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April 10, 2020

New Incentives for Solar Power Projects in Vietnam

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On April 6, 2020, the Prime Minister of Vietnam issued Decision No. 13/2020/QD-TTg on the mechanism for encouraging the development of solar power in Vietnam (“Decision 13”). Decision 13, which will take effect on May 22, 2020, introduces a number of new incentives and mechanisms for investors in solar power projects in Vietnam.

New Feed-in Tariff

One of the most notable features provided by Decision 13 is the extension of the feed-in tariff (FIT) for solar projects that failed to reach commercial operation date (COD) by June 30, 2019, in accordance with the earlier Decision 11/2017/QD-TTg on the mechanism for encouraging the development of solar power projects (“Decision 11”).

Decision 13 stipulates single national FITs for solar projects nationwide, with an exception for Ninh Thuan province. In particular:

National FITs

  • For floating solar power projects: VND 1,783/kWh (equivalent to 7.69 US cents/kWh);
  • For ground-mounted solar power projects: VND 1,644/kWh (equivalent to US 7.09 US cents/kWh); and
  • For rooftop solar power systems: VND 1,943/kWh (equivalent to 8.38 US cents/kWh).

The above FITs will be applied for 20 years from COD. Solar projects eligible to apply for these FITs include:

1) Grid-connected solar power projects satisfying the following conditions: (i) were granted a decision on investment policy before November 23, 2019, (ii) achieved COD between July 1, 2019, and December 31, 2020, and (iii) have solar cell efficiency of greater than 16% or module efficiency of greater than 15% (Article 5.1 and Article 5.5 of Decision 13). For projects not fulfilling these conditions, the purchase price of electricity will be determined by a “competitive mechanism” (Article 5.4 of Decision 13).

2) Rooftop solar power projects satisfying the following conditions: (i) have been directly connected to the grid of Vietnam Electricity (EVN), (ii) have sold electricity to EVN, and (iii) reached COD and had verified meter readings in the period from July 1, 2019, to December 31, 2020 (Article 8.2 and Article 8.4 of Decision 13). For projects not fulfilling these conditions, the purchase price will be agreed between the parties.

FITs for Ninh Thuan Province

Decision 13 continues to provide special incentives for projects located in Ninh Thuan province on Vietnam’s South Central Coast by allowing solar power projects which have been included in the national/provincial power development plans and achieved COD before January 1, 2021, to be eligible for the special applicable FIT of VND 2,086/kWh (equivalent to 9.35 US cents/kWh). Solar power projects in Ninh Thuan that are unable to achieve COD by the January 1, 2021, deadline will have applicable FIT determined by a competitive mechanism which may be introduced at that time.

Purchasers and Sellers

In accordance with Decision 13, rooftop solar power systems are allowed to sell part or all of the electricity produced not only to EVN (as previously regulated under Decision 11), but also to other purchasers for non-grid connected projects (Article 8.1 of Decision 13).

Power Purchase Agreement

Decision 13 requires the investor to sign a power purchase agreement (PPA) using the template issued by the Vietnamese government to sell electricity to EVN. Accordingly, the term of the solar energy PPA is 20 years from the COD, following which the parties may agree to extend the term or execute a new PPA in accordance with the existing regulations. For other projects in which the purchaser is not EVN or its authorized member units, the parties are allowed to freely negotiate the price, terms, and conditions (Article 8.3).

For more information on Decision 13, please contact us at [email protected].

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