Handle the shortcomings in the electricity generation pricing mechanism

Faced with the shortcomings in the development and issuance of the electricity generation pricing mechanism for the transitional projects, 36 investors with solar and wind power projects in Vietnam have sent proposal to the Prime Minister.

Accordingly, in the content of the proposal, the investors said that, as investors of solar and wind power projects, strongly supported the “Strategy for development of renewable energy in Vietnam” which was approved in Decision 2068/QD-TTg dated November 25, 2015 and “Scheme on tasks and solutions to implement the results of the COP26” was approved in Decision 888/QD-TTg dated July 25, 2022 by the Prime Minister to concretize the Government’s commitments at the COP26 Conference in 2021.

In fact, renewable energy projects have contributed to bringing the total installed capacity of solar and wind power from a negligible level before 2019 to 26% of the total capacity of Vietnam’s power system in 2021.

However, due to the severe impact of the COVID-19 pandemic, there are 84 renewable energy projects with a total capacity of 4,676.62 MW (including 4,184.8 MW of wind power and 491.82 MWac of solar power) was behind schedule of commercial operation date (COD) compared to plan (transitional project).

This delay makes these projects unable to enjoy the feed-in tariffs (FIT) of Prime Minister’s Decision 39/2018/QD-TTg dated September 10, 2018 on fixing amending and supplementing a number of articles of Decision 37/2011/QD-TTg on mechanisms to support the development of wind power projects and Decision 13/2020/QD-TTg of the Prime Minister dated April 6, 2020 on the mechanism to encourage the development of solar power projects.

In which, especially the group of 34 transition projects with a total capacity of 2,090.97MW (including 28 wind power projects with a total capacity of 1,638.35MW and 6 solar power projects with a total capacity of 452.62MWac) have been completed construction and testing to ensure sufficient mobilization conditions (updated information until March 2023). Investors also had to wait the Government for a long time to issue a new electricity generation price mechanism as a premise for negotiating electricity prices with Electricity of Vietnam (EVN).

According to investors, after a long time of waiting, policies applied to transition projects have recently been issued by the Ministry of Industry and Trade according to the following documents: Circular No. 15/2022/TT-BCT dated October 3 2022 of the Ministry of Industry and Trade (MoIT) stipulating the method of formulating the price bracket for electricity generation of solar power plants and transitional wind power plants (Circular No.15); Decision No. 21/QD-BCT dated  January 01 2023 of the MoIT promulgating the electricity price bracket for solar power plants and transitional wind power plants (Decision 21); and Circular No. 01/2023/TT-BCT dated January 19, 2023 of the MoIT on the cancel of a number of provisions in Circulars regulating the implementation of wind and solar power project development and purchase and the sample of power purchasing agreement (Circular No. 01)

“However, contrary to investors’ expectations, the provisions of Decision No. 21 and Circular No. 01 have made investors extremely worried and deeply concerned due to inadequacies of legal and regulatory, financial efficiency for investors, which cause loss and bankruptcy”, the investors expressed.

At the proposal, investors are also concerned that the above documents will seriously affect the sustainable development goals set by the Politburo and the Government. In particular, the unreasonable electricity generation price mechanism will negatively affect the investment environment, reduce the ability to attract foreign investment capital due to the instability of the clean energy development policy; as well as its impact on the banking and financial system.

Specifically, according to investors, if the new mechanism is applied, only 34 projects have completed construction with the total nearly 85 trillion VND investment capital, of which about 58 trillion dong from bank loans will face risk of financial plan failure, bad debt led to enterprises and banks not able to recover capital.

In the long run, an ineffective price mechanism will lead to the halt or delay of investment in energy projects that cause insecurity of energy, failure to implement policies and commitments on energy transition, reducing carbon emissions and the Government’s emission reduction roadmap, as well as reducing opportunities to create domestic supply chains and create jobs for local people.

With the desire to create a mechanism suitable for practice, bring investment efficiency and comply with current regulations on encouraging investment in renewable energy development, the investors also detailed inadequacies and inappropriate points in promulgating the electricity generation pricing mechanism for transition projects.

At the same time, it is proposed to the Prime Minister to consider and direct the MoIT to study and correct the shortcomings in order to ensure the issuance of the electricity generation pricing mechanism for the transitional project in accordance with the provisions of law, as well as creating an attractive environment for investors in Vietnam in the field of renewable energy.

In details, the Government should recalculate the electricity price frame in Decision No. 21/QD-BCT; issue a Circular providing specific guidance on Power Purchase Agreements for transitional projects; allow to mobilize the capacity of factories that have completed construction; complete the direct electricity purchase and sale (DPPA) mechanism.


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