Renewable energy developers suffer from low sales prices

Wind and solar power investors in Vietnam that missed out on preferential feed-in-tariffs (FiTs) have asked the government to fix shortcomings in electricity price negotiations, saying that low temporary prices offered by Vietnam Electricity will leave them "clinically dead".

In a document sent to Prime Minister Pham Minh Chinh on April 28, 23 companies also proposed a temporary power utilization mechanism for their projects, also known as "transitional" renewable energy projects.

Investors have already submitted applications to join electricity price negotiations with the Electricity Power Trading Company under Vietnam Electricity (EVN-EPTC).

However, many submissions have not been approved as the projects were included in the now expired Power Development Plan VII (PDP VII), while the PDP VIII is yet to be issued. Meanwhile, the negotiation progress remains very slow due to a lack of guiding documents as a basis for electricity price calculations.

According to the new price bracket, issued under the Ministry of Industry and Trade’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).

The developers said EVN-EPTC has 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 907.97 (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 through renewable energy development,” they noted.

Therefore, they proposed two price options during the temporary utilization period. Firstly, EVN will pay investors 90% of the ceiling price in their brackets under Decision 21 from the time of utilization until the buyer and seller agree on a final price, without a retroactive mechanism.

Secondly, EVN will pay investors 50% of the ceiling price in their brackets under Decision 21 during the temporary utilization period, but with a retroactive mechanism. In this case, the temporary utilization time will not be included in the 20-year period of official power purchasing agreements signed between EVN and investors.

“If there is no retroactive mechanism, any investor who accepts the temporary prices will certainly suffer losses,” they said.

In addition, renewable energy developers have asked the PM to direct the Ministry of Industry and Trade (MoIT) to issue regulations as a legal basis for negotiations between EVN and investors.

On March 10, 2023, 36 companies developing wind and solar projects also sent a letter to PM Pham Minh Chinh stating shortcomings in the new pricing mechanism and asking for changes to power price policies.

In response, the PM and his deputy Tran Hong Ha asked the MoIT to urgently review and handle issues related to the pricing mechanism for transitional wind and solar projects and report the results to the government before April 15, 2023.

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.