27 March, 2019
On 8 January 2019, the Prime Minister issued Decision 02 to amend certain articles of Decision 11 on mechanism for encouragement of development of solar power in Vietnam. Decision 02 promulgates new payment scheme to replace the troublesome net-metering structure of the rooftop solar power projects under Decision 11. However, Decision 02 was alleged to be a lackluster as it did not provide any model PPA for rooftop solar power projects and it only applies to limited rooftop solar power projects which having commercial operation date – COD, together with electricity meter readings confirmation, prior to 1 July 2019. It is worth noting that Circular 16 required a rooftop solar power generator to enter into a model PPA (in the form attached to Circular 16) with EVN or its authorized subsidiary. However, such model PPA and the net-metering under Circular 16 were not supported by EVN due to its payment complexity nature. In fact, following Decision 02, Ministry of Industry and Trade (”MOIT”) did not issue any model PPA for rooftop solar power project to support Decision 02 until 11 March 2019.
On 11 March 2019, the MOIT has issued Circular 05/2019/TT-BCT (“Circular 05”) to replace old model PPA for rooftop solar power projects attached to Circular 16 and extend the FITs for all rooftop solar power projects. Circular 05 will become effective on 25 April 2019. We highlight some key items of this Circular as follows:
FITs for all Rooftop Solar Power Projects
Circular 05 has abolished the requirement on COD deadline of rooftop solar power projects to enjoy FITs in Article 16 of Circular 16.
Prior to 1 January 2018, FIT for rooftop solar power projects is VND2,086 / kWh not inclusive of VAT (approx. USD9.35 as the central exchange rate between VND / USD of the State Bank of Vietnam on 10 April 2017, i.e., VND22,316 / USD1). This FIT is supposed to apply for outstanding rooftop solar power projects came into operation prior to 1 January 2018.
From 1 January 2018 onward, the FIT must be adjusted according to the last applicable central exchange rate between VND / USD issued by the SBV on the previous year.
Improved Model PPA for Rooftop Solar Power Projects
The new model PPA has been simplified for the sale of solar power from the rooftop solar generators to EVN / power purchasers, and completely canceling the net-metering structure which mixing of sale / purchase of power between the parties. In addition, the sale of power from EVN / retail power companies to rooftop solar power generators shall be made under separate retail power purchase agreements and in accordance with the rules for supplying retail powers to end-user consumers.
We outline below some improvements:
(i) The model PPA indicates clearly that the FIT will be applicable for 20 years from the COD.
(ii) The model PPA provides a detail but simple formula to calculate the power generated and the price paid to the generators.
(iii) The model PPA separates payment and invoice procedure for corporate entities from the one for individuals / households.
(iv) The model PPA regulates the obligation of power purchasers to pay default interest (i.e., average inter-bank interest rate of 1 month issued by SBV on the payment date) on
any late payments owing to rooftop solar generators.
For further information, please contact:
Oliver Massmann, Partner, Duane Morris
omassmann@duanemorris.com
