On 25 September 2020, the Ministry of Industry and Trade of Vietnam (MOIT) circulated to the relevant line ministries and Vietnam Electricity (EVN) the draft proposal letter to the Prime Minister (“Draft Proposal“), together with the full text of the draft Prime Minister’s Decision on the pilot program for competitive selection of solar power projects (“Draft Decision“).
The pilot program targets a limited number of solar power projects that have been included (or will be included soon) in the power development master plan, but are not eligible for Feed-in-Tariff (FiT) 1 and FiT 2 (“Pilot Program“). Under the Draft Proposal, this program will tentatively take place from November 2020 to May 2021 (to be finalized) as a transition phase for future competitive auction mechanisms (such as “substation-based” and “solar park” models).
To participate in the Pilot Program, among other criteria, the project must:
- have been included in the power development plan
- be included in the list of solar projects eligible for the Pilot Program prepared by the MOIT (and such list is subject to further review by local Provincial People’s Committees)
- have a proposed Commercial Operation Date (COD) before 1 July 2022
Specific selection criteria will focus on the proposed electricity sale/purchase price (i.e., among projects that have met the eligibility criteria above, projects with lowest proposed electricity sale/purchase price will be selected) as a key principle. Under the Draft Decision, the ceiling price is proposed to be same as FiT 2 under Decision No. 13.1 Currently, the MOIT proposes that the PPA template for FiT 2 projects under Circular No. 18 also apply to the pilot program.2
The Draft Decision also imposes certain other legal restrictions on projects selected through the Pilot Program, among other things:
- a maximum capacity for the whole Pilot Program (at 60% of all projects participating in the program) and maximum capacity for project(s) of one investor (at 20% of all projects selected through the Pilot Program)
- a restriction on “project transfers” before COD
- an expansion of circumstances where the projects may not be able to get a refund of security deposits
- a reduction of electricity sale price by 5% per quarter of delay in COD beyond the required long stop date of 30 June 2022
The contents of the Draft Proposal and the Draft Decision circulated by the MOIT on 25 September is in draft form only. Final contents are subject to the Prime Minister’s Decision, to be issued for the pilot program.
Please do not hesitate to contact us if you would like to know more about any of the following:
- The upcoming regulations related to the solar auction/competitive bidding program
- Necessary legal considerations for existing and newly proposed solar farms to best prepare for participation in the Pilot Program, and/or other alternative mechanisms
- Specific selection procedures as proposed under the Draft Decision, including the contents of the MOIT’s template RfP/electricity sale price proposal form
- Specific opportunities and challenges, as well as legal and practical solutions for development and investment in solar power projects in Vietnam
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1 Decision No. 13/2020/QD-TTg dated 6 April 2020 of the Prime Minister on encouragement mechanisms for solar power development in Vietnam (“Decision No. 13“).
2 Circular No. 18/2020/TT-BCT dated 17 July 2020 of the MOIT regulating on project development and model PPAs for solar power projects (“Circular No. 18“).