On July 21, 2022, Vietnam’s Ministry of Industry and Trade (MOIT) submitted Report No. 126/BC-BCT to the Prime Minister regarding the mechanism for transitional wind and solar power projects. In this report, the MOIT proposed some recommendations to explicitly address difficulties for outstanding wind and solar power projects (“Transitional Projects”) which have been developed under the Prime Minister’s Decision No. 13/2020/QD-TTg dated April 6, 2020, on the development of solar power projects (Decision 13) and Decision No. 37/2011/QD-TTg dated June 29, 2011, on the development of wind power projects (Decision 37), as amended by Decision No. 39/2018/QD-TTg dated September 10, 2018 (Decision 39).
The Transitional Projects primarily include those which have completed construction but have not yet been put into operation, and those which have been put into operation but for which the power price has not yet been decided, due to missing the deadline set forth under the aforementioned decisions to be eligible for the feed-in-tariff (FIT).
In particular, the MOIT has proposed the following key recommendations to the Prime Minister:
Mechanism for Transitional Projects
The MOIT proposes two options:
Option 1: Developers of the Transitional Projects negotiate and sign power purchase agreements (PPA) with Vietnam Electricity (EVN) within the price framework issued by the MOIT in accordance with the Law on Electricity, the Law on Prices, and their subordinate guiding legislation; or
Option 2: The Prime Minister formulates a new decision specifying the mechanism for bidding on the purchase of power produced by the Transitional Projects, estimated to be implemented for the time limit of three years and within the price framework issued by the MOIT.
Mechanism for future wind and solar power projects
The MOIT proposes to apply the mechanism that developers of future wind and solar projects negotiate the power price and sign the PPA with EVN within the price framework and guidance issued by the MOIT to ensure compliance with the Law on Electricity, Law on Prices, and other related legislation.
Mechanism for approved/accepted projects put into commercial operation
The Prime Minister is requested to issue a written direction so that the MOIT can have grounds to provide subsequent guidance for review and reconsideration of the signed PPA between EVN and the developers to balance the interests and benefits of the related parties, including sellers, buyers, end-user customers, and the state.
Invalidation of Decision 13, Decision 37 and Decision 39
Currently, Decision 13, Decision 37 and Decision 39 are still legally effective. Nevertheless, the MOIT requests the Prime Minister to repeal these decisions for the following reasons:
- Provisions on the FIT are no longer effective (from January 1, 2021, for solar power and from November 1, 2021, for wind power).
- A number of key provisions of these decisions are no longer appropriate, including (i) the PPA term of 20 years; (ii) the FIT’s adjustment following the fluctuation of the exchange rate between VND and USD, which is applied for 20 years from the commercial operation date; and (iii) EVN’s responsibility to purchase all of the power generated from solar and wind projects.
- The price of renewable energy around the world has shown a downward trend recently, and the market has become increasingly competitive. Therefore, it is no longer appropriate to maintain the supportive policies for wind and solar power projects under these decisions.
Upon cancellation of these decisions, the MOIT will subsequently amend its guiding circulars, including Circular No. 02/2019/TT-BCT dated February 28, 2019, and Circular No. 18/2020/TT-BCT dated August 31, 2020, on development of wind and solar power projects, to align with the new mechanism.
For further information, please contact:
Doan Ngoc Tran, Tilleke & Gibbins
doan.t@tilleke.com
