Current price bracket for transitional renewable energy suitable: minister

The current price bracket for renewable energy projects that missed out on preferential feed-in-tariffs (FiTs) is completely consistent with global prices and domestic socio-economic realities, said Minister of Industry and Trade Nguyen Hong Dien on Thursday.

Clarifying issues related to renewable energy at a discussion during the legislature’s ongoing session, Dien said renewable power pricing is based on the Electricity Law, the Price Law, and government decrees.

The Ministry of Industry and Trade (MoIT) developed the latest price bracket on the basis of statistics from solar and wind power plants and data from international energy agencies, he said, adding that it strictly followed the process of collecting opinions from the Ministry of Finance, the Commission for the Management of State Capital at Enterprises, and the advisory council on price bracket appraisal results.

According to the new price bracket, the maximum purchase price for transitional solar power projects is VND1,185-1,508 (5.0-6.4 U.S. cents) per kWh, depending on the type and excluding VAT. Meanwhile, the ceiling price for transitional wind power projects is VND1,587-1,816 per kWh (6.8-7.7 U.S. cents).

The minister said most investors in projects that are not eligible for FiTs had raced against time to take advantage of the policy, but skipped several procedures as prescribed. Some even violated specialized laws.

"The expiration of the FiT policy was reflected in the Prime Minister's decision, not abruptly, and we made the new price range in compliance with the Price Law, the Law Electricity and related decrees, and on the basis of negotiations and the spirit of shared risks and harmonized benefits," Dien noted.

Eighty-five solar and wind power projects with a total capacity of more than 4,736 MW missed deadlines for FiTs. The 20-year preferential FiTs are 9.35 U.S. cents per kWh (Decision 11/2017) and 7.09-8.38 U.S. cents per kWh (Decision 13/2020) for solar power projects that became operational by December 31, 2020; and 8.35-9.8 U.S. cents per kWh (Decision 39/2018) for wind power projects that became operational by November 1, 2021.

To utilize the capacity of these projects, the MoIT repeatedly issued documents urging investors to complete procedures for price negotiations with state utility Vietnam Electricity (EVN), he stated.

The ministry also directed EVN to urgently coordinate with investors to reach an agreement on electricity prices in order to put the projects into operation soon, he added.

However, by March 30, two months after the new price bracket was launched, only one investor had sent its application to EVN. By the end of May 31, that figure had reached 59.

The remaining 26 investors have yet to submit applications as they disagree with the new price levels, saying they are too low, Dien said, adding other reasons may be incomplete procedures or power transmission difficulties.

Earlier, National Assembly delegate Nguyen Van Hien representing the Central Highlands province of Lam Dong claimed that the authorities had made sudden policy changes, especially regulations on the electricity price bracket and power plants.

“These policies do not incentivize transitional solar and wind power plants and have even stricter regulations,” he noted.

He said that these issues had directly affected the investment environment. A large amount of electricity is not being used, wasting energy resources and causing difficulties for investors.

Previously, transitional wind and solar power investors in Vietnam asked the government to fix shortcomings in electricity price negotiations, saying that low temporary prices offered by EVN will leave them "clinically dead".

In a document sent to Prime Minister Pham Minh Chinh on April 28, 23 developers said EVN had offered temporary prices of no more than 50% of the ceiling levels in this bracket, equivalent to VND592.45 (2.5 U.S. cents) per kWh for ground-mounted solar power; VND754.13 per kWh (3.2 U.S. cents) for floating solar power; VND793.56 (3.4 U.S. cents) per kWh for inland wind power; and VND907.97 (3.9 U.S. cents) per kWh for offshore wind power.

“The application of these prices will leave us "clinically dead" and completely go against the policy of encouraging the development of renewable energy and the government's commitment to cutting carbon emissions,” they noted.

In a report released in April, top Vietnamese securities broker VNDirect said transitional renewable energy projects will not enjoy profitability under the new price frame set by the MoIT.

The VNDirect analysts argued that the new price frame is the lifeline for transitional renewable developers as their projects have been sitting idle since the FiT mechanism expired in November 2021.

Speaking at the Vietnam Business Forum (VBF) on March 19, Gabor Fluit, chairman of EuroCham Vietnam, said: "Transitional projects that are already built may have no choice but to accept these tariffs or face bankruptcy (the only alternative for them is zero revenue)."

Transitional wind projects not already built will not be able to raise finances at these tariff rates, as they are now facing world market turbine pricing more than 30% higher than at the time the FiTs expired, as well as higher loan interest and insurance rates, he said.

Fluit added that price appraisals for future projects should take into account existing macroeconomic conditions (higher capex, higher interest rates, supply chain bottlenecks) which many transitional projects that are already built did not fully face.

"The MoIT should consult independent experts to verify the assumptions and methodologies taken, before finalizing the price bracket," he said.

So far, 59 transitional renewable power projects without pricing mechanisms have submitted applications for price negotiations and power purchase agreements (PPA). Investors in 85% of the projects have proposed temporary prices equal to 50% of the ceiling levels set by the MoIT.

EVN has completed temporary electricity price negotiations and initialed PPAs with developers of 46 projects. Meanwhile, the MoIT has okayed the quality of 19 projects or project segments, granted electricity generation permits to 27 projects, and extended investment plans for 22 others.