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On 5 March 2020, the Prime Minister of Vietnam officially issued Decision No. 08 amending Decision No. 24/2014/QD-TTg dated 24 April 2014 (“Decision No. 24“) on support mechanisms for the development of biomass power projects in Vietnam. Effective from 25 April 2020, Decision No. 08, among other revisions, increase Feed-in-Tariffs (“FiT“) for biomass power projects.1

Specific provisions on the FiT for grid-connected biomass power projects

Under Decision No. 08, tariffs at the delivery point are increased as follows:

  • For combined heat and power (“CHP“) biomass power projects: 7.03 US cent per kWh (exclusive of VAT) (increased from 5.8 US cent per kWh under the previous Decision No. 24 and from 6.77 US cent per kWh under the previous draft during November 2019); and
  • For other biomass energy projects: 8.47 US cent per kWh (exclusive of VAT) (instead of the avoided cost tariff under the current Decision No. 24).

The proposed FiT shall be adjusted in accordance with the fluctuation of the VND-USD exchange rate on the date of issuance of the relevant invoice. The proposed FiT is to be applied throughout the PPA term of 20 years from the commercial operation date.

Explanations of the MOIT

According to the MOIT’s previous proposal, there are approximately 10 CHP biomass power projects operating in Vietnam. Most of these are active in utilizing bagasse from sugar mills for self-consumption and were established before the issuance of Decision No. 24 on 24 March 2014. However, throughout Decision No. 24’s approximately 6-year implementation, no other grid-connected biomass power projects have been constructed or operated.

Further, the amended Power Development Plan VII previously set a target of power production from biomass energy to constitute 1% (in 2020), 1.2% (in 2025) and 2.1% (in 2030) of the country’s total energy mix.

In order to achieve this target, Decision No. 08 was proposed by the MOIT and issued by the Prime Minister to increase the FiT for biomass power projects and encourage investment.


1 Decision No. 08/2020/QD-TTg of the Prime Minister dated 5 March 2020 amending and supplementing a number of articles of Decision No. 24/2014/QD-TTg on support mechanisms for the development of biomass power projects in Vietnam (“Decision No. 08”).

Author

Frederick Burke is a member of Baker McKenzie’s Global Policy Committee, comprised of the Firm’s Managing Partners globally, responsible for driving the overall strategy of the Firm. He is also the Managing Partner of our Baker McKenzie offices in Vietnam, more particularly in Hanoi and Ho Chi Minh City. He has more than 30 years’ experience practicing in the areas of corporate law, real estate, international trade and is highly regarded for his work on foreign investment projects in Vietnam and China for key players in property development, trade, IT/C, and project finance, among other areas. Mr. Burke is the go-to advisor for big deals in Vietnam’s flourishing industries including: renewable energy, agribusiness, airlines, hotels, resorts and tourism and large scale infrastructure projects. He is currently the representative of the American Chamber of Commerce in Vietnam to the Prime Minister’s Advisory Council on Administrative Reform in Vietnam and he has been recognized by the Ministry of Justice of Vietnam for his “Outstanding contributions in the field of international legal cooperation”. Mr. Burke is consistently ranked as a Leading Lawyer in Corporate / M&A by leading legal publications in Vietnam (Legal 500 AP 2007-2018; Chambers and Partners AP 2012-2018; IFLR1000 2010-2018).

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Chi Lieu Dang joined Baker McKenzie's Hanoi office in 2008 and became a special counsel in July 2012. He focuses his practice on mergers and acquisitions, corporate, energy, mining and infrastructure. He also has substantial experience in commercial, insurance and telecommunications. Mr. Dang is a member of the Hanoi Bar Association.

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Thanh Hai Nguyen is an Associate in Baker McKenzie's Hanoi office.