Vietnam to offer pricing stimulus for wind energy projects

It has been confirmed that the Prime Minister has initialled the contents of a draft decision proposed by the Ministry of Industry and Trade (MOIT) with an increase in feed-in-tariff (FIT) to 8.5 US cents/kWh (onshore) and 9.8 US cents/kWh (offshore).

An official decision to this effect will be announced soon.

The MOIT’s proposed amendment to Decision 37/2011 would have increased the FIT for wind energy projects from the current 7.8 US cents/kWh (onshore) to 8.77 US cents/kWh (onshore) and 9.97 US cents/kWh (offshore).

Under the MOIT proposal, the price amendment would apply to projects achieving a commercial operation date (COD) before January 1, 2021.

This is the latest of several moves made by the government to boost the renewable energy sector and promote socio-economic development.

Just last week, a proposal to extend the deadline for a key FIT incentive for solar power projects in Ninh Thuan was approved.

The government issued Resolution No.115/NQ-CP that allows solar power projects in the central province to enjoy a FIT of 9.35 cents/kWh for a period of 20 years as long as they begin commercial operations by the end of 2020.

This was an extension of the earlier COD deadline of June 30, 2019, applying to all localities, which was set by the Prime Minister’s Decision No.11/2017/QD-TTg.

The extension of COD for Ninh Thuan, as specified in the new resolution, will hold good until projects reach a combined capacity of 2,000MW.

In order to support the next policy consideration, the MOIT had formally asked relevant government bodies and their units to participate in a working group to draft a decision amending Decision 11 and another draft decision to create bidding mechanisms for the solar power sector.

These will be submitted to the PM for his consideration.

It is to be noted that post-June 2019 solar power projects may expect a lower FIT rate of approximately 7.6 US cents/kWh.

Indications are that the content of the current Model Power Purchase Agreement (PPA) will not be revised to address existing bankability issues.

Cosmetic changes, however, are expected on the technical side.

The authorities are also considering a special provincial plan to support investment in the two key provinces of Ninh Thuan and Binh Thuan, where investors are interested in a large number of solar projects.

On August 15, the Government Office issued a notification in which Deputy PM Trinh Dinh Dung instructed all ministries to implement and promote projects for electricity generation and grid connection as targeted by the Revised Power Development Plan VII.

It authorized the MOIT and provincial people's committees to carry out procedures to supplement solar power projects as needed under relevant development plans for the electricity sector.

The ministry was also instructed to carry out studies on solar power development until 2020, 2025 and 2030 and complete a new draft National Master Plan with mechanisms to add projects to it if required.

The national power utility, Vietnam Electricity (EVN), has been directed to expedite grid connection agreements (GCA) and power purchase agreements for existing projects that have been approved.

*Dang Duong Anh is managing partner and Vaibhav Saxena an associate with the Vietnam International Law Firm (VILAF)