Only one transitional wind power investor applies for price negotiations

Only one out of 85 investors of renewable power projects missing the government's preferential feed-in-tariffs (FiTs) has applied to negotiate power prices with Vietnam Electricity (EVN), according to the state utility.

EVN general director Tran Dinh Nhan said that the group is looking forward to the close cooperation of investors in preparing negotiation documents with a wish that transitional projects would be put into operation as soon as possible in line with the law.

He also expressed his hope that the Ministry of Industry and Trade (MoIT) would soon issue a document guiding the negotiation method in accordance with Article 26 of the government’s Decree No. 137/2013/ND-CP dated October 21, 2013.

Meanwhile, a representative of T&T Group, one of the Vietnamese renewable energy investors, said it is facing difficulties in completing the applications.

To date, 34 wind and solar power projects with a combined capacity of 2,091 megawatts has been completed, some of which had experienced trial operation and been accepted by the MoIT, said Nguyen Thi Thanh Binh, deputy general director in charge of international relations at T&T Group.

That means these projects are fully qualified to connect to the grid. Therefore, while waiting for regulators to review the price range and investors to negotiate with EVN, the MoIT should allow the immediate utilization of power generated by eligible transitional projects with temporary prices equal to 90% of those of imported electricity to avoid wasting social resources, as well as investment resources.

According to Pham Le Quang, director for renewable energy project development at Bamboo Capital Group, all transitional power projects have signed power purchase agreements (PPAs) with EVN before, so in this second negotiation round, EVN should only ask the investors to add the missing documents.

"For example, EVN requires an assessment of the power system operator on the investor’s capacity release ability, while this is an internal matter for EVN. This procedure is hindering businesses," Quang argued.

Authorities of coastal localities in the Mekong Delta complained that with dozens of wind power projects yet to be put into commercial operation, their local budgets lose trillions of Vietnamese dong (VND1 trillion = $42.5 million) compared to the plans.

According to the Department of Industry and Trade of Soc Trang province, the locality has 20 wind power projects with a total capacity of 1,435 MW approved by the Prime Minister. By October 31, 2021, when the FiT mechanism expired, only 110.8 MW was put into commercial operation.

At present, six projects have been completed, with a capacity of 295.6 MW. Once commercially operational, they will contribute hundreds of billions of Vietnamese dong (VND1 billion = $42,500) to the local budget, said Vo Van Chieu, director of the department. However, because they missed the deadline for the FITs, the investors have to renegotiate the power purchase prices with EVN.

Similarly, Tra Vinh province now has four wind power projects that have been completed but are yet to be put into commercial operation.

“It is estimated that the projects will provide over 1,450 million kWh of clean energy per year, earn VND1.7 trillion ($72.26 million), pay VND700 billion ($29.75 million) to the local budget, and generate jobs for 450 local workers,” said Vice Chairman of the province Nguyen Quynh Thien.

According to Ca Mau province’s Department of Industry and Trade, there are 14 licensed wind power projects with a total capacity of 800 MW in the locality. By the FIT deadline, only three projects of 100 MW could generate commercial power. Now three others of over 200 MW have been basically completed but are yet to be put into commercial use.

The delayed commercial operation of wind power projects is not only causing local budget revenue losses, but also pushing many investors to the brink of bankruptcy as their financial plans are disrupted.

The MoIT has requested EVN to reach agreements on purchase prices with renewable power projects that missed the government's preferential FiTs before March 31. That would help pave the way for the transitional renewables projects to come into operation soon, avoiding waste of resources, reads the ministerial letter dated March 20.

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

A letter signed by 36 companies and sent to Prime Minister Pham Minh Chinh in mid March claimed that Decision 21 might lead to their bankruptcy. According to the petition, the Covid-19 pandemic slowed their plans to start wind and solar projects in the country, resulting in them missing the FiT deadlines.

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.

Gabor Fluit, newly-elected chairman of EuroCham Vietnam, said in his presentation at the recent Vietnam Business Forum (VBF): "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)."