8 April 2020

New Decision On Solar Power Development

On 6 April 2020, the Prime Minister issued Decision No. 13/2020/QD-TTg on the Mechanism for Encouragement of Development of Solar Power in Vietnam (“Decision 13”). Decision 11 will take effect on 22 May 2020 and is the long awaited regulation to replace Decision No. 11/2017/QD-TTg dated 11 April 2017
of the Prime Minister as amended by Decision 02/2019/QD-TTg dated 8 January 2019 of the Prime Minister which expired on 30 June 2019. We will take a brief look at the key points of Decision 13 in this insighInsights

Classification of Solar Power Projects

Decision 13 classifies solar power projects into two categories of grid-connected solar power projects (with two sub categories discussed below) and rooftop solar power projects:

1. Roof solar power system: a solar power system with solar energy panels installed on the rooftop of a construction work with an output not exceeding 1 MWp, directly or indirectly connected to the power grid of the power purchaser with a voltage of 35kV or less of the power purchaser.
2. Grid-connected solar power project: a solar power project directly connected to the national power grid except for rooftop solar power systems above.
A further distinction is made between grid-connected projects being: (i) floating solar power projects (those with solar panels installed on floating structures on water); and (ii) ground mounted solar power projects: grid connected solar power projects not being floating solar power projects.

The regulations in Decision 13 on  grid-connected projects apply to  both floating and ground mounted  solar projects with the only exception  being a different FiT is applied (as  discussed further below). 

Grid-Connected Solar Projects

FiT for Sale to EVN

A FiT of:

∙ VND1,620 (7.09 US cents) per kWh will apply for all ground-mounted solar power projects; and

∙ a FiT of VND1,758 (7.69 US cents) per kWh will apply for all floating solar power projects,

that:

(i) have been issued a decision on investment policy by the relevant authority prior to 23 November 2019;

(ii) will achieve COD for the project in whole or in part between 1 July 2019 and 31 December 2020; and

(iii) use solar cells with efficiency of more than 16% or module efficiency greater than 15% to qualify for the applicable FiT.

A limited number of grid connected projects located in Ninh Thuan province with the total accumulated capacity up to 2,000 MW already approved in the master plans, achieving COD before 1 January 2021, and that use solar cells with efficiency of more than 16% or module efficiency, will benefit from a preferred FiT of VND 2,086/kWh, (9.35 US cents/kWh).

The applicable FiT for such grid connected solar projects above will apply for 20 years. The FiT will be adjusted with fluctuations of the VND/USD exchange rate published by the State Bank of Vietnam on the day the seller issues the invoice to EVN.

Competitive mechanism

For grid-connected solar projects that do not meet the conditions to qualify for the applicable FiT above, the FiT will be determined by competitive mechanisms or auctions. MoIT is still developing the details of the proposed competitive mechanisms that will determine the applicable FiT for such grid-connected solar projects, but the details have yet to be finalised.

PPA for sale to EVN

The model PPA issued by the MOIT for  grid-connected projects must be used for sale of electricity from grid connected solar power projects to EVN.  

The term will be 20 years from the COD  and this may be extended on expiry  subject to applicable laws.

Sale to other persons not being EVN

Decision 13 defines the power  purchaser as either EVN, or also other  organisations and entities not being EVN  purchasing power from the power seller. 

It also states that the power purchaser is  responsible to purchase all electricity  produced by grid-connected solar  power projects loaded onto the  national grid. Decision 13 does not  provide any further explicit provisions on  sale of electricity from grid-connected  solar power projects to power  purchasers not being EVN (unlike for  rooftop solar power systems discussed  below). However, it seems this may have  been drafted widely to include  permission to sell to other persons not  being EVN under regulations being  developed separately, such as the  direct power purchase programme (i.e.  under a pilot virtual PPA) proposed by  the MOIT under Proposal 544/TTr-BCT  dated 21 January 2020. 

Rooftop Solar Power Projects  

Decision 13 provides specific regulations  applicable to rooftop solar power  projects where the rooftop solar power  system meets the conditions set out in  the definition of: (i) having an output not  exceeding 1 MWp, (ii) being installed on  the building structure and directly and  indirectly connected to the power grid  of the power purchaser; and (iii) with a  voltage of 35kV or less of the power  purchaser.

Scope of sale of electricity generated from a rooftop solar power system

For rooftop solar power systems that  meet the conditions set out set out  above, electricity may be sold in  whole or part to EVN, or to power  purchasers (such as industrial  customers) not being EVN if the power  grid of EVN is not used. 

Consequently, for qualifying rooftop  solar power systems, it will now be  permitted for a developer to sell  electricity generated by a rooftop  solar power system to a private  customer onsite. 

FiT for Sale of Electricity to EVN

A FiT of VND1,916 (8.38 US cents) per  kWh will apply for sale of electricity to  EVN from such rooftop solar power  systems that:  

(i) achieve COD and certificate of  meter readings in the period from  1 July 2019 to 31 December 2020;  and  

(ii) use solar cells with efficiency of  more than 16% or module  efficiency greater than 15%. 

This FiT will apply for 20 years from the  COD for such rooftop solar power  projects. 

The FiT will be adjusted annually in  accordance with fluctuations of the  VND/USD exchange rate published by  the State Bank of Vietnam on the last  day of the previous year for  calculating monetary payments for  the following year. 

PPA for Sale of Electricity to EVN 

The applicable model PPA issued by  the MOIT for use in rooftop solar power  projects must be used for sale of  electricity from rooftop solar power  systems to EVN.  

The term will be 20 years from the COD and this may be extended on expiry subject to applicable laws. 

PPA for Sale of Electricity to Power  Purchasers other than EVN 

Decision 13 stipulates that in the case  of sale of electricity generated by a  rooftop solar power system to a power  purchaser other than EVN, the  applicable price per kWh, and other  terms of the PPA will be as negotiated  between the developer and the  relevant customer provided such  private PPAs observe generally applicable laws. 

This permits rooftop solar power  developers to develop their own  private PPAs for use with rooftop solar  power projects entered into with onsite  private customers. 

Development of rooftop solar power  systems 

Investment in and development of  rooftop solar power systems directly or  indirectly connected to the grid must  be after the grid-connection  agreement has been obtained from  the relevant provincial level of EVN. 

EVN will invest in, install and maintain  the metering equipment for use in  PPAs signed with EVN. 

Electricity Operation License  

Decision 13 stipulates that ‘Electricity  Retailers or Distributors outside of EVN’,  are those entities licensed to distribute,  retail and wholesale electricity. This  may suggest that a private power  company will be required to obtain an  electricity operation license to sell  electricity regardless of the capacity  of the system.  

However, under current regulations on  electricity operation licenses an entity  is exempt from obtaining an electricity  operation license if the system has an  installed capacity of less than 1MWp  (system in one location with one  connection point) for sale to other  entities and it seems this exemption  should continue to apply unless further  stipulated by the authorities.