Công văn 7200/BCT-DL

In furtherance of the Prime Minister in Notice No. 221/TB-VPCP dated July 01, 2020 of Government Office, which contains the verdict of Deputy Prime Minister Trinh Dinh Dung at the meeting for proposing mechanisms for determination of competitive solar power prices. On the basis of opinions offered by the Ministries and central authorities, the Ministry of Industry and Trade has prepared the draft Decision of the Prime Minister on the pilot program for determination of solar power purchase prices (enclosed herewith).

The Ministry of Industry and Trade would like to receive your opinions on the draft Decision before October 05, 2020./.

Provisional List of People’s Committees of:

1. Binh Thuan Province

2. Ninh Thuan Province

3. Gia Lai Province

4. Phu Yen Province

5. Thanh Hoa Province

6. Dac Nong Province

7. Thua Thien Hue Province

8. Binh Phuoc Province

9. Long An Province

10. An Giang Province

11. Lam Dong Province

12. Quang Ngai Province

13. Dak Lak Province

14. Khanh Hoa

STATEMENT

DRAFT DECISION OF THE PRIME MINISTER ON PILOT PROGRAM FOR DETERMINING SOLAR POWER PRICE

To: Prime Minister

Implementing direction of the Prime Minister under Notice No. 221/TB-VPCP dated July 1, 2020 of Office of the Government on Conclusion of the Prime Minister Trinh Dinh Dung in the meeting for proposing mechanisms for determining competitive electricity price for development of solar power projects;  On the basis of research and acknowledging feedback of ministries; Ministry of Industry and Trade reports pilot Program for determining solar power price to the Prime Minister as follows:

I. CURRENT STATE OF SOLAR POWER DEVELOPMENT AND DEVELOPMENT DEMANDS FOR 2020 - 2025

1. Current state of solar power development in Vietnam and impact assessment of feed-in-tariff (FIT)

In order to encourage solar power development, the Prime Minister issued Decision No. 11/2017/QD-TTg on incentives policies for development of solar power projects in Vietnam (ceased to have effect on June 30, 2019) and Decision No. 13/2020/QD-TTg dated April 26, 2020 on incentive policies for development of solar power projects in Vietnam, which regulated the adoption of FIT mechanism in solar power projects.

The FIT mechanism specified under Decision 11 and Decision 13 permitted investors to benefit from FIT within 20 years if power plants are able to achieve commercial operation date within the period in which FIT is adopted. This mechanism has motivated the new solar power market in Vietnam, effectively mobilized private capital for development of solar power, promoted development of domestic equipment manufacture and service markets, utilized empty land in multiple provinces and mobilized massive commercial investment capital for electricity infrastructure development (estimated as USD billion USD).

By the end of August, 2020, 92 solar power projects have begun to generate power with total capacity of 6,165 MWp (equivalent of approximately 4,930 MW).

2. Solar power development demands during 2020 - 2025

Ministry of Industry and Trade has issued Official Dispatch no. 1931/BCT-DL dated March 19, 2020 and Official Dispatch No. 3299/BCT-DL dated May 8, 2020 reporting to the Prime Minister on balancing power demands and renewable energy development demands. According to which, balanced electricity demands for 2021-2025 suggest apparent risk of power shortage during 2021-2024.  Amount of power shortage would increase from 400 million kWh in 2021, peak at 13.3 billion kWh in 2023 and reduce to 11 billion kWh in 2024.

In order to reduce the risk of power shortage during 2021-2025, one of the proposed measures is to promote development of renewable energy, especially solar power due to ability of rapid implementation and satisfaction of operational progress from as soon as 2021. Total estimated solar power capacity at the end of 2025 is 14,450 MW and 20,050 MW at the end of 2030.

II. NECESSITY FOR ISSUANCE OF DECISION ON PILOT PROGRAM FOR DETERMINING SOLAR POWER PRICE

1. Limits in implementing FIT in case of expanded solar power market and requirements for developing bidding mechanisms for solar power development

FIT mechanism specified under Decision No. 11 and Decision No. 13 has effectively motivated solar power development in Vietnam. However, FIT policy observes certain limits: Projects are focused in areas with good potentials thereby overloading electrical grids in some areas, affecting stability of electrical grid and increasing land competitiveness; The current price defining mechanism is difficult to closely and promptly reflect changes to technology price in the market.

In the past 3 years, solar power in Vietnam has developed extensively, total installation capacity has increased rapidly, equipment manufacturing and service provision markets have expanded. Thus, policies and regulations on solar power development must be reviewed, researched and amended to aim towards competitive market while enhancing effectiveness in management, investment and operation. Research and completion of bidding mechanisms for selecting investors, investment projects and serving as the basis for determining solar power sale price are necessary and conforming to global trend.

Applicable regulations and law on investment, bidding and electricity have covered selecting investors of solar power development projects based on electricity price. Law on Bidding and relevant legislative documents focus on implementation provisions for investment projects that use plots and land funds with high value.  Law on Investment in form of public-private partnerships (PPP) regulates bidding for partially state-joined power sources.  Meanwhile, solar power projects that require more land tend to have medium and small capacity (mostly below 100 MW); do not require distribution of participating state capital; do not require guarantee from the Government in sale and payment for electricity; procedures and progress of rapid implementation, thus, clear and transparent mechanisms are required to encourage private capital involvement in development of power sector. 

In order to mobilize adequate solar power sources that meet load demands, maximize development and operation of electrical grids and minimize power price, bidding mechanisms for selecting investors and investment projects must be designed appropriately, which agrees on procedures, contact point and decentralization in terms of project investment development shown in relevant policy framework on Law on Electricity, Law on Investment, Land Law, Law on Planning, etc. Thus, research must be conducted to propose regulations on competitive bidding mechanisms to ensure transparency and competitiveness to reduce power cost and increase effectiveness in management and investment. Implementing Article 10 of Decision 13, Ministry of Industry and Trade is currently conducting research to finalize bidding mechanisms for solar power projects and implementation roadmap in order to report to the Prime Minister to approve nationwide implementation.

2. Request for issuance of Decision on pilot Program for determining solar power price (pilot Program)

2.1 Necessity for pilot Program

FIT mechanism specified under Decision No. 13 shall be applied to solar power projects that meet time requirements, are granted investment guidelines and have commercial operation date before January 1, 2021. According to preliminary statistical report of Ministry of Industry and Trade, until present, 8 solar power projects have been added to electricity development planning with total capacity of approximately 610 MW and ineligible for adopting FIT mechanism specified under Decision No. 13; 21 solar power projects having total capacity of approximately 1000 MW have been prioritized by the Prime Minister for planning (under Notice No. 221/TB-VPCP dated July 1, 2020) of the Office of the Government and 103 solar power projects have appraised applications for inclusion in planning with capacity of approximately 10,000 MW. These projects are waiting for new policies on development of solar power in order to be invested.

During the transition period from FIT mechanism to bidding mechanism for projects included in power development planning and ineligible for application of FIT specified under Decision No. 11 and Decision No. 13, Ministry of Industry and Trade proposes implementation of pilot Program for determining solar power price (according to Method 1 under Statement No. 1968/TTr-BCT dated March 19, 2020 of Ministry of Industry and Trade presenting to the Prime Minister).

Objectives of pilot Program:

- Ensuring continuity of incentive policies for solar power development to promptly mobilize power supply until 2025 and supply demand balance provided the risk of power shortage in southern region.

- Aiming towards competitive and discount mechanisms for solar power projects during the transition period from FIT to bidding.

- Acting as the pilot step to assess advantages, disadvantages and complaints regarding policies, guidelines and procedures serving research and proposing bidding mechanism suitable for Vietnam.

- Facilitating maintenance and development of equipment and service markets, promoting investment capital market and workforce in renewable energy technology, especially when COVID 19 epidemic is heavily impacting the economy.

On the basis of impact assessment and implementation result of the pilot Program, Ministry of Industry and Trade shall complete bidding mechanism for solar power projects and implementation roadmap and report to the Prime Minister to approve nationwide implementation.

2.2 Principles for developing draft Decision on pilot Program

Ministry of Industry and Trade shall develop draft Decision on pilot Program based on following principles:

- Pilot mechanism must be designed flexible, focusing on competitiveness in power price, permitting participation of solar power projects of all development phase and proposed for development on a nationwide scale.

- Ensure competitiveness in electricity price among projects.

- Adopt regulations and procedures of applicable laws on investment and continuous operation.

On such basis, draft Decision on pilot Program prescribing procedures for determining competitive electricity price for solar power projects shall be designed as follows:

- Suggest investors in provinces for pilot Program with respect to solar power projects in power planning implemented by People’s Committees of provinces.

- Assess connection methods and ability to release capacity: Vietnam Electricity shall exercise according to specialized tasks.

- Assess electricity price to select projects with optimal electricity price: Ministry of Industry and Trade shall review and approve list of solar power projects expected to participate in pilot Program on the basis of suggestion of People’s Committees of provinces regarding investors and remarks of EVN about release capacity assessment; approve Plan for implementation of pilot Program and Solicitation for electricity price offer of pilot Program; assess Electricity price offer of investors to select and apply electricity price; approve selected results.

III. BASIC CONTENTS OF PILOT PROGRAM FOR DETERMINING ELECTRICITY PRICE

3.1 Scale and period of implementation of pilot Program:

In order to ensure competitiveness in electricity price, Ministry of Industry and Trade shall propose that total maximum capacity of projects selected for solar power development in pilot Program equals 60% of total capacity of all projects participating in pilot Program.

Expected period of implementation of pilot Program:

- Selecting projects based on electricity price: From November, 2020 to May, 2021.

- Finish procedures and invest in projects: From 2021 to June 30, 2022.

3.2 Implementation method and participants in pilot Program:

- Solar power projects participating in pilot Program having proposed electricity price in ascending order below the maximum price approved by the Prime Minister shall be selected for development until total capacity of pilot Program is reached.

- Determination of electricity price in pilot Program shall be conducted independently for floating solar and ground solar. Determination of electricity price of projects shall be implemented if at least 5 investors apply for participation.

- Total maximum capacity of selected projects of any investor in pilot Program shall equal 20% of total capacity of selected projects.

3.3 Solar power price ceiling of pilot Program

Ministry of Industry and Trade shall propose ceiling price in order to apply to pilot Program which is solar power price approved under Decision No. 13. Electricity price applied to selected projects shall be proposed electricity price of investors and less than ceiling price approved by the Prime Minister.

3.4 Summary of implementation of pilot Program and responsibilities of parties

(1)     (1) Review lists of solar power projects in solar power development planning expected to participate in pilot Program

Ministry of Industry and Trade shall prepare lists of solar power projects in solar power development planning expected to participate in pilot Program. Lists of solar power projects shall be submitted to People’s Committees of provinces where projects are expected to take place to provide remarks about investors (if any), propose investors and provide feedback on application and project preparation in provinces.

(2) Assess ability to release capacity of solar power projects

Ministry of Industry and Trade shall send lists of solar power projects expected to participate in pilot Program to Vietnam Electricity to enable Vietnam Electricity to review and assess ability to release capacity of solar power projects.

(3) Ministry of Industry and Trade shall prepare and approve Plan for implementation of pilot Program, list of projects expected to participate in pilot Program and Solicitation for electricity price offer of pilot Program. Plan for implementation of pilot Program shall be submitted to People’s Committees of provinces where projects are expected to take place and to expected investors and posted on websites of Ministry of Industry and Trade and national bidding networks.

(4) Within 45 days from the date on which Ministry of Industry and Trade posts information on Plan for implementation of pilot Program on website thereof, investors interested in solar power development shall prepare and submit Electricity price offer for pilot Program to Ministry of Industry and Trade.

(5) Ministry of Industry and Trade shall assess electricity price offer to select solar power projects and determine electricity price for application; approve selected results.

Investors of selected projects shall develop procedures for investing in project development satisfactory to regulations and law on investment, planning, construction, electricity safety, land, fire prevention, environmental protection and other regulations and law.

IV. CONSOLIDATION AND EXPLANATION OF MINISTERIAL REMARKS

Consolidation and explanation of ministerial remarks are specified under Annex.

V. PROPOSITIONS

On the basis of analysis above, Ministry of Industry and Trade hereby has the honor to request Prime Minister to consider:

1. Approving Decision on pilot Program for determining solar power price.

2. Assigning Ministry of Industry and Trade to take charge and cooperate with ministries in conducting research, developing and finalizing bidding mechanisms for solar power projects for nationwide application and reporting to Prime Minister for consideration and decision./.

DECISION

PILOT PROGRAM FOR DETERMINING SALE PRICE OF SOLAR POWER

Pursuant to the Law on Government Organization dated June 19, 2015;

Pursuant to Law on Electricity dated 2004 and Law on amendments to Law on Electricity dated 2012;

Pursuant to Law on Investment dated 2014;

Pursuant to Law on Bidding dated 2013;

Pursuant to Decision No. 2068/QD-TTg dated November 15, 2015 of Prime Minister approving Renewable energy development strategy of Vietnam until 2030 and vision until 2050;

At request of Minister of Industry and Trade;

The Prime Minister promulgates pilot Program for determining sale price of solar power.

HEREBY DECIDES:

Article 1. Scope and regulated entities

1. This Decision prescribes pilot Program for determining solar power price (hereinafter referred to as “pilot Program”).

2. This Decision only applies to solar power projects in solar power development planning.

3. This Decision only applies once for floating solar power projects and once for ground solar power projects.

4. Investment in grid-connected solar power projects in form of PPP and DPPA are not regulated by this Decision.

5. This Decision applies to organizations and individuals participating in development of grid-connected solar power.

Article 2. Scale and period of implementation of pilot Program

1. Total maximum capacity of projects selected for solar power development in pilot Program shall equal 60% of total capacity of all projects participating in pilot Program.

2. Period of implementation of pilot Program:

- Determining electricity power to select and develop solar power projects: From November, 2020 to May, 2021.

- Prepare, invest and initiate COD: From 2021 to June 30, 2022.

Article 3. Principles for implementation of pilot Program

1. Solar power projects participating in pilot Program having proposed electricity price in ascending order and below the ceiling price specified under Clause 1 Article 4 shall be selected for development until total capacity of pilot Program specified under Clause 1 Article 2 of this Decision is reached.

2. Determination of electricity price in pilot Program shall be conducted independently for floating solar and ground solar. Determination of electricity price of projects shall be implemented if at least 5 investors apply for participation.

3. Total maximum capacity of selected projects of any investor in pilot Program shall equal 20% of total capacity of selected projects.

Article 4. Ceiling price and applied electricity price

1. Solar power ceiling price of pilot Program for applying electricity price specified under Decision No. 13/2020/QD-TTg dated April 6, 2020 on incentives policies for development of solar power projects.

2. Applied electricity price

a) Electricity price applied to power purchase agreements of selected projects is the price proposed by investors in Electricity price offer at point of connection (VAT not included).

b) Applied electricity price shall be adjusted based on Vietnam Dong to US Dollar ratio (equivalent to Uscents/kWh), applied conversion rate shall be central ratio between Vietnam Dong to US Dollar publicized by the State Bank of Vietnam on the date on which the Seller produces invoice(s).

c) This price shall be applied for 20 years from the COD of projects and specified in power purchase agreements. Forms of power purchase agreements are specified under Annex 1 of this Decision.

d) In case projects selected for development in pilot Program according to Clause 5 Article 5 of this Decision are permitted by competent agencies to extend investment progress and commercial operation date to past June 30, 2022, applied electricity price of projects shall be the price specified under Point a of this Clause reduced by 5% per quarter behind intended progress.

Article 5. Implementation procedures

1. Review lists of solar power projects in solar power development planning expected to participate in pilot Program

Within 10 working days from the date on which the Prime Minister approves this Decision, Ministry of Industry and Trade shall prepare list of solar power projects in electricity development planning expected to participate in pilot Program. The list of solar power projects shall be sent to People’s Committees of provinces where projects are expected to take place to propose investors participating in pilot Program (one investor proposed per project).

On the basis of written investor proposition of People’s Committees of provinces, Ministry of Industry and Trade shall complete list of solar power projects expected to participate in pilot Program.

2. Assess ability to release capacity of solar power projects

Ministry of Industry and Trade shall send lists of solar power projects expected to participate in pilot Program to Vietnam Electricity to enable Vietnam Electricity to review and assess ability to release capacity of solar power projects. Within 15 working days from the date on which request of Ministry of Industry and Trade is received, Vietnam Electricity shall assess and report on ability to release capacity of projects and propose list of solar power projects expected to participate in pilot Program.

3. Ministry of Industry and Trade shall prepare and approve Plan for implementation of pilot Program, list of projects expected to participate in pilot Program and Solicitation for electricity price offer of pilot Program. Plan for implementation of pilot Program shall be submitted to People’s Committees of provinces where projects are expected to take place and to expected investors and posted on websites of Ministry of Industry and Trade and national bidding networks. (Form of Solicitation for electricity price offer of pilot Program under Annex 2).

4. Within 45 days from the date on which Ministry of Industry and Trade posts information on Plan for implementation of pilot Program on website thereof, investors interested in solar power development shall prepare and submit Electricity price offer for pilot Program to Ministry of Industry and Trade. Deadline for submission of Electricity price offer in pilot Program is specified under invitation for participation in pilot Program.

Electricity price offer in pilot Program consists of:

- Application for participation in pilot Program;

- Basic information on projects;

- Legal documents of the projects requested under Solicitation for electricity price offer.

- Offered electricity price using Form under Solicitation for electricity price offer.

Electricity price offer shall be submitted in envelopes bearing seals as specified under Solicitation for electricity offer.

5. Ministry of Industry and Trade shall assess and determine electricity price to choose solar power projects.

a) Projects eligible for participation in pilot Program for determining electricity price must guarantee capacity requirements under Clause 3 Article 3 of this Decision and requirements in terms of legal documents of the projects in Solicitation for offer.  Ministry of Industry and Trade shall review, approve and post list of projects participating in pilot Program to assess electricity price offer.

b) On the basis of requirements for principles for implementing pilot Program specified under Clause 1 Article 3 and ceiling price specified under Clause 1 Article 4 of this Decision, Ministry of Industry and Trade shall assess electricity price offer to determine electricity price of solar power projects.  Ministry of Industry and Trade shall elaborate method of assessing electricity price offer in Solicitation for electricity price offer.

c) On the basis of assessment results of Electricity price offer, Ministry of Industry and Trade shall approve list of solar power projects selected for development based on electricity price and electricity price applied to each project. Ministry of Industry and Trade is responsible for sending Decision on approving list of projects and electricity price applied to projects to People’s Committees of provinces where projects are expected to take place (included projects that are not selected) and investors of projects participating in pilot Program.

d) Decision on approving list of projects selected for development and applied electricity price including following basic information:

- Name of projects, capacity (MW).

- Name of investors proposing the projects.

- Location of projects (Communes, wards, districts and cities).

- Estimated date of commencement.

- Applied electricity price.

Article 6. Investment project execution commitment and investment project execution

1. Within 10 working days from the date on which Ministry of Industry and Trade issues Decisions on approving list of selected projects and applied electricity price, investors must produce investment project execution commitment and submit to Ministry of Industry and Trade and People’s Committees where the projects expected to take place. Ministry of Industry and Trade shall prescribe contents of the commitment in Solicitation for electricity price offer.

2. People’s Committees shall consider and issue investment guidelines for projects and investors selected for development in pilot Program and having project execution commitment according to applicable regulations and law. In case investors have been issued with Decisions on project investment guidelines by competent authorities before joining pilot Program, People’s Committees of provinces shall consider and amend Decisions on project investment guidelines to conform to Decisions on approving selected investment projects and applied electricity price (in terms of location, scale and progress of the projects) and project commitment.

3. Selected investors shall develop procedures for investing in project development satisfactory to regulations and law on investment, planning, construction, electricity safety, land, fire prevention, environmental protection and other regulations and law.

4. Investors have the rights to partially or totally transfer projects and partially or totally transfer rights and obligations according to signed power purchase agreements to the borrowers or other investors once the projects start to generate electricity.  Conditions and procedures for transfer shall conform to Law on Investment.

Article 7. Margin for execution of investment projects

1. Selected investors must sign margin to guarantee execution of investment projects according to Law on Investment and legal documents elaborating to Law on Investment. Margin amount shall conform to regulations and law based on scale, nature and implementation progress of each project. Margin for investment project execution shall be returned to investors based on execution progress, except for cases in which return is ineligible.

2. Margin shall be signed within 60 days from the date on which competent agencies issue Decisions on approving selected solar power projects and applied electricity price.

3. Cases in which margin is not returned:

a) Violate Decisions on approving list of selected projects and applied electricity price of pilot Program, Decision on investment guidelines, project commitment or investment registration certificate.

b) Fail to execute effective power purchase agreements.

c) Other cases according to relevant regulations and law.

4. Projects that do not have margin as specified under Clauses 1, 2, and 3 of this Article and ineligible for margin return as specified under Clause 3 of this Article shall cease to participate in pilot Program.

Article 8. Implementation

1. Responsibilities of Ministry of Industry and Trade

a) Organizing implementation of pilot Program according to this Decision.

b) Approving following basic contents in pilot Program:

- Approving Plan for implementing pilot Program.

- Approving list of solar power projects participating in pilot Program.

- Approving and publicizing list of solar power projects selected for development and applied electricity price for each project in pilot Program.

c) Assess results and experience in implementing pilot Program to complete bidding mechanism for solar power projects and implementation roadmap and report to the Prime Minister to approve nationwide implementation.

2. Responsibilities of Vietnam Electricity

a) Assessing and reporting ability to release capacity of solar power projects participating in pilot Program as specified under Clause 2 Article 5 of this Decision.

b) On the basis of list of selected solar power projects and applied electricity price approved by Ministry of Industry and Trade, within 15 days from the date on which request for signing power purchase agreements of project developers is received, the Buyers shall be responsible for reviewing power purchase agreements and signing power purchase agreements with selected investors.  Effective period of power purchase agreements for grid-connected solar power projects shall be 20 years from the commercial operation date. After this period, extension of contracts or signing of new contracts shall conform to regulations and law at the time of extending contracts or signing new contracts. Power purchase agreements and connecting agreements must conform to proposed progress and commitment of investors in Electricity price offer to guarantee project progress.

c) Implementing relevant responsibilities in case of breaching power purchase agreements and operational regulations of electrical grids thereby affecting investment and operation of solar power plants.

d) Purchasing all electricity produced by grid-connected solar power projects and uploading on the national grid according to regulations and law on operating electrical grids and technical standards, regulations of power sector; prioritizing regulation in order to fully utilize capacity and power of solar power projects.

e) Investing in developing receiving grid and capacity release system of selected solar power projects in pilot Program to guarantee progress according to power development planning approved by competent authorities.

3. Responsibilities of Committee for managing State capital at enterprises

Allocating capital and approving investment projects for developing lines and receiving transformers and capacity release system of selected solar power projects in pilot Program to guarantee progress according to power development planning approved by competent authorities.

4. Responsibilities of People’s Committees of provinces

a) Reviewing land use planning and other planning within their competence while assessing, proposing projects and proposing investors participating in pilot Program as specified under Clause 1 Article 5 of this Decision. Following up with procedures for repurposing land (if necessary) and issuing Decisions on assigning land, hiring land for projects to investors of selected solar power projects in pilot Program.

b) Completing procedures for issuing decisions on investment guidelines and issuing investment registration certificates as per the law. Project progress under investment registration certificates conform to progress proposed under Electricity price offer.

d) Monitoring and supervising commitment execution of investors in terms of project execution progress. Terminating operation of investment projects and revoking investment registration certificates in case of violations according to applicable regulations and law on investment and promptly reporting violations to Ministry of Industry and Trade.

e) Regulating and guiding implementation of signing margin and managing margin.

g) Closely cooperating with Ministry of Industry and Trade and Vietnam Electricity in providing necessary information regarding investment preparation and project development; assisting in dealing with complaints in investment preparation and project development.

5. Responsibilities of investors

a) Ensuring honesty and being legally responsible for application for participation in pilot Program to People’s Committees of provinces and for Electricity price offer to Ministry of Industry and Trade.

b) Being responsible for executing investment projects according to relevant applicable regulations and law; guaranteeing project progress according to project commitments and decisions of competent authorities.

c) Being responsible for managing and operating solar power projects conforming to regulations on national electrical grids and relevant regulations and law.

Chapter IV

IMPLEMENTATION

Article 10. Entry into force

This Decision comes into effect from the day of signing.

Article 11. Responsibilities for implementation

1. Ministers, heads of ministerial agencies, heads of Governmental agencies, Chairpersons of People’s Committees of provinces and central-affiliated cities, General Director of Vietnam Electricity, authorities, organizations, units and individuals are responsible for the implementation of this Decision.

2. Ministry of Industry and Trade shall take charge and cooperate with ministries and relevant local governments in monitoring, expediting and inspecting implementation of this Decision./.