VIETNAM – PRIME MINISTER REQUESTS MOIT TO SUPPLEMENT MORE WIND POWER PROJECTS INTO THE ELECTRICITY DEVELOPMENT PLAN AND TO EXTEND THE DEADLINE OF FiT RATE

On 9 June 2020, the Prime Minister issued Document No.693/TTg-CN on the addition of wind power projects to electricity development planning. In this Document, the PM requests the Ministry of Industry and Trade (“MOIT”) to:

1. Accelerate the process of approving the inclusion of more wind energy projects into the Master plan to avoid the inherent possibility of electricity shortage nationwide due to large coal thermoelectricity power plants don’t start COD until 2023.

2. Quicken the process of appraisal and approval for inclusion of wind power plants into the Master plan, especially in localities with potential and advantage for wind power development but are having only a few projects and can implement quickly to supplement the power supply for the country.

3. Prepare the formulation of the National Electricity Development Planning in the 2021-2030 period, with a vision to 2045 (Electricity Planning VIII) to submit to the Prime Minister for approval before 31 October 2020.

4. Consider the matter of extending the fixed price mechanism for wind power projects until 31 December 2023. Under Decision 39/2018/TT-BCT, the current FiT rate is 8,5 UScent/kWh (excluding VAT) for onshore projects and 9,8 UScent/kWh (excluding VAT) for offshore projects. These prices are applicable to wind power projects that have part or the whole of the plant with commercial operation date before 1 November, 2021 and apply for 20 years from the date of commercial operation.

Some comments on Document 693:

This is one of the many attempts of the Vietnamese government to encourage development of wind energy, which opens up more rooms for investors looking to participate in this sector as well as allow current investors ample time to obtain key licenses and start construction and commissioning process required for their projects.

The promotion of wind power source is an effective solution to counter power shortage issue because it can takes advantage of the free, limitless wind natural resource without relying on imported fuels from abroad and is eco-friendly. Vietnam has to take into consideration environmental by-products of its economic activities from now on since this is a duty in the EU-Vietnam Free Trade Agreement, which was approved by the National Assembly on 8 June 2020.

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 (in 16 months), because:
-The construction of wind power projects takes quiet some times. 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 when there is unexpected delay of equipment delivery;

-The wind power projects included in the electricity development planning in the Southwestern provinces are mostly offshore or near the shore projects using technology and techniques different from those implemented for onshore turbines, hence require longer project preparation time (e.g. construction of onshore wind power projects takes around 2 years and 3 – 3.5 years for offshore ones). Not to mention, the regulations on determining sea borders, licensing for usage of the sea area are quite complicated, thus further increase project schedule time and costs associated with offshore projects.

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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.