Ministry approves temporary prices for 15 wind, solar power projects

Vietnam's Ministry of Industry and Trade has approved temporary prices for 15 solar and wind power plants that missed out on preferential feed-in-tariffs (FiTs).

These projects, which are also known as transitional projects, have a total capacity of 1,200 MW and are completing procedures and technology to be connected to the national grid.

The provisional prices will be applied until state utility Vietnam Electricity (EVN) and the project developers reach an agreement on official prices, said Tran Viet Hoa, director general of the ministry's (MoIT) Electricity Regulatory Authority of Vietnam.

The temporary prices are equal to 50% of the ceiling levels set in a new electricity generation price bracket under Decision 21 issued by the MoIT on January 7, 2023, meaning VND754 - 908 ($3.2-3.85) per kWh, excluding VAT, he added.

These projects do not enjoy FiTs for 20 years as they missed out the government's power generation deadlines and have to negotiate electricity prices with EVN under the price bracket, with prices 20-30% lower than before.

Under 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 MoIT will this week approve temporary prices for six more projects that have already made agreements between their investors and EVN, according to Hoa.

One of the problems in negotiating prices for transitional renewable power plants is the unclear pricing method of the MoIT, he said, adding 24 investors have agreed to apply a discounted cash flow pricing method following a ministry circular issued in 2020.

However, 48 other transitional projects have not yet submitted their negotiation applications to EVN, while 11 will need to supplement their documents.

According to the Electricity Law, before becoming operational, projects need an electricity operation license. However, so far only 19% of transitional renewable energy projects have been granted this license. The ministry is currently evaluating an additional 12 applications.

"Some investors were asked to supplement documents at the end of March, but they have not so far to date. Investors should urgently complete procedures to speed up the negotiation process, thus quickly putting their projects into operation," Hoa noted.

Last week, Deputy Prime Minister Tran Hong Ha asked the industry ministry to revise regulations and provide specific instructions on price calculation methods for transitional wind and solar power projects.

"The ministry should study a pricing mechanism similar to that applied to build-transfer (BT) transport projects, with independent audits and an acceptable profit level to ensure investment motivation for developers," he said.

Currently, 84 renewable energy projects with a total capacity of more than 4,600 MW have missed deadlines for commercial operation. Of these, 34 transitional projects (28 wind and six solar power) with a total capacity of nearly 2,100 MW have been completed and put on trial runs.

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.

Under the freshly approved power development plan, known as PDP VIII, renewable energy will make up 50.3% of the total capacity generated in Vietnam by 2030 and 70% in 2050.