The National Power Development Plan for the 2021-2030 period, with a vision to 2045 (“PDP VIII”) is a plan focusing on the development of power sources, transmission power grids with the voltage of 220kV or higher in the period 2021-2030 and a vision to 2045, including plans to connect the national grids of neighboring countries. The Ministry of Industry and Trade (“MOIT”) is the organization in charge of planning and ensuring that requirements are implemented.
On 08 October 2021, after collecting the opinions from relevant Ministries, and other authorities, the MOIT completed the Draft PDP VIII and submitted it to the Prime Minister for review and approval. At the United Nations Climate Change Conference 2021 (COP26), the Prime Minister committed to reducing Vietnam’s net emissions to zero by 2050 and prioritizing the development of clean and renewable energy. As a result, the MOIT is concentrating on completing the PDP VIII under the Prime Minister’s instruction to send it to local authorities for discussion before finalizing and reporting to the Prime Minister in the first quarter of 2022.
Through this article, BLawyers Vietnam would like to summarize some highlights of the Draft PDP VIII updated to February 2022.
I Structure of renewable energy electricity according to the Draft PDP VIII
- The power capacity structure has had some changes
According to the Draft PDP VIII submitted in October 2021 (“October 2021 Draft”), the power capacity structure has the proportion of renewable energy sources (including hydropower, solar, wind power, biomass, electricity from waste…) of up to 43.9% in 2030 and 51.1% in 2045. The share of electricity produced by renewable energy sources reach 31.5% in 2030, and increase to over 36.3% in 2045, with solar and wind power accounting for 11% in 2030 and 27.2% in 2045, respectively. In the revised PDP VII, the share of electricity generated by renewable energy sources will only be 23% by 2030.
However, the solar power development plan for the 2021-2030 period is still excessively aggressive (approximately 25% of the power capacity structure); the MOIT is assessing to minimize the scale of solar power sources, increase offshore wind power sources, and ensure efficiency.
The MOIT proposed in the modified draft PDP VIII on 21 February 2022 (“February 2022 Draft”) that the total source capacity installed by 2030 is around 146,000 MW and over 352,000 MW by 2045.
- PDP VIII maintains to prioritize the development of renewable energy sources, particularly offshore wind power
Renewable energy sources are still prioritized for development in a reasonable and harmonious proportion across regions, while ensuring economic – technical and operational criteria, in accordance with the overall power system development program through 2030.
According to the MOIT, 5,000 MW of offshore wind power will be developed by 2030, increasing to around 40,000 MW by 2045. Offshore wind will account for 12% of the system source structure by 2045, with a planned building capacity of 41 GW.
Under the Ministry of Industry and Trade’s recalculation estimates, the total installed capacity of the power will expand to around 25,000 MW by 2045. Onshore and nearshore wind power will increase by 5,000 MW, offshore wind power by 3,000 MW, large-scale solar power by 13,600 MW, flexible thermal power source running on hydrogen gas by 4,300 MW, hydroelectricity and battery storage by 5,400 MW and rooftop solar power will expand by 3,400 MW.
In comparison to the October 2021 Draft, the February 2022 Draft will reduce lower emissions by 5 million tons of CO2 in 2030 and 38 million tons of CO2 in 2045.
- PDP VIII restricts the development of new coal-fired power plants
The PDP VIII restricts the development of new coal-fired power plants, the coal-fired power projects to be continued are those approved by the Prime Minister in the revised PDP VII and consider highly practical by the MOIT.
Many coal power facilities across the country have not been considered for development in the future. Some of the coal power facilities including Bao Dai, Pha Lai 3, and Quang Trach 2 with a combined capacity of 2,020 MW are removed out of the Draft PDP VIII. Several LNG gas power plants are also dropped from the Draft PDP VIII, including Hai Phong 1 and 2, and Long An 2, with a total capacity of 7,500 MW. Onshore wind power, offshore wind power, and solar electricity will be used to replace these excluded power facilities.
II Incentive policies for renewable energy projects in Vietnam
Pursuant to PDP VIII, renewable energy projects in Vietnam can gain some incentive policies such as incentives on corporate income tax, equipment import tax, land use incentives, etc. Specifically, as follows:
|Level of incentive
|Corporate income tax
|Corporate income tax rate:
The first 4 years from the year of taxable income: 0%Next 9 years: 5%Next 2 years: 10%The remaining years: 20%
|Imported goods as fixed assets, materials, and semi-finished products are not manufactured in domestic.
Investors should check the Ministry of Planning and Investment’s annual list of commodities and products exempt from import tax.
|Preferential land rental according to provincial regulations
|Environmental protection fee
|The Vietnam Development Bank (VDB) lends up to 70% of the total investment cost at an interest rate equivalent to a 5-year Government bond plus 1% each year.
Therefore, in addition to guiding the development of power over the next ten years, the PDP VIII is a landmark of our country’s renewable energy revolution. Accordingly, the power source structure is more appropriate, reducing fossil energy while increasing renewable energy and clean energy, with a particular plan to increase offshore wind power and an energy storage system in the entire source structure.
The aforementioned are some highlights on the Draft PDP VIII updated to February 2022. The MOIT is amending and supplementing the Draft to submit it to the Government in the first quarter of 2022.
For further information, please contact:
Minh Ngo Nhat, Managing Partner, BLawyers