EVN requested to reach price agreements with 'transitional' renewables projects before end-March

The Ministry of Industry and Trade has requested Vietnam Electricity (EVN) to reach agreements on purchase prices with renewable power projects that missed the government's preferential feed-in-tariffs before March 31.

That would help pave the way for the "transitional" solar and wind power projects to come into operation soon, avoiding waste of resources, reads the ministeral letter dated March 20.

The ministry (MoIT) stressed that its Document 1094 dated March 2, 2023 had given guidance to state utility EVN in negotiating and reaching agreements with the "transitional" project investors.

Many industry insiders argued that the March 31 deadline is too tight as most of the investors would not be able to complete documents for negotiations with EVN by then.

Previously, in mid March, a letter signed by 36 companies developing renewables projects in Vietnam had been sent to Prime Minister Pham Minh Chinh to ask for changes in power price policies.

According to the petition, the Covid-19 pandemic slowed plans to start 84 wind and solar projects in the country, resulting in them missing the deadlines to obtain the country’s favorable pricing, better known as feed-in-tariffs (FITs).

The 84 projects have a combined electricity generation capacity of 4,871.62 megawatts, of which 4,184.8 MW are wind power.

Developers of these projects are disappointed with the MoIT’s new pricing policies under Decision 21 dated January 7, 2023, which they consider might lead to their bankruptcy.

Under Decision 21, 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. The ceiling price for "transitional" wind power projects is VND1,587-1,816 per kWh (6.8-7.7 U.S. cents).

This framework will provide the basis for EVN to negotiate prices with the developers after a two-year wait.

The rates for "transitional" projects under Decision 21 are lower than the incentivized FiTs applied to the projects that met the FiT deadlines.

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.

The 36 investors said an estimated VND85 trillion ($3.61 billion) had been invested in their completed projects, of which VND58 trillion came from bank loans.

In a meeting on March 20 between the MoIT, EVN and investors of the 84 projects, the investors suggested EVN temporarily buy electricity from them at VND6.2 U.S cents/kWh.

According to EuroCham, Decision 21 ceiling tariff levels represent a 20%-25% reduction from the previous FiT levels (for wind, based on current FX rates) and almost a 40% reduction for groundmounted solar.

In his presentation at the Vietnam Business Forum (VBF) last Sunday, Gabor Fluit, newly-elected chairman of EuroCham Vietnam, said : "Transition 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)."

Vietnam is seeking to reach carbon neutrality by 2050. In December 2022, it became the third country in the world to agree on a Just Energy Transition Partnership with a group of wealthy countries and development banks, which are set to provide $15.5 billion to help Vietnam transition away from coal and accelerate cleaner energy development.