On 3 May 2019 the Ministry of Industry and Trade of Vietnam (the “MOIT”) submitted to the Prime Minister a draft decision intended to replace Decision No. 11/2017/QD-TTg of the Prime Minister on mechanisms for the encouragement of development of solar power, dated 11 April 2017 (“Decision 11”). In response to this submission, the Prime Minister requested the MOIT to consider several issues related to the draft decision.
The MOIT recently submitted a report (the “Report”) expressing opinions of MOIT in response to the issues identified by the Prime Minister.
SOLAR POWER DEVELOPMENT REGION
The Report analyzed two possible options to divide Vietnam into irradiation regions for the purpose of calculating the Feed-In-Tariff (“FiT”). The first option is to divide Vietnam in two irradiation regions while the second option is to divide Vietnam into four irradiation regions.
The MOIT still suggests the Prime Minister to approve the second option (with four irradiation regions as provided for in the draft decision number three, issued on 12 April 2019) to incentivize investment in different provinces providing for a wider deployment of solar generation across Vietnam and therefore deploying solar generation across a wider range of the national grid.
Nonetheless, Vietnam Electricity (“EVN”), in its Official letter No. 3219/EVN-TTD dated 21 June 2019 on the opinion regarding FiT mechanism after 30 June 2019 (“Official letter 3219”), states that EVN agrees with the first option (with two irradiation regions). EVN proposed not to provide additional financial incentives to solar generators in low irradiation regions at this stage, but to instead continue to encourage investment in high irradiation regions, in order to reduce the pressure of increasing of the retail price. Mechanisms to incentivize development of solar power projects in low irradiation regions will be considered at a later stage.
The Report also specifies the FiT in case of dividing into 2 regions as follows:
Previously, MOIT proposed the FiT for four irradiation regions as follows:
*Exchange rate based on the central exchange rate of Vietnam Dong against US Dollar, we understand the VND/kWh exchange rate will be updated.
FIT FOR ROOFTOP SOLAR POWER MODELS
After the issuance of Decision 11, there are around 4,000 clients with energized rooftop solar power with a total capacity of approximately 45 MWp. To encourage the development of this type of project, the MOIT has proposed the Prime Minister to continue applying the FiT of 9.35 US cent/kWh for all rooftop solar power projects in the country until the end of 2021. By Official letter 3219, EVN also expresses its agreement with this proposal of MOIT.
TIMELINE TO APPLY THE FIT OF NEW DECISION
Up to 26 June 2019, 90 solar power projects with the total capacity of 4,500 MWp which have reached commercial operation. More than 30% of these projects are located in Ninh Thuan province (15 projects with the total capacity of more than 1,000 MWp) and Binh Thuan province (19 projects with the total capacity of about 900 MWp).
As proposed, all the solar power projects which start their commercial operations from 1 July 2019 will have this new FiT applied, subject to the regulations under the new Decision to be issued by the Prime Minister.
The information provided in this article is for information purposes only and is not intended to constitute legal advice should be obtained from qualified legal counsel for all specific situations.
Partner & Managing Director, DFDL Vietnam
Partner, DFDL Vietnam
Senior Legal Adviser & Deputy Head Regional Energy, Mining and Infrastructure Group, DFDL Vietnam