the flat rate.

13
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

more than 400 kW) and the rates increase when customers consume more electricity. The TOU rates are different by time period (peak and off-peak)
and voltage levels. Both tariff structures of residential customers have a fix charge. In this study, commercial customers are referred to the customers in
Medium General Service whose maximum monthly consumed energy is 30–999 kW. These customers can choose between the flat and TOU rate,
classified by the level of voltage. Both flat and TOU rates include a fixed month charge, energy and demand charges. Demand charges for both rate
structures are different according to the voltage levels. The energy charges for the TOU rate are different between peak and off-peak period where the
off-peak period starts from 10pm to 9am on weekdays and on all days on weekends and the rest periods are for on-peak period. The electricity tariffs in
Thailand used in this study are shown in Tables 15–17.

Table 15
Residential block rates with fixed monthly charge of 1.092 USD/kW and buyback rates for NB

Block Energy Charge (USD/kWh) Buyback Rate (USD/kWh)

1 0.0895 0.0746
2 0.1173 0.0746
3 0.123 0.0746

Table 16
Residential TOU rates with fixed monthly charge of 1.092 USD/kW and buyback rates for NB

Period Energy Charge (USD/kWh) Buyback Rate (USD/kWh)

Peak 0.1623 0.0746

Off-peak 0.072 0.0746

Table 17
Commercial TOU rates with fixed monthly charge of 8.921 USD/kW and buyback rates for NB

Period Energy Charge (USD/kWh) Demand Charge (USD/kW) Buyback Rate (USD/kWh)

Peak 0.1162 3.798 0.0746

Off-peak 0.0711 3.798 0.0746

Vietnam: An inclining block rate is the only option for a residential customer with a normal meter. Under the inclining block rate, the electricity
rates are divided into 6 blocks (1–50 kWh, 51–100 kWh, 101–200 kWh, 201–300 kWh, 301–400 kWh, 400 kW, and more than 400 kW). For com­
mercial customers, the TOU rate is the only option, and it is classified by level of voltage and there is no demand charge. The TOU rate is divided into 3
periods, namely standard, peak and off-peak. The peak period starts from 9.30am to 11.30am and 5pm–8pm on Monday to Saturday. The off-peak
period starts from 10pm to 4am in every day. The standard period covers other hours. The electricity tariffs in Vietnam used in this study are
shown in Tables 18 and 19.

Table 18
Residential block rates with no fixed monthly charge and buyback rates for NB

Block Energy Charge (USD/kWh) Buyback Rate (USD/kWh)

1 0.0803 0.1031
2 0.083 0.1031
3 0.0964 0.1031
4 0.1214 0.1031
5 0.1357 0.1031
6 0.1402 0.1031

Table 19
Commercial TOU rates with no fixed monthly charge and buyback rates for NB

Period Energy Charge (USD/kWh) Buyback Rate (USD/kWh)

Standard 0.1277 0.1269

Peak 0.2196 0.1269
Off-Peak 0.0777 0.1269

14
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

Appendix 2. Representative Load Profiles for the Analysis

Residential: The load profile shape of residential customers usually has one small peak in the morning when people wake up and go to work and
another large peak in the evening when people return home. The residential load profile selection is validated based on literature review of load
profiles of residential customers in Southeast Asia nations [10,11,89,90]. The residential load profiles used in this study are on an hourly basis and
different from month to month as shown in Fig. 5. Average monthly consumption is at around 400 kWh per month to correspond with the average
middle-income household consumption in Southeast Asia nations [89,91,92].

Fig. 5. Monthly average load profile of a residential customer.

Commercial: For commercial customers, they usually consume electricity during the working hours such as from 9am to 8pm for offices or from
10am–10pm for shopping malls. The load shape is similar to the hill shape, where the electricity consumption of offices starts going up and reaches the
peak around 9am and then the consumption is stable and starts going down around 8pm [11]. The commercial buildings usually have limited areas for
installing PV systems. The commercial load profiles used in this study are on an hourly basis and different from month to month as shown in Fig. 6

15
S. Junlakarn et al. Renewable and Sustainable Energy Reviews 145 (2021) 110820

Fig. 6. Monthly average load profile of a commercial customer.

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