26 February, 2019
Recent developments
On 29 January 2019, the Ministry of Industry and Trade of Vietnam (MOIT) released the first draft of Decision of the Prime Minister on the mechanism for encouraging the development of solar power projects in Vietnam applicable from 1 July 2019 (Draft Decision).
In addition to proposing new Feed-in-Tariffs for application from 1 July 2019 until 30 June 2021, the Draft Decision sets out detailed guidelines and requirements for rooftop solar power projects in Vietnam to replace the current Decision No. 11 in 2017 as recently amended by Decision No. 02 in early January 2019.1
Models of Rooftop Solar Power Projects
Under the Draft Decision, rooftop solar power projects are defined as solar power projects having solar PV panels installed on the roof or attached to buildings and having an installed capacity of 1 MWp or less. This definition proposed by the MOIT serves the purpose of determining the tariffs and licensing requirements for these rooftop solar power projects. For a "rooftop" solar power project having an installed capacity of more than 1 MWp directly connected to the national grid, it will be considered a solar farm for those purposes.
The Draft Decision provides for four rooftop solar power models:
- "Whole power selling business" model, which is defined as a model of rooftop solar power project installed and measured independently / separately from the power consumption system of the household/business, directly connected to the Power Purchaser’s grid and selling the entire generated power output to the Power Purchaser, and the household/business does not directly consume any power generated from its rooftop solar power system.
- "Consumption household" model, which is defined as a model of rooftop solar power projects installed with a bi-directional metering system together with the household’s power consumption system for directly consuming power generated from the household's rooftop solar power system, simultaneously receiving power directly from the grid of EVN/the Power Purchaser. Under this model, any excess energy output after self-consumption by the household will be delivered / exported / backfed onto the grid of EVN/Power Purchaser. Payment and invoicing will be made separately between power output delivered / exported and power output received / imported by the household / business. This model is proposed following the recently issued Decision No. 02 of the Prime Minister on the new tariff mechanism for rooftop solar, which replaced the former netmetering scheme.
- "Direct power sale and purchase" model, which is defined as a model of rooftop solar power project under which individuals and organizations invest, generate and sell power from their rooftop solar power projects to other individuals and organisations (i.e., not EVN) without connecting or utilizing national grid systems.
- "Intermediary power sale and purchase" model, which is defined as a model of rooftop solar power project under which individuals and organizations invest, generate and sell power from their rooftop solar power project through power distributing and retailing entities not belonging to EVN.
- "Intermediary power sale and purchase" model, which is defined as a model of rooftop solar power project under which individuals and organizations invest, generate and sell power from their rooftop solar power project through power distributing and retailing entities not belonging to EVN.
Technical Requirements for Rooftop Solar Power Projects
Rooftop solar power projects directly or indirectly connected with the national grid must register their grid connections with the provincial-level Power Corporations/Utility.
In terms of connection point, the Draft Decision provides for the following specific requirements:
1) With respect to the "Consumption household" model
- A rooftop solar power project under this model will have its grid connection point in front of the EVN/Power Purchaser's meter.
- The relevant Power Corporation/Utility of the relevant province or city under central government will coordinate with the investor/power generator to install a bi-directional meter to record power output consumed and power output generated from the solar power system on a monthly basis. Costs of investments and installation of bi-directional meters shall be borne by the Power Corporation/Utility.
2) With respect to the "Whole power selling business" model
- Under this model, the Power Seller/generator and EVN/Power Purchaser may freely reach an agreement for the connection point to be either in front of, or behind, the Power Purchaser's meter.
- The provincial-level Power Corporation/Utility will coordinate with the investor/power generator to install a bi-directional meter to record power output consumed and power output generated from the solar power system on a monthly basis. Under this model, costs of investments and installation of meters and costs for upgrading interconnection systems/facilities shall be borne by the Power Seller.
3) With respect to "Direct power sale and purchase" model
The Draft Decision proposes two options:
- If the Power Seller does not use the national grid at all, the Power Seller and the private Power Purchaser may freely reach an agreement on metering and interconnection arrangements in accordance with applicable regulations on civil and commercial transactions.
- If the rooftop solar power system is indirectly connected to the national grid, the Power Seller must reach an agreement with the provincial-level Power Corporation/Utility for installing a bidirectional meter to record power output consumed and power output generated from the solar power system on a monthly basis. Under this option, costs of investments and installation of meters and costs for upgrading interconnection systems/facilities shall be borne by the Power Seller. In addition, the Draft Decision requires the MOIT to formulate detailed regulations on the procedures and formalities for grid connection registration, grid connection agreements, technical requirements for interconnection facilities and examination of conditions of grid connection for operation.
n addition, the Draft Decision requires the MOIT to formulate detailed regulations on the procedures and formalities for grid connection registration, grid connection agreements, technical requirements for interconnection facilities and examination of conditions of grid connection for operation.
Tariff mechanism for Solar Rooftop Projects
- As a general principle governing offtake commitments, EVN/the Power Purchaser is obligated to purchase the entire power output generated from rooftop solar power projects. Compared to the current Decision No. 11, the Draft Decision clarifies that this offtake commitment is limited "to the extent and conditions permitted by electrical grid".
- The proposed tariffs for rooftop solar power projects are exclusive of VAT and are subject to adjustments based on the fluctuation of the United States Dollar (in UScents/kWh) in accordance with the central exchange rate between the United States Dollar and the Vietnamese Dong as announced by the State Bank of Vietnam on the last day of the previous year to calculate the power payment for the following year.
- The proposed tariffs will apply to part or the whole of rooftop solar power projects' systems achieving actual commercial operation date before 30 June 2021 (which is still to be confirmed) for application for a PPA term of 20 years from the commercial operation date.
- With respect to the "Direct power sale and purchase" model however, the power seller/developer may freely reach an agreement with private power consumers/purchasers on tariffs and PPA terms in accordance with applicable legal regulations of Vietnam.
- With respect to the "Intermediary power sale and purchase" model, the power distributing and retailing entity must coordinate with EVN to record the power output delivered/sold from the solar power project to the grid through bi-directional meters; and EVN will directly make energy payments to the power seller.
- As the next step, the MOIT is required to fomulate new model PPA templates for rooftop solar projects under the "Whole power selling business model" and "Consumption household model", as well as detailed guidelines for energy payments. The maximum term of the PPA for rooftop solar power projects is 20 years from the commercial operation date. Upon expiration of the PPA's term, the parties may extend the term or enter into a new agreeement in accordance with the applicable regulations.
For the Draft Decision's proposed tariffs applicable for solar power projects from 1 July 2019 until 30 June 2021, please click here to read the details in our earlier alert.
Please note that the proposed policies under the Draft Decision are still in draft form, allowing members of the private sector to recommend revisions and supplementations to it before 20 February 2019 (as requested by the MOIT's Electricity and Renewable Energy Authority).
For further information, please contact:
Frederick Burke, Partner, Baker McKenzie
frederick.burke@bakermckenzie.com
1 Decision No. 11/2017/QD-TTg of the Prime Minister dated 11 April 2017 on the mechanism for encouragement of the development of solar power projects in Vietnam ("Decision No. 11"), as amended by Decision No. 02/2019/QD-TTg of the Prime Minister dated 8 January 2019 amending and supplementing a number of articles of Decision No. 11 ("Decision No. 02")
