Vietnam renewable investors seek changes in power price policy

A letter signed by 36 companies developing wind and solar projects in Vietnam has been sent to Prime Minister Pham Minh Chinh to ask for changes in power price policies.

According to the petition, the Covid-19 pandemic slowed plans to start 84 wind and solar projects in the country, resulting in them missing the deadlines to obtain the country’s favorable pricing, better known as feed-in-tariffs (FITs).

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.

The 84 projects have a combined electricity generation capacity of 4,871.62 megawatts, of which 4,184.8 MW are wind power and 491.82 MW solar power.

Developers of these projects are disappointed with the Ministry of Industry and Trade’s new pricing policies under Decision 21 dated January 7, 2023, which they consider might lead to their bankruptcy.

Under Decision 21, 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).

This framework will provide the basis for state-run Electricity of Vietnam (EVN) to negotiate prices with developers of "transitional" renewable energy projects after a two-year wait. The rates for transitional projects under the ministerial decision are lower than the incentivized FiTs applied to the projects that met the FiT deadlines.

"Contrary to expectations, the provisions of Decision 21 and Circular 01 have made investors extremely worried and concerned due to inadequacies in terms of legal issues and financial efficiency, leading us to risks of losses and bankruptcy," the petition reads.

Circular No. 01/2023 annulls a number of provisions in Circular 02 and Circular 18 regulating the implementation of wind and solar power projects and model power purchase agreements.

The documents may also harm Vietnam’s goals for sustainable development, the 36 companies argued.

According to them, buying prices suggested by EVN "do not assure 12% in the internal rate of return for them, as stipulated in Circular 15".

Vietnam is seeking to reach carbon neutrality by 2050. In December 2022, it became the third country in the world to agree on a Just Energy Transition Partnership with a group of wealthy countries and development banks, which are set to provide $15.5 billion to help Vietnam transition away from coal and accelerate cleaner energy development.

The country’s road to net-zero carbon emissions by 2050 is still long and full of challenges, Asia-focused advisory and management consulting firm YCP Solidiance said in its “The Current Energy Transition in Vietnam” 2023 report earlier this month.

Vietnam’s efforts to drive its renewable energy development are gaining momentum but big challenges are along the way, requiring better collaboration between key players, YCP Solidiance said.