Could the new regulation of Vietnam on the method of formulating power generating tariff ranges for electricity generation of transitional wind and solar power plants open opportunities for solar power and wind power projects?

According to the Ministry of Industry and Trade (“MOIT”), it is unreasonable for Vietnam Electricity Corporation (“EVN”), a state-owned enterprise, to propose a price bracket for purchasing electricity from renewable energy plants and it is convenable to avoid conflicting interests. Therefore, on 03 October 2022, the MOIT issued Circular No. 15/2022/TT-BCT (“Circular 15”) providing regulations on the method for formulating power generating tariff ranges for electricity generation of transitional wind and solar power plants (“WSPPs”). Accordingly, renewable energy investors will have the opportunity to negotiate electricity prices, power purchase agreements with EVN within the power generating tariff ranges, and guidelines issued by the MOIT. Circular 15 will take effect from 25 November 2022.

The promulgation of Circular 15 can be regarded as an opportunity and a source of optimism to resolve the WSPPs’ problems. Through this article, BLawyers Vietnam would like to provide an overview of Circular 15.

1. Applicable objects of Circular 15

Circular 15 applies to the following objects:

  1. EVN; and
  2. Organizations and individuals involved in the implementation of investment in solar power plants in part or whole that have signed a power purchase agreement with the EVN before 01 January 2021, investment in wind power plants in part or whole that signed a power purchase agreement with EVN before 01 November 2021 but were not eligible for feed-in-tariffs under Decision No. 13/2020/QD-TTg and Decision No. 39/2018/ QD-TTg (“Investor”).

Accordingly, these power plants or parts of power plants must adequately comply with regulations and laws on investment, and construction, closely follow the absorption capacity of the national electrical system and the ability to release capacity of electrical grids; strictly adhere to electricity price structures during operation and take responsibilities for project effectiveness under approved regimes.

If violations are detected, an inspection or investigation authority shall handle violations strictly pursuant to the laws. Pursuant to the laws on construction investment, competent authorities may withdraw investment licenses or suspend project with serious violations.

2. Method for formulating power generating tariff ranges

The method for formulating power generating tariff ranges for electricity generation is developed based on the following principles:

  1. The power generating tariff ranges for electricity generation of ground-mound solar power plants, floating solar power plants, onshore wind power plants, and offshore wind power plants (“PPs”) refers to prices ranging from the minimum value (0 VND/kWh) to the maximum value;
  2. The maximum value applicable to solar power plants is the electricity generation price of the standard solar power plants as determined by the method specified in Circular 15; and
  3. The maximum value applicable to wind power plants shall be the electricity generation price of a standard wind power plants as determined by the method specified in Circular 15.

3. Order and procedure for developing, appraising, and promulgating power generating tariff ranges

According to Circular 15, the order and procedure for developing, appraising, and promulgating power generating tariff ranges are as follows:

(i) Within 15 days from the effective date of Circular 15 (i.e., 25 November 2022), the Investor must provide a feasibility report or technical design to EVN;

(ii) Based on the provided documents, EVN is entitled to hire a consultant to select specifications, calculate and determine the power generating tariff ranges of the solar power plants and the wind power plants under Circular 15;

(iii) Within 45 days from 25 November 2022, EVN will develop the power generating tariff ranges of the PPs and send to the Electricity Regulatory Authority of Vietnam (“ERAV”);

(iv) Within 05 working days from the date on which documents on calculating power generating tariff ranges are received, the ERAV shall check in detail documents for their contents, adequacy, and legitimacy.

In case the documents are inadequate or illegitimate, the ERAV shall send a written request to EVN to revise, amend or clarify the contents of the documents.

(v) Within 45 days from the date of receipt of valid documents of calculation of the power generating tariff ranges, the ERAV shall appraise the power generating tariff ranges.

If necessary, the ERAV shall organize consultations with independent experts or collect opinions on the tariff ranges via the Board of Council established by the MOIT’s decision.

(vi) Within 10 working days from the date on which appraisal results of the power generating tariff ranges are produced, the ERAV shall finalize the documents and submit them to the Minister of MOIT for approval and carry out the procedures for publication on the website of the MOIT and the ERAV.

4. Other issues related to Circular 15

On 04 October 2022, the MOIT also issued the Official Dispatch No. 6015/BCT-DTDL to request EVN to implement the contents of Circular 15. In which, EVN was requested to prepare a written request sent to the Investor to provide an appraised feasibility report, technical design for serving the calculation of the power generating tariff ranges applied to WSPPs, submit the power generating tariff ranges to the ERAV for checking, appraising and reporting to the MOIT.

However, EVN also had realized that the regulation requiring EVN to negotiate electricity prices and power purchase agreements with the Investors within the power generating tariff ranges issued by the MOIT would be challenging. Because the negotiation period would be lengthy and the WSPPs has been invested in many stages, and implemented with the power generating tariff ranges cannot be retroactively negotiated in large quantities.

To summarize, WSPPs will be applied to the electricity price in the negotiation procedures and power purchase agreement with EVN from 25 November 2022. This can be regarded as an opportunity to resolve the difficulties of more than one year of the WSPPs.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

Date: 28 October 2022

Writer: Linh Nguyen

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