Tag Archives: FIT

BREAKING NEWS – Vietnam’s PM decides to do away with solar FiTs in favor of auctions

Get ready for auctions!  After months of confusion and uncertainty over the policy for solar power development in Vietnam Prime Minister Nguyen Xuan Phuc today issued his conclusions and looks to have signed the death knell for solar feed in tariffs (FiT) in favor of competitive auctions.

In Notification No. 402/TB-VPCP dated 22 November 2019, the Prime Minster concluded that rational future development of the sector necessitates introducing an auction system for ground-mounted solar projects.  FiTs will continue to apply only for rooftop solar projects and certain already-approved ground-mounted projects.

The decision comes nearly five full months after expiry of the blanket 9.35c/ kWh FiT issued in April 2017 that kicked off a huge, and largely uncontrolled, rush that culminated in some 4,500MW of solar generation capacity becoming operational by July 2019 and, reportedly, an incredible 35GW of registered interest.  The first number alone is some 500% more than the 850MW of solar that was planned to be operational by 2020 in National Power Development Masterplan 7 (revised as of 2016).  That both highlights just how frenetic the activity was and also how efficiently the private sector is able to get these projects developed, financed and constructed.  Just imagine what could be done with an international-standard PPA and a developed grid infrastructure.

The Prime Minister, in his conclusions, chides the MOIT for the helter skelter development over the past two years, with many projects concentrated in areas where grid infrastructure is unable to properly serve the facilities resulting in widespread curtailment problems.  The Prime Minister has urged the MOIT to learn its lessons and re-orient itself towards a new reality.  The gold rush days are over and developers can expect a more rigorous licensing and approval process for new projects now.

FiTs aren’t entirely dead yet though.  The Prime Minister’s conclusions suggest, without stating definitively, that certain projects will still be entitled to FiTs.  Specifically, ground-mounted projects that already have signed PPAs and can be put into operation in 2020 appear set to continue to enjoy FiTs.  Rooftop solar projects will also continue to enjoy FiTs.  The Prime Minister has instructed the MOIT to propose the final FiT terms, including a list of projects entitled to enjoy the new FiT, and present them for his approval by 15 December 2019.  While the number is still unknown, it is widely expected to be 7.09c for ground-mounted projects and stay at 9.35c for rooftop projects (which are favored due to not needing land to be allocated).

Certain, already announced, special rules for Ninh Thuan province will continue to apply with some adjustment.  Specifically, some already-approved projects in that province will continue to enjoy the 9.35c FiT but only until total operational capacity there reaches 2000 MW or until the end of 2020, whichever comes first.  The race is on there.

For all other ground-mounted solar projects, the Prime Minister has determined that competitive auctions are the way forward.  No doubt having an eye on the September 2019 auctions in Cambodia that resulted in solar tariffs as low as 3.87c, and record low prices in other markets around the world, this is seen as the appropriate way to marry investor appetite with actual conditions.  There is of course a huge question mark over how such auctions will function in practice and there remains a lot to be seen.  Most significantly, will there be any changes to the standard PPA terms to facilitate low prices.  If not, the market will have to put a firm price on the bankability and contractual risk.

For more information about Vietnam’s energy sector, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

VIETNAM – SOLAR POWER FEED IN TARIFFS BREAKING NEWS – FINAL DRAFT DECISION ON SOLAR POWER FEED-IN-TARIFFS FOR THE PERIOD FROM 1 JULY 2019 TO 31 DECEMBER 2021

On 19 September 2019, the Ministry of Industry and Trade of Vietnam (“MOIT”) submitted to the Government the final draft decision of the Prime Minister on the mechanism for encouraging the development of solar power projects in Vietnam from 1 July 2019 to 31 December 2021 (“FIT2”). It is expected that the new solar FiT2 decision will be issued soon this month.

Notably, the final FiT2 draft aims mostly at encouraging solar power project development in southern area as the MOIT estimated an addition capacity of approx. 6-8 GW need to be realized to satisfy major power demand of this area up to 2021.

New FITs for Solar Power Projects – from 1 July 2019 to 31 December 2021

Compared to the previous drafts, the final FIT2 draft does not determine FiT prices based on regions but only on technology types. The final FIT2 draft classified solar power projects into three groups as follows:

• Ground-mounted solar energy project: VND 1,620/kWh (USD 7.09 cent/kWh);
• Floating solar energy project: VND 1,758/kWh (USD 7.69 cent/kWh)
• Rooftop solar energy project: VND 2,156/kWh (USD 9.35 cent/kWh)

The above FIT2 price shall be applied for solar power projects reaching COD within the period from 1 July 2019 to 31 December 2021 and applied for 20 years from the COD date.
For Ninh Thuan province, solar power projects that reach COD before 1 January 2021 (within the capacity of 2,000 MW as already approved by the Government) still enjoy the FIT price of 9.35 cent/kWh.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Vietnam’s draft new solar tariffs – more sun, less cents, more sense

A new proposed tariff structure for solar energy projects in Vietnam sets out different rates for different irradiation regions and gives long-awaited indication of direction for the market after 30 June 2019.  On 29 January 2019, the Ministry of Industry and Trade (“MOIT“) released parts of a draft decision to update the country’s current feed in tariff (FiT) structure which is only valid until 30 June 2019 (the “Draft”).

The Draft is of course still just that, a draft, but forecasts a clear change in strategy with respect to FiTs.

Under the current FiT policy (regulated by Decision 11 and Decision 16) there is only one FiT for all projects regardless of location.  That is an internationally respectable FiT of 9.35 US cents per kWh for all on-grid solar power projects that achieve commercial operation date (“COD”) prior to 30 June 2019 (with the exception of some projects in Ninh Thuan province which have a later COD timeline).

The Draft however sets out a wide range of differing FiTs that vary based on: (i) when COD happens, (ii) location (3 regions are identified based on solar irradiation data), and (iii) the type of solar projects (i.e., floating, ground-mounted, integrated storage system or rooftop solar).

The table below shows what the Draft contemplates:

Projects with COD from 1 July 2019 to 30 June 2020

 

Solar power types Region 1 (see regions below)

(28 northern provinces with annual solar irradiation of up to 1,432.8 kWh/m2/year)

Region 2

(6 central provinces of Vietnam with annual solar irradiation of up to 1,676.1 kWh/m2/year)

Region3

(29 central highlands and southern provinces of Vietnam with annual solar irradiation of up to 1,910.3 kWh/m2/year)

VND / kWh US cent equivalent VND / kWh US cent equivalent VND / kWh US cent equivalent
Floating solar power projects 2,135 9.35 1,838 8.05 1,612 7.06
Ground-mounted solar power projects 2,095 9.18 1,802 7.89 1,583 6.94
Solar power projects with integrated storage system N/A N/A N/A N/A 2,052 8.99
Rooftop solar power projects 2,448 9.85 1,933 8.47 1,697 7.43
Projects with COD from 1 July 2020 to 30 June 2021

 

Floating solar power projects 2,028 8.88 1,746 7.65 1,531 6.71
Ground-mounted solar power projects 1,990 8.72 1,712 7.50 1,504 6.59
Solar power projects with integrated storage system N/A N/A N/A N/A 1,949 8.54
Rooftop solar power projects 2,023 8.86 1,740 7.62 1,527 6.69

 

While no changes will please everyone, especially the many developers who have committed considerable resources based on assumptions of the current FiT rate, the changes still indicate strong support for solar power projects generally and a rational approach to reflect the markedly different irradiation levels across the country.  Such an approach should take some pressure of heavily-stretched Southern hotspots (stretched from both power infrastructure and bureaucratic bottleneck perspectives).

We will continue to monitor this and update further as possible.  Meanwhile, we’d be delighted to hear views from developers and financiers about the change of strategic policy direction and FiTs forecast by the Draft.  Get in touch and tell us what you think.

Region 1: comprising 28 northern provinces of Vietnam with annual solar irradiation of 1,225.6 – 1,432.8 kWh/m2/year or daily solar irradiation of 3.36 – 3.92 kWh/m2/day. Including: Ha Giang, Bac Kan, Cao Bang, Tuyen Quang, Thai Nguyen, Lao Cai, Yen Bai, Lang Son, Quang Ninh, Phu Tho, Vinh Phuc, Bac Giang, Hai Duong, Hoa Binh, Hanoi, Ha Nam, Bac Ninh, Hung Yen, Hai Phong, Ninh Binh, Thai Binh, Ha Tinh, Nam Dinh, Quang Binh, Thanh Hoa, Lai Chau, Nghe An and Son La.

Region 2: comprising 6 central provinces of Vietnam with annual solar irradiation of 1,456 – 1,676.1 kWh/m2/year or daily solar irradiation of 3.99 – 4.59 kWh/m2/day. Including: Quang Tri, Dien Bien, Thua Thien Hue, Quang Nam, Da Nang and Quang Ngai.

Region 3: comprising 29 central highlands and southern provinces of Vietnam with annual solar irradiation of 1,703.9 – 1,910.3 kWh/m2/year or daily solar irradiation of 4.67 – 5.23 kWh/m2/day. Including: Kon Tum, Ca Mau, Hau Giang, Binh Dinh, Phu Yen, Bac Lieu, Kien Giang, Soc Trang, Gia Lai, Can Tho, Vinh Long, Tra Vinh, Dak Lak, Khanh Hoa, Lam Dong, Ben Tre, Tien Giang, An Giang, Dak Nong, Ho Chi Minh City, Dong Nai, Dong Thap, Ba Ria – Vung Tau, Long An, Binh Duong, Binh Phuoc, Tay Ninh, Ninh Thuan and Binh Thuan.

For more information about Vietnam’s solar and renewable energy sectors, please contact Giles at GTCooper@duanemorris.com, Tran Thanh at MTTran@duanemorris.com or any of the lawyers in our office listing.  Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

Vietnam Wind Power is taking off – The new Feed in Tariff – what you must know:

Decision No. 37 of the Prime Minister on supporting regime for wind power projects provides an FIT of 7.8 UScent/ kWh. This FIT applies to two current projects in operation in Binh Thuan, namely Phu Lac and Binh Thuan No. 1. For Bac Lieu near shore wind project, the FIT follows a special financial regime, being 9.8 UScent/kWh. However, with the current FIT, the Ministry of Industry and Trade (MOIT) opines that it will be difficult for these plants to recover their investment capital.

Thus, the MOIT has recently proposed the Government to increase wind FIT for inland wind power plants to 8.77 UScent/ kWh and to 9.97 UScent/kWh for near shore wind projects. This proposal is expected to attract more investors in the market as well as create incentive for current projects whose pre-feasibility reports have been approved by the MOIT to come into real operation.

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If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!