Vietnam's Deputy Prime Minister Tran Hong Ha has asked the industry ministry to study a pricing mechanism similar to that applied to build-transfer (BT) transport projects for wind and solar power projects that missed out on preferential feed-in-tariffs.
In his Wednesday conclusion following a meeting with ministries and sectors on measures to remove difficulties for solar and wind power projects, Ha asked the Ministry of Industry and Trade (MoIT) to soon revise regulations and provide specific instructions on price calculation methods for such projects, which are also called transitional projects.
"The pricing mechanism may be similar to that applied to the BT projects in the transport sector, with independent audits and an acceptable profit level to ensure the investment motivation for developers," he said.
Currently, 84 renewable energy projects with a total capacity of more than 4,600 megawatts 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 into trial run.
These projects do not enjoy FITs for 20 years and have to negotiate electricity prices with state utility Vietnam Electricity (EVN) under an electricity generation price bracket set out by the MoIT earlier this year, with prices 20-30% lower than before.
According to the new price bracket, issued under the MOIT’s Decision 21 dated January 7, 2023, 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).
However, the investors and state utility EVN recently faced difficulties in price negotiation because there was no detailed guidance on price calculation methods from the MoIT. According to EVN, by mid-May, 31 transitional renewable energy projects had submitted applications for electricity price negotiation, but only half of them provide enough legal documents and are under negotiation.
In addition, only 13 out of 84 transitional projects have electricity generation licenses. Therefore, Deputy Prime Minister Tran Hong Ha asked the MoIT to urge relevant agencies to speed up the issuance of such a license.
EVN added that among the investors that have submitted applications, 16 proposed to apply the temporary prices during the negotiation period. Of them, 10 accept a temporary price equal to 50% of the ceiling price in the bracket set by the MoIT without retroactiveness.
Two others wanted a temporary price equal to 50% of the ceiling price with retroactiveness and the remaining four offered a temporary price equal to 90% of the ceiling price.
Deputy PM Ha requested the MoIT to guide EVN to negotiate temporary prices with investors to enable renewable energy projects to be connected to the grid soon. After negotiation, the projects will be paid with the official prices.
To date, six projects with a total capacity of nearly 358 MW have agreed on temporary electricity prices with EVN.
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.