In late January, the Ministry of Industry and Trade (MoIT) issued a draft decision guiding the selection of investors implementing solar power projects under the bidding mechanism. Since the prime minister’s Decision No.13/2020/QD-TTg dated April 6, 2020 on mechanisms to promote development of solar power in Vietnam applies to grid-connected projects with commercial operation date (COD) by December 31, 2020 only, it is expected that the draft will soon be finalised and become effective, so solar energy developers as well as relevant government authorities can have guidelines for projects with COD from 2021 onwards.
|Dr. Oliver Massmann - General director Duane Morris LLP |
According to the draft, the decision would be applicable to projects with grids connected directly to the national power network. Every two years, the MoIT shall issue a price framework for electricity generation in order to determine the ceiling price for bids to select investors of solar power projects with COD in the next two years. There are four notable points in the draft. First is the applicable solar power purchase price, which is the price for the connection point proposed by the winning bidder/investor in the bidding dossier (excluding VAT).
Second is the adjustment to the investment schedule. If the investor is permitted to adjust the investment schedule and the project’s COD occurs after the commitment date stated in the bidding documents, the applicable electricity price of the project is the electricity selling price specified in the first point above with a cumulative reduction rate of 4 per cent for every 90 days of delay in investment schedule. Project delay time must not exceed 12 months.
The third notable point is the bidding procedure itself. People’s committees of localities are to publish the bidding dossiers, and investors are to submit a bid which includes a technical proposal and a power price proposal. Bid opening will be conducted twice, with the technical proposal to be opened right after the deadline for submission of bids, and investors who satisfy technical requirements will have their power price proposals examined for evaluation.
Last is the bidding guarantee. Investors must apply a bid security measure, which is equal to 0.5 per cent of the total project investment, before the bid is closed.
The MoIT is to coordinate with Vietnam Electricity and the people’s committees of localities to organise and approve the plan for development of renewable energy sources for a period of five years as well as every two years as per the plan. The plan shall be used as a basis for the selection of investors, regulation of local solar power projects, and construction of power transmission systems, among others.
Within six months of the 2-year plan being approved, the people’s committees of the provinces must complete the plan to select investors to develop solar power projects in their localities for the coming two years.
Once the draft comes into effect, the feed-in tariff mechanism will no longer apply to solar energy projects. The MoIT has proposed that the same strategy is to be executed for wind power projects after 2023. The employment of a bidding method will enable the selection of capable developers through transparent procedures in order to eliminate the quiet prevalent issue of projects running behind schedule for years.
The Vietnamese government has continuously promoted the development of renewable energy sources as a feasible and effective solution to counter the country’s ongoing power shortage issue. This is because renewable energy projects can be constructed quickly and promptly for operation in the period of 2021-2023, while taking advantage of the country’s natural potential without relying on imported fuels, and while also being eco-friendly.