8 May, 2019
Recent developments
On 12 April 2019, the Ministry of Industry and Trade of Vietnam ("MOIT") released the third draft ("Third Draft") of the Decision of the Prime Minister on the mechanism for encouraging the development of solar power in Vietnam, applicable from 1 July 2019 ("Draft Decision").
In addition to proposing new Feed-in-Tariffs for application from 1 July 2019 through to 31 December 2021, the Draft Decision sets out guidelines and requirements for
rooftop solar power systems in Vietnam to replace the current Decision No. 11 in 2017 as amended by Decision No. 02 in early January 2019.1
The Third Draft continues to recognize a "direct power sale and purchase" model (as defined below) for rooftop solar power systems with an installed capacity of less than 1MWp. The Third Draft leaves unchanged (compared to the second draft) the specific FiT rates for "rooftop solar power systems".
However, the Third Draft has removed the "intermediary power sale and purchase" model from the list of rooftop solar power systems under the Draft Decision.2
Models of Rooftop Solar Power Systems
Under the Third Draft, "rooftop solar power systems" are defined as solar power systems having solar PV panels installed on the roof or attached to civil buildings and
having an installed capacity less than 1 MWp. This definition proposed by the MOIT serves the purpose of determining the tariffs and licensing requirements for thes rooftop solar power systems. For "rooftop" solar power systems having an installed capacity of 1MWp or greater directly connected to the national grid, under the Draft Decision, they will be considered "Grid-connected solar power projects" (i.e., solar farms) for those purposes.3
The Draft Decision provides for four models of rooftop solar power systems:
"Power Consumption" model, which is defined as a model of "Rooftop solar power systems" under which organizations and individuals invest and install rooftop solar power systems to (i) use (consume) parts of energy output produced from the rooftop solar power systems and (ii) sell excess energy output to the national grid.
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"Excess power sale business" model, which is defined as a model of rooftop solar power systems under which organizations and individuals invest in and install rooftop solar power systems to (i) sell parts of power energy outputs to other organization and individuals and (ii) sell excess power energy output to the national grid.
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"Entire power sale business" model, which is defined as a model of rooftop solar power systems under which organizations and individuals invest in and install rooftop solar power systems to sell the entire power energy output produced from the rooftop solar power systems to the national grids.
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"Direct power sale and purchase" model, which is defined as a model of rooftop solar power project under which organizations and individuals invest in, install and sell power from their rooftop solar power systems to other individuals and organisations (i.e., not EVN) without directly utilizing the national grid systems.
Compared to the first draft in January 2019, the Third Draft has removed the "intermediary power sale and purchase" model from the list of rooftop solar power systems under the Draft Decision.
Technical Requirements for Rooftop Solar Power Systems
Under the Third Draft, rooftop solar power systems directly or indirectly connected with the national grid must register their grid connections with EVN or its authorized entities.
Investors of rooftop solar power systems must also ensure compliance with the requirements on electrical power safety and construction safety under the relevant legal regulations.
Tariff mechanism for Rooftop Solar Power Systems
As a general principle governing offtake commitments, EVN/the Power Purchaser is obligated to purchase the entire power output sold from rooftop solar power systems to the grids consistent with the regulations on operation of national power systems and the technical standards and regulations of the electrical power industry.
These technical regulations are separately provided for by the MOIT and EVN.
For (i) "Power Consumption" model, (ii) "Excess power sale business" model and (iii) "Entire power sale business" model, the proposed tariffs for sale of power output from rooftop solar power systems to the national or EVN grids are as follows:
|
Solar Power Technologies |
Zone 1 Tariff |
Zone 2 Tariff |
Zone 3 Tariff |
Zone 4 Tariff |
||||
|
VND /kWh |
US cent / kWh4 |
VND /kWh |
US cent / kWh |
VND /kWh |
US cent / kWh |
VND /kWh |
US cent / kWh |
|
|
"Rooftop solar power projects/ systems" |
2,486 |
10.87 |
2,139 |
9.36 |
1,916 |
8.38 |
1,803 |
7.89 |
These proposed tariffs are exclusive of VAT and are subject to adjustments based on the fluctuation of the United States Dollar (in US cents/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 involved parties are responsible for complying with the regulations on taxes and fees.
The proposed tariffs for sale of power output to EVN will apply to part or the whole of rooftop solar power systems achieving an actual commercial operation date between 1 July 2019 and 31 December 2021 for application for a PPA term of 20 years from the commercial operation date.
For the "Direct power sale and purchase" model (i.e., in case the power purchaser is not EVN or its authorized entities), then, under the Third Draft, the tariff and the terms of the direct power purchase agreement (DPPA) between the power seller/developer and private power consumers/ purchasers shall be "implemented in line with the current regulations". The Third Draft is not entirely clear as to what this means, but it implies that the parties to this DPPA are not subject to the FiT for rooftop solar power systems or the standard terms of model PPA template regulated by the MOIT.
For the Third Draft's proposed tariffs applicable for all types of solar power projects from 1 July 2019 until 31 December 2021, please click here to read the details in our earlier alert.
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").
2 Under the first draft in January 2019, "Intermediary power sale and purchase" model was 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", but it has been removed from the Draft Decision.
3 Please note that it is to be confirmed and clarified with the MOIT if rooftop solar power systems / projects with installed capacity of 1MWp only is considered "Rooftop solar power systems" or "Grid connected solar power projects" for the purpose of determining varying tariffs and licensing requirements (given that the drafting of the Third Draft appears to be conflicting with the current Circular No. 36/2018/TT-BCT on power operation licenses.
4 For the purpose of the Draft Decision, the MOIT applies the USD/VND central exchange rate announced by the State Bank of Vietnam on 9 December 2018.
