Vietnam renewable energy projects to pay back for improper FIT rates

Renewable energy projects found to have enjoyed the feed-in-tariff (FIT) rates improperly in Vietnam will have their gain reclaimed by the government.

According to a conclusion issued by the Government Inspectorate late last year, the Ministry of Industry and Trade (MoIT) was found to have made mistakes in consulting on applying the FIT mechanism to solar power projects in the south-central province of Ninh Thuan after the government’s Decision 11/2017 expired.

As a result, 14 solar projects were incorrectly granted the FIT rate of 9.35 U.S. cents per kWh for 20 years. Between 2020 and June 2022, the additional payments that the Vietnam Electricity (EVN) had to make to these investors totaled VND1.48 trillion ($58.16 million).

In a report sent to Deputy Prime Minister Nguyen Hoa Binh regarding the resolution of issues with renewable energy projects previously under inspection, the MoIT proposed that EVN and the project developers reconsider eligibility for the incentivized FIT rates.

Projects failing to meet the conditions to enjoy the FIT will have their electricity selling prices reassessed in accordance with the regulations. For such projects, EVN will report to relevant authorities for necessary payment adjustments.

This resolution, according to the ministry, is based on an analysis and comparison of the social and economic benefits, aiming to minimize disputes and lawsuits, as well as to protect the investment environment.

The Government Inspectorate's conclusion clarified that according to Resolution 115/2018, only solar projects approved by the Prime Minister in the national electricity development plan were eligible for the 9.35 U.S. cent FIT rate over 20 years.

Such projects have a total capacity of 2,022 MW. However, the Ministry of Industry and Trade subsequently expanded the application of the FIT rate to projects included in provincial or regional electricity development plans.

As a result, 14 solar projects were granted the FIT improperly, including Hacom Solar, Sinenergy Ninh Thuan 1, Thuan Nam Duc Long, Thien Tan Solar Ninh Thuan, Phuoc Ninh, Son My 2, Son My, Solar Farm Nhon Hai, Bau Zon, Thuan Nam 12, SP Infra 1, Adani Phuoc Minh, Ho Bau Ngu, and the 450 MW Thuan Nam project combined with the 500 kV Thuan Nam station and its 500kV, 220kV transmission lines.

For rooftop solar projects built on agricultural and forestry land that violated land use planning but were still granted the FIT rate of 8.38 U.S. cents per kWh within 20 years, the ministry has asked EVN to review and make a list of such projects to report to provincial authorities.

Local governments would then verify their land usage, and if any violations are found, the projects will no longer be eligible for the FIT rate.

In addition to the FIT misapplication, the conclusion revealed that the MoIT had approved the addition of 154 solar projects with a total capacity of 13,837 MW to the national power development plan without proper legal basis. Among them, 123 projects were a major cause of an imbalance in the power system and power sources, wasting social resources.

The government has agreed to address the issues surrounding these 154 renewable energy projects, as outlined in a November regular meeting resolution. During the December 12 meeting, Prime Minister Pham Minh Chinh affirmed the cabinet’s determination to resolve the projects' problems definitively, thus avoiding waste of social resources and maintaining domestic and international investor confidence.