Renewable power projects missing incentive deadline to negotiate purchase prices

The Ministry of Industry and Trade has proposed that solar and wind power project investors missing the incentivised feed-in-tariff deadline be allowed to negotiate purchase prices with Vietnam Electricity (EVN).

The 20-year preferential FiT was 9.35 cents per kWh (Decision 11/2017) and 7.09-8.38 cents per kWh (Decision 13/2020) for solar power projects; and 8.35-9.8 cents per kWh for wind power projects that became operational by November 1, 2021.

Many wind and solar power projects that were developed with an aim of benefitting from the incentives but missed the deadline are yet to have their electricity prices determined despite investments of hundreds of millions of U.S. dollars.

Currently, 62 wind power projects with a total capacity of nearly 3,480 MW have signed power purchase contracts with EVN, but are yet to have purchase prices fixed as they failed to meet the incentive deadline.

Five solar power projects or project components with a total capacity of 452.62 MW are also awaiting determination of electricity prices. In addition, a number of renewable energy projects are still being developed.

The Ministry of Industry and Trade (MoIT) suggests that a mechanism be devised to determine purchase prices for such projects.

It is, therefore, seeking prime ministerial approval for the projects to shift to negotiations with national power utility EVN on prices and purchase contracts within a framework devised by the ministry.

For solar and wind power projects that will be deployed in the future, the ministry proposes that the PM allows application of a uniform negotiation mechanism to ensure the consistency of legal corridors for all projects.

For projects that have begun commercial operations, it proposes the government issues directions based on which the ministry will review contracts between EVN and investors, harmonizing and ensuring interests of the seller, buyer, consumer and state.

The ministry also asked the PM to annul existing decisions on incentives for wind and solar power development on the grounds that the FiT provisions have expired, but the legality remains.

On the other hand, some regulations are no longer relevant, it says, citing as examples the 20-year power purchase agreement term (a maximum 20 years for rooftop solar power); the purchase price of electricity adjusted to fluctuations in the USD/VND exchange rate; and the 20-year term for application of electricity prices starting from the commercial operation date (COD).

According to the MoIT, the above-mentioned preferential policies and FiT prices should only be applied for a certain time to encourage investments in wind and solar power.

It notes that the prices of renewable energy are decreasing; it accounts for a higher proportion in the national energy mix; and the prices of equipment have also become more competitive. Therefore, maintaining such incentives is no longer appropriate, the ministry argues.

Over the past three years, solar and wind power projects have developed rapidly in many localities. Currently, the number of operating wind and solar power projects accounts for nearly 27% of the country’s total installed power capacity, including 16,545 MW of ground and roof solar power and 4,126 MW of wind power, EVN data shows.

Over the past three years, solar and wind power projects have developed rapidly in many localities. Currently, operational ground and roof solar power projects with a total capacity of 16,545 MW and operational wind power projects with 4,126 MW are enjoying the FiTs under the prime minister's decisions, EVN data shows.

The country’s electricity output in the first six months of the year reached more than 133.1 billion kWh, up nearly 4% year-on-year. Of this, renewable energy (wind power, solar power, biomass electricity) hit about 19.2 billion kWh (over 74% is solar power, and 26% wind power). This output level is equivalent to 14.4% of the country’s total electricity output.