Solar profitability rises 9% in Southeast Asia with battery integration

Stable policies and foreign investment are vital to unlock the region's solar potential.

Solar projects in Vietnam, the Philippines, and Indonesia can increase their reliability and profitability by as much as 9 percentage points with the integration of batteries.

According to Ember’s new analysis, the three nations can unlock private and public capital investments in clean energy by focusing on integrating storage, improving power purchase agreement (PPA) tariffs and lowering capital costs.

Indonesia offers the strongest price signal based on PPA ceiling prices for storage, with solar project internal rate of returns going up to 23% after including storage, from 11% to 16% without storage.

The countries can unlock the potential by cementing stable, predictable policies around tariffs, risk allocation and auction design, whilst also fast-tracking project approvals and easing bottlenecks that inflate capital costs.

“Hedging risks in renewable energy projects helps stabilise prices and boosts investment appeal for long-term sustainability,” Ember said, citing the Philippines as an example with its indexation of Green Energy Tariff for GEA projects, marking a positive shift by giving independent power producers avenues to include the forward price of renewable energy production.

The Ember report noted that existing policies are already boosting investor confidence. These policies include Vietnam’s Direct Power Purchase Agreement, which could double the share of renewables from 19% to 42% by allowing factories to buy clean electricity directly, and the Philippines’ move to open its renewable sector to 100% foreign ownership.

“Bold reforms are essential to place renewables at the forefront of the region’s energy security,” said Dr Dinita Setyawati, senior energy analyst at Ember and lead author of the report.

“A multi-trillion-dollar opportunity is stalled by circular bureaucracy, outdated permitting, and neglected grid infrastructure. With smart governance reforms and decisive execution, megawatt targets will mean something, energy security will be achieved, and foreign investment will flow into the region,” said Atem Ramsundersingh, CEO of WEnergy Global.