VIETNAM – MOIT PROPOSES EXTENSION OF CURRENT FiT RATE FOR WIND POWER PROJECTS

On 8 May 2020, the Ministry of Industry and Trade issued Official Letter No.3299/BCT-DL (“the Letter”) on supplementation of wind power projects into the Power Development Planning.

Notable provisions of the Letter:

1. EVN records a 8,6% increase in electricity demand each year, and suspect the possibility of power shortage, especially in 2023, if the Government doesn’t immediately implement measures such as increase development in the renewable energy sector, increase electricity import from countries in the area, etc.;

2. Most thermal power sources are 1-2 years behind schedule, even some projects are delayed by 4-5 years;

3. As solutions for the possible power shortage issue, EVN suggests that the Government promote the development of renewable energy sources and increase electricity import from China;

4. MOIT is reviewing the possibility of supplementing the Power Development Planning VII adjusted to the ability to release and balance supply and demand to report to the Prime Minister;

5. MOIT is expecting to develop renewable energy centers in areas with good wind potential and are capable of releasing capacity (when new transmission capacity is added);

6. The current FiT rate expires on November 2021; MOIT proposes to extend this deadline to 31 December 2023;

7. After 2023, MOIT proposes wind energy projects to apply auction, bidding methods;

8. MOIT to assume the responsibility of calculating new FiT rate for wind power projects, applicable from 1 November 2021 to 31 December 2023 in case the Prime Minister doesn’t agree to extend the current FiT rate.

It can be seen that the Government has continuously encouraged the development of wind and solar power projects – the most recent is the issuance of Decision No.13/2020/QD-TTg that published the new, attractive FiT rate for solar power plants. In other words, there are a lot of rooms for investors looking to participate in renewable energy development

To promote the development of renewable energy sources is a feasible and effective solutions to counter power shortage issue because renewable energy projects can be constructed quickly and promptly for operation in the period of 2021-2023, while taking advantage of the country’s natural potential without relying on imported fuels and is eco-friendly.

The need to extend the deadline for current FiT rate is essential because the projects waiting to be included in the Revised PDP VIII is unlikely to have commercial operation date before November 2021, because:

1. The supplement into PDP for new wind power sources was suspended for more than 1 year (from October 2018) because there were no guidelines to implement the Planning Law;

2. The construction of wind power projects takes more time than that of solar power projects. For feasibility study reports, investors must carry out wind measurement for at least 12 months. Moreover, wind turbines are mostly imported from abroad, which costs investor extra time, especially there is unexpected delay of equipment delivery.

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Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.