VIETNAM – WIND ENERGY – LATEST UPDATE ON TARIFFS – Vietnam Economic Times interviewing Dr. Oliver Massmann

1. As the new proposed FiT extention by the Ministry of Industry and Trade (MoIT) would reduce tariffs for onshore and intertidal wind power by 17.4 per cent and 13.6 per cent respectively, one of the most dramatic reductions seen for wind power globally. How would you comment on the impacts of this new Draft on Vietnam’s wind power market? How would this move affect wind power developers in the country and investment attraction in the local wind power market?

It can be seen that the Government has continuously encouraged the development of wind power projects. The new, attractive proposed FiT rate for wind power plants and extended the deadline of FiT rate for wind power projects are an indication that there are a lot of rooms for investors looking to participate in this sector of renewable energy development.

By the end of 2020, the total solar power capacity (including floating) put into operation was about 17 GW, concentrated in the southern provinces and the Central Highlands. Transmission grids are not enough in quantity, especially in Ninh Thuan and Binh Thuan provinces, to accommodate the increasing number of solar power projects and reduction in construction time of them due to advanced technology. As a result, most projects that have come into operation in such localities are being subjected to daily decrease in generating capacity to avoid overloading the regional grid.

To promote the development of wind energy sources is a feasible and effective solutions to counter the imminent 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.

2. As the Covid-19 pandemic has continued causing regulatory challenges and delays to many wind power projects in Vietnam, what are your proposals to the Government in extending tariff policies to support wind power developers in the country?

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

– 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;

– 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.

3. How would you forecast Vietnam’s wind power market in 2021?

On 22 February 2021, the Ministry of Industry and Trade (“MOIT”) has made available to the public the long-awaited draft Power Development Planning VIII (“PDP 8”). By 2030, the total installed capacity of Vietnam’s electricity sources is predicted to be at 137.2 GW, of which 29% is renewable energy (including wind, solar, and other types of energy). At a glance, the PDP 8 reinforces the Vietnam Government’s current view on prioritizing renewable energy sources to minimize negative impacts caused by electricity production on the environment. Moreover, by 2040, the North’s commercial electricity demand will start to exceed that of the South. Hence, investors may want to switch their focus to the Southern region or develop transmission grids connecting to thereof to accommodate the increasing power demand.

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For more information on the above, 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.

VIETNAM – MOIT PROPOSES NEW FIT RATE FOR WIND POWER PROJECTS

On 28 October 2020, the Ministry of Industry and Trade (MOIT) issued Official Letter No.8159/BCT-DL to collect comments from other Ministries and relevant agencies on solutions for difficulties in wind energy project development. The comments were combined into a Draft report for the Prime Minister’s review and approval.

A notable provision of the Draft report is for wind power projects that have been supplemented into the power development planning and do not meet the COD deadline for current wind FiT rate of November 2021, the new applicable FiT rate shall be:

No. Category FiT rate for onshore projects (Uscent/kWh) FiT rate for offshore projects (Uscent/kWh)

1 Projects reaching COD from November 2021 to December 2022 7,02 8,47

2 Projects reaching COD in 2023 6,81 8,21

In addition, the Draft report also proposes to extend the current FiT rate deadline to 31 December 2023, instead of November 2021.

As stated in our previous articles on FiT rate for wind power projects, 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:
• 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;
• 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 investors extra time, especially when there is unexpected delay of equipment delivery (e.g. due to Covid-19).

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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.

VIETNAM – APPRAISAL OF WIND POWER PROJECTS SUSPENDED

The Government’s policies have created a driving force for wind energy development in Vietnam over the years. From 2018 to now, the Ministry of Industry and Trade (“MOIT”) has received requests for project inclusion into the National Power Development Plan (“NPDP”) of up to 50,000 MW.

At the moment, the total planned capacity of wind power in 2025 is 11,800 MW – of which competent authorities have approved 4,800 MW before January 1, 2019, and an additional 7000 MW was included by July 2020. MOIT has also sent a written report to the Prime Minister on the appraisal results of 74 wind power projects with a total capacity of about 6400 MW, which are proposed to be included in the NPDP.

MOIT is urgently completing the National Electricity Development Plan VIII (“VIII Master Plan”) for the period 2021-2030, with a vision to 2045 to submit for the Prime Minister’s approval in October 2020. To assist with this process, on 5 October 2020, MOIT issued Document No.7421/BCT-DL on the list of wind power projects proposed to be included in the VIII Master Plan, guiding the following:

1. The People’s Committees of provinces and cities to create a list of wind power projects requesting for survey, research, and supplementation into the NPDP.

2. Due to time constraint on the submission deadline of the VIII Master Plan, appraisal and approval for inclusion of wind energy projects shall be suspended until further notice.

3. The People’s Committees of provinces and cities are responsible for reviewing the site planning of wind power plants.

MOIT’s guidance to suspend the inclusion of more wind power projects into the NPDP is a recommendable move given the fact that the national power transmission system has been experiencing overload. Moreover, Electricity Vietnam (EVN) predicts that roughly 20-35% of total installed capacity will not be released in the South Central Region (including renewable energy hotspots Binh Thuan and Ninh Thuan) in 2025 if all projects that have been included in the NPDP go into operation in the next 4 years.

For more information on the above, 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.

VIETNAM – PM ANNOUNCES NAME OF WIND POWER PROJECTS TO BE CONSIDERED FOR INCLUSION IN THE ELECTRICITY DEVELOPMENT PLANNING

On 25 June 2020, under Dispatch No.795/TTg-CN, the Prime Minister announced list of wind power projects and grids to be considered for inclusion in the national electricity development planning. The list entails name, location, capacity, connection plans and conditions to release capacity of each project.

The list focuses on 5 regions, of which the Southwest area (including Bac Lieu, Ben Tre, Soc Trang provinces) has the highest number of projects – 3166.8 MW waiting to be included in the power master plan. Follow up is the Central Highlands (Gia Lai, Dak Lak, Dac Nong provinces) with 2432 MW. Next is the North Central region with 941.2 MW of wind projects concentrated mostly in Quang Tri province waiting to be included in the national power development planning.

All wind power projects in the South Central region are located in Ninh Thuan province. The South East region has only 1 project to be considered for inclusion – the Cong Ly Ba Ria Vung Tau project.

Dispatch 795 is expected to serve as a basis for the supervision of investment/construction process of wind power projects, so that these projects can quickly go into operation, supplement the electricity supply for the country and combat electricity shortage. Having a clear, official list of projects to be included in the master plan also helps to combat bribery/corruption among developers and relevant authorities – the latter enables low quality projects to be connected to the national grid thus subsequently damage the infrastructure of the distribution system and create financial loss for the buyer and consumers.

The Ministry of Industry and Trade is responsible for making sure wind power projects and power grids connected to the national electricity system to be appraised in accordance with laws and can contribute to common economic efficiency. The Ministry must also ensure there will be no overload of power grid when putting these projects into operation.

For names and more information of the wind power projects to be considered for inclusion in the electricity development planning, 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.

VIETNAM – WIND ENERGY BREAKING NEWS – FEED IN TARIFF COULD BE EXTENDED – WHAT YOU MUST KNOW:


FEED IN TARIFF
(“FIT”) scheme for wind power may be extended until the end of 2023 if it is approved by the Prime Minister. On April 09th, 2020, MoIT sent the Government Office the Official Letter no. 2491/BCT-DL to propose to extend FIT scheme for wind power. The proposed content is as follows:

1. Extending FIT scheme for wind power until 31/12/2023.

2. Assigning MoIT to calculate and propose a new FIT price for the projects COD after 01 November 2021 until 31 December 2023.

3. Competitive tender and auction scheme shall be applied after 2023.

The reason for this proposal is the predicted shortage of power for Southern Vietnam from 2021 to 2025 because many thermal projects are behind schedule, thus the need for wind power from 2021 to 2025 is predicted from 6,030 MW to 11,630 MW.

This extended FIT scheme, if approved by the Prime Minister, shall be a lucrative opportunity for investors in the following years.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer in our office listing 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.
Thank you!

VIETNAM – POWER SECTOR – NEW FEED-IN-TARIFFS FOR WIND ENERGY PROJECTS

THE PRIME MINISTER’S IN-PRINCIPLE APPROVAL
On 11 September 2018, the Prime Minister has approved a draft decision on new feed-in tariffs (FITs) applicable to wind power projects in Vietnam. This FITs decision will become effective 1 November 2018 (the “PM Decision”). The PM Decision will amend and revise certain articles of the Prime Minister’s Decision No. 37/2011/QD-TTg on the mechanisms supporting the development of wind power projects in Vietnam.

FITS PRICE FOR WIND ENERGY PROJECTS
FITs price for wind power projects will be increased from the current 7.8 US cents / kWh to (i) 8.5 US cents / kWh applicable to onshore wind power projects, and (ii) 9.8 US cents / kWh applicable to offshore wind power projects.
Onshore and offshore wind power projects are roughly defined in the PM Decision as follows: (i) onshore wind power project means on-grid wind power project that having its wind turbines to be built and operated on inland areas and coastal zones (NB: boundary of such inland areas and coastal zones is the average low water line for 18.6 years), and (ii) offshore wind-power project means on-grid wind power project that having its wind turbines to be built and operated outside inland areas and coastal zones to the sea.
We believe that the MOIT should provide further guidelines for a better definition of onshore and offshore wind power projects.

COD FOR NEW FITS – WIND POWER PROJECTS
The new FITs price must apply to a part or the whole of a wind power project that achieves commercial operation date (“COD”) before 1 November 2021, and such new FITs will apply for 20 years from the COD of such wind power project.
For wind power projects that have achieved COD prior to the effective date of the PM Decision (i.e., 1 November 2018), the new FITs price may apply for the remaining term of the relevant signed wind power purchase agreement (PPA). However, it is not crystal clear if the new FITs price will automatically apply to the current operating wind power projects, or it is still required to re-negotiate and revise the current signed wind PPA with EVN. In case of the latter, it will be very challenging to re-negotiate and revise the current signed wind PPA with EVN.

AUCTION MECHANISM AFTER 1 NOVEMBER 2021
According to the PM Decision, MOIT must prepare and submit a policy on auction for selection of new wind power projects and wind power prices since 1 November 2021 onward.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any lawyer in our office listing 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 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!

 

 

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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