Solar projects integrating storage in Indonesia, Viet Nam and the Philippines are now reaching internal rate of return levels comparable to those sought by major infrastructure investors. In several cases, particularly in Indonesia, power purchase agreements (PPAs) structured with a storage component offer internal rate of return (IRR) levels reaching up to 23%, compared to a regional average of 12 to 15%.
Regulatory reforms reshape investment signals
This development follows reforms aimed at making PPAs longer, more stable and better tailored to private developers. In Indonesia, the latest guidelines from the Ministry of Energy and Mineral Resources allow PPA durations of up to 30 years, introduce a foreign exchange risk-sharing mechanism, and clarify developers’ rights to monetise renewable energy certificates. In Viet Nam, the launch of the Direct Power Purchase Agreement (DPPA) mechanism allows direct sales between producers and large consumers, reducing dependence on the state utility EVN.
In the Philippines, authorities have lifted restrictions on foreign ownership of renewable assets and published an operational framework for storage. This framework includes the technical roles of batteries, their remuneration via ancillary services, and their integration into tenders, consolidating the position of hybrid projects within the national energy roadmap.
Storage becomes a strategic asset in constrained grids
The role of storage is also evolving in these markets. It is now valued not only for its capacity to optimise solar generation but also as a system stability tool in coal-reliant contexts such as Indonesia and the Philippines. Ember notes that in these inflexible systems, batteries help reduce reliance on peak thermal plants, enabling a reduction in fossil fuel subsidies.
Storage also addresses grid congestion and curtailments — forced production reductions — that affect solar projects in Viet Nam. This ability to smooth production peaks and provide more predictable electricity is becoming a key factor in securing contracts.
Economic balances highly sensitive to tariff parameters
Profitability analyses using financial models such as the System Advisor Model show strong IRR sensitivity to tariff parameters. A 10% increase in PPA tariffs can lead to a disproportionate rise in IRR, given the stability of costs and production over time. Conversely, aggressive tariff reductions in future tenders could make storage-integrated projects unbankable, despite the continued decline in solar module costs.
Capital costs remain high in these markets, and field-observed capital expenditures — 10 to 30% above global benchmarks — amplify this sensitivity. Battery price declines remain dependent on lithium market volatility and logistical constraints, making cost projections cautious.
Strategic competition over value chains
These dynamics take place amid growing competition between Western and Chinese capital. Most solar modules are imported from China, whose exports rose by over 70% in 2025, according to Ember. In response, governments are seeking to attract institutional finance from the United States, European Union, Japan and South Korea through more predictable PPAs and credit-enhanced mechanisms tied to environmental, social and governance (ESG) standards.
Compliance pressure is also intensifying, particularly with Western sanctions targeting operators linked to Russia or Iran. Infrastructure projects will need to demonstrate supply chain traceability and the absence of links with entities listed by the Office of Foreign Assets Control (OFAC) or the European Union, influencing the choice of partners and suppliers.
Regional integration prospects and developers’ arbitrage
The increasing integration of storage is also linked to the development of the ASEAN Power Grid, a regional electricity interconnection project. Storage plays a role as a local stabilisation tool facilitating cross-border flows. The three countries under study could eventually become “clean power” export platforms for neighbouring countries lacking renewable resources.
For developers and independent power producers (IPPs), decision-making is increasingly between “merchant” models without long-term contracts and regulated PPAs that include a flexibility premium. Electro-intensive industries, particularly in manufacturing and data centres, are the primary buyers of such power, as they seek green electricity that is both reliable and compliant with international decarbonisation standards.
