Mechanisms for encouraging solar power development

illustration photo

DECISION

ON MECHANISM FOR ENCOURAGING SOLAR POWER DEVELOPMENT IN VIET NAM

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

Pursuant to the Law on Electricity dated December 3, 2004; The Law Amending and Supplementing to a Number of Articles of the Law on Electricity dated November 20, 2012;

Pursuant to the Law on Investment dated 26 November 2014;

Pursuant to the Law on Construction dated June 18, 2014;

At the request of the Minister of Industry and Trade;

The Prime Minister promulgates the Decision on mechanism for encouraging solar power development in Viet Nam.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

This Decision stipulates mechanisms for encouraging the development of solar power projects in Viet Nam.

Article 2. Subjects of application

The subjects of application of this Decision are organizations and individuals involved in the development of solar power projects in Viet Nam and other related organizations and individuals.

Article 3. Interpretation of terms

In this Decision, the terms below are construed as follows:

1.Electricity buyers are the Viet Nam Electricity Group or an authorized member unit.

2.Electricity sellers are organizations and individuals licensed to conduct activities generating electricity from solar power plants connected to the grid, and organizations and individuals having solar roof projects that sells surplus electricity to Electricity buyers.

3. A solar power project is a project to produce electricity from solar panels that convert light energy into electricity.

4. A solar rooftop project, hereinafter referred to as rooftop project, is a solar power project installed on a rooftop or on a construction works and directly connected to grids of the Electricity buyer.

5. Solar grid-connected projects, hereinafter referred to as grid-connected projects, are solar power projects which are connected to the national power grid or electricity grids of the Electricity buyer, except for the projects specified in Clause 4 of this Decision.

6. Connection point is a point where the Electricity seller’s line connects to the Electricity buyer’s power system.

7. Power point is a point for installing power measuring device and agreed upon in a power purchase agreement in order to determine the electricity output sold by the Electricity seller.

8. Power purchase agreement template for grid-connected projects and rooftop projects is a power purchase agreement issued by the Ministry of Industry and Trade as the foundation for electricity trading transactions between the Electricity seller and the Electricity buyer.

9. Feed in Tariff rate (FIT) for solar power project is a fixed price that the Electricity buyer has to pay to the Electricity seller.

Chapter II

PLANNING AND INVESTING IN THE DEVELOPMENT OF SOLAR POWER PROJECTS

Article 4. Solar Power Development Planning

1. Solar Power Development Plannings include the National Solar Power Development Planning and Provincial Solar Power Development Plannings. Solar Power Development Plannings are the foundation for investment in solar power development, which shall be adjusted in line with feasibility studies and assessments of solar power projects in each period.

2. The National Solar Power Development Planning and Provincial Solar Power Development Plannings shall be developed once for the period until 2020 with a vision to 2030 and adjusted and supplemented when necessary. For the successive planning phases, Solar Power Development Plannings shall be integrated into Provincial Electricity Development Plans and the National Power Development Plan.

3. Solar Power Development Plannings apply only to grid-connected projects, not to rooftop solar power projects.

Article 5. Development, approval and publicization of Solar Power Development Plannings

1. The Ministry of Industry and Trade shall organize the development of the National Solar Power Development Planning and submit it to the Prime Minister for approval, then publicize and guide, monitor and inspect the implementation of the approved National Solar Power Development Planning.

2. The People's Committees of provinces and centrally-governed cities (hereinafter referred collectively to as provincial-level People's Committees) shall organize the development of provincial-level Solar Power Development Plannings and submit them to the Minister of Industry and Trade for approval.

3. The publication and adjustment of the plannings shall comply with the current regulations.

4. Main content of Solar Power Development Plannings

a) Key contents of the National Solar Power Development Planning:

- Solar power potential of localities;

- A list of solar power projects;

- Orientation for the connection of solar power projects to the national power system.

b) Key contents of a Provincial Solar Power Development Planning include:

- Solar power potential of the province;

- The total area and boundaries of areas for development of solar power projects;

- A list of solar power projects;

- Capacity of each solar power project and the connection to the national power grid.

5. The Ministry of Industry and Trade shall specify the contents, order and procedures for development, appraisal and approval of Solar Power Development Plannings.

Article 6. Funding for the development of Solar Power Development Plannings

1. Funds shall be allocated from the central budget for the development, appraisal, publication and adjustment to the National Solar Power Development Planning.

2. Funds shall be allocated from budgets of provinces and centrally-run cities for the development, appraisal, publication and adjustment to Provincial Solar Power Development Plannings.

3.It is encouraged to mobilize other lawful funding sources for the development of Solar Power Development Plannings.

Article 7. Investment in the construction of solar power projects

1.Investment in the construction of grid-connected projects must be aligned with Electricity Development Plannings approved by the competent agencies.

2.Investment in the construction of solar power projects shall comply with the current legislation on investment, construction, fire prevention and fighting, environmental protection and other related regulations.

3.Main equipment of solar power projects must meet technical standards of solar power. Electricity quality of solar power projects must meet technical requirements on voltage, frequency and other relevant requirements according to current regulations.

4.Electricity sellers shall have to invest in and install electricity-measuring and -counting equipment, organize the inspection, calibration and testing of electricity-measuring and -counting equipment in strict compliance with current regulations on measurement.

5.Organizations and individuals investing in the construction of solar power projects, which have the responsibility to install solar power equipment, must ensure safety of structure and works according to the current regulations.

6. Investment in the construction of rooftop projects must meet the following requirements:

a) Roofs or structures constructed with solar panels must have the capacity to bear the load and structure of solar panels and associated accessories.

b) Electricity safety regulations must comply in accordance with current regulations.

c) Surrounding landscape and environment must be preserved.

Article 8. Connection of solar power projects to the power system

1. Electricity sellers shall be responsible for the investment, operation and maintenance of transmission line and transformer station (if any) from the powerhouse of the Electricity sellers to the point of connection with electricity grid of the Electricity buyers.

2. Connection points shall be agreed upon by the Electricity sellers and the Electricity buyers according to the principle that a connection point is the nearest point connected from the Electricity sellers’ line to the power grid of the Electricity buyers, ensuring the electricity transmission capacity of the Electricity sellers and in alignment with the approved electricity development plan. In case the connection point is different from that of the measuring equipment, the Electricity sellers shall bear the loss of power on the connecting line and the loss of the transformer. The Ministry of Industry and Trade shall promulgate the method of calculating loss on the connection line.

Chapter III

MECHANISMs FOR ENCOURAGING SOLAR POWER PROJECTS

Article 9. Responsibility to buy electricity from solar power projects

1. Electricity buyers are responsible for purchasing all electricity generated from solar power projects. Priority shall be given to exploiting the full capacity and electricity generated by solar power projects for commercial operation.

2. The sale and purchase of electricity shall be made with a solar power purchase agreement made under the solar power purchase agreement template for solar projects issued by the Ministry of Industry and Trade.

3. Within 30 days after the Electricity seller has collected all dossiers and documents for electricity sale, the Electricity buyer and seller shall sign power purchase agreement according to current regulations.

4. Duration of a power purchase agreement for solar power projects is 20 years from the date of commercial operation. After 20 years, the two parties can extend the agreement period or sign a new agreement in accordance with current regulations.

Article 10. Incentives on investment capital and taxes

1. Mobilization of investment capital: Organizations and individuals participating in the development of solar electricity projects are entitled to mobilize lawful capital from domestic and foreign organizations and individuals for investment in the implementation of electricity projects in accordance with the current legislation.

2. Import tax: Solar power projects are exempted from import duties on goods imported to create fixed assets for the project, must comply with the current regulations on import tax and export tax on goods imported for production of projects with raw materials, input supplies and semi-finished products which can not be produced domestically.

3. Corporate income tax: The exemption and reduction of corporate income tax for solar power projects shall be the same as for projects in the categories eligible for investment preferences under current tax regulations.

Article 11. Land incentives

1. Solar power projects, transmission lines and transformer stations for connection with power grids shall be entitled for exemption or reduction of land use levy, land rents and water surface rents according to the current regulations for projects in the investment incentive sectors.

2. Based on plannings approved by competent authorities, provincial-level People's Committees shall create favorable conditions for arranging land funds for investors to carry out solar power projects. Compensation and support for ground clearance shall be implemented in accordance with the current land legislation.

Article 12. Electricity Price of Solar Power Projects

1. For power grid-connected projects

a) The Electricity buyers shall have the responsibility to purchase all of the electricity generated from power grid-connected projects at the purchase price of VND 2,086/kWh (excluding value added tax, equivalent to approximately 9.35 US cents/kWh at the current VND/USD exchange rate of VND 22,316/USD announced by the State Bank of Viet Nam on April 10, 2017). Electricity price will be adjusted in line with the VND/USD exchange rate, and only applies only to power grid-connected projects with the cell efficiency above 16 percent or productivity module over 15 percent.

b) Adjustment of electricity prices based on exchange rate fluctuation of the Vietnamese dong against the US dollar for grid-connected projects shall comply with the power purchase agreement template issued by the Ministry of Industry and Trade.

2. For rooftop projects

a) Rooftop projects shall apply net-metering mechanism for two-dimensional meter system. The excess amount of electricity generated from rooftop projects after subtracting the consumption amount in a billing cycle will be transferred to the next billing cycle. At the end of the year or upon the termination of the power purchase agreement, the excess electricity amount shall be sold to the Electricity buyers at the selling prices prescribed in Clause 1 of this Article.

b) Annually, based on the central exchange rate of the Vietnamese dong against the US dollar announced by the State Bank of Viet Nam on the last exchange rate announcement date of the previous year, the Ministry of Industry and Trade shall issue the purchase and sale price of solar power rooftop projects for the following year.

3. Electricity purchasing cost from solar power projects mentioned in Clauses 1 and 2 of this Article shall be calculated and included in the input parameters of the electricity price scheme of the Viet Nam Electricity Group.

4. The Ministry of Industry and Trade shall monitor and propose adjustments of electricity trading prices specified at Point a, Clause 1 of this Article to the Prime Minister for review and decision if necessary.

Chapter IV

TERMS OF ENFORCEMENT

Article 13. Responsibilities of state management agencies

1. The Ministry of Industry and Trade shall

a) Organize, guide and coordinate with the People's Committees of provinces and centrally-run cities in inspecting and supervising the implementation of this Decision.

b) Promulgate a power purchase template for power grid-connected projects, rooftop projects and guidelines for implementation.

c) Promulgate a methodology to calculate losses on the line in case the measurement points do not coincide with connection points.

d) Promulgate technical standards on solar power, regulations on electricity metering for solar power projects and guidelines on procedures for connecting and installing meters and calculating net-metering mechanism for solar rooftop projects.

dd) Study bidding process of solar power projects and organize the implementation thereof with an appropriate roadmap in order to increase investment efficiency and reduce the cost of solar power projects.

e) Study and propose mechanisms to encourage the development of solar power projects for the period after June 30, 2019.

g) Discuss with the People's Committees of provinces and centrally-run cities to agree on the land fund for solar power projects and ensure the implementation progress of projects according to the approved planning.

h) Promulgate electricity prices for solar projects based on exchange rate fluctuation of the Vietnamese dong against the US dollar for the following year.

i) For solar power projects that are not included in the approved list of Solar Power Development Planning and the Electricity development plan, the Ministry of Industry and Trade shall review and approve supplementary planning of solar power project with capacity less than or equal to 50 MW, and submit to the Prime Minister for approval of the supplementary planning of solar power projects with capacity over 50 MW.

2. The Ministry of Planning and Investment shall

Lead and coordinate with other Ministries and sectors in formulating mechanisms to encourage investment in development of production of solar electric equipment in Viet Nam and report them to the Prime Minister for consideration and approval.

3. The Ministry of Finance shall

Lead the studying and supplementing to tax and fee exemption regulations for rooftop projects (with the total capacity of less than 50 kW) and submit them to competent authorities for consideration and approval.

4. The People's committees of provinces and centrally-governed cities shall

a) Coordinate, support investors in compensation, ground clearance, infrastructure, human resources to invest, implement and develop solar power projects in the area.

b) Arrange and publicize land fund used for solar power projects in land use planning.

c) Monitor, supervise and inspect the implementation of local solar power projects within their authority.

d) Perform state management of activities related to solar power in their respective localities as stipulated by the current regulations.

e) Before January 31 every year, the People's Committees of provinces and centrally-run cities shall report to the Ministry of Industry and Trade on the total installed capacity of solar power grid-connected and rooftop projects in the province as of December 31 of the previous year.

Article 14. Responsibilities of other concerned organizations and individuals

1. The Viet Nam Electricity Group and its member units shall be authorized to

a) Negotiate and sign power purchase agreements with Electricity sellers under power purchase agreements according to the template prescribed in Article 12 of this Decision if the Electricity sellers satisfy the conditions for investment in constructing Solar power projects stipulated in Article 7 of this Decision.

b) The Viet Nam Electricity Group shall be responsible for calculating the electricity purchase cost of solar power projects and inputting input parameters in the annual electricity price scheme of the Viet Nam Electricity Group, and submitting to the competent authorities for approval.

c) Prior to 31 January every year, the Viet Nam Electricity Group shall report to the Ministry of Industry and Trade on the total installed capacity of solar power projects as of 31 December of the previous year.

2. Electricity sellers shall

a) Negotiate and sign power purchase agreements with Electricity buyers under the power purchase agreement template and sale prices specified in Article 12 of this Decision.

b) Install a system of energy meters in accordance with the current regulations to measure the amount of electricity consumption for payment.

c) Send 01 copy of the signed power purchase agreement to the Ministry of Industry and Trade within at least 30 days from the date of signing for grid-connected projects.

d) Comply with regulations on operation of the power system, regulations on power transmission system, electricity distribution system, metering system and related regulations issued by the Ministry of Industry and Trade.

Article 15. Transitional Provision

For power grid-connected projects and roof-based projects with power purchase agreements signed before the effective date of this Decision, the two Parties shall have the responsibility to discuss and sign revised agreements in accordance with provisions of this Decision.

Article 16. Enforcement

1. This Decision shall be effective from June 01, 2017 to June 30, 2019.

2. Ministers, Heads of the ministerial-level agencies, Heads of the agencies under the Government, Presidents of the People's Committees of provinces and centrally-run cities, Heads of agencies, units and organizations directly involved in the development of solar power projects in Viet Nam shall be responsible for the implementation of this Decision.

PRIME MINISTER

(Signed)

Nguyen Xuan Phuc

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