On 19 December 2023, the new Ministry of Industry and Trade Circular No. 19/2023/TT-BCT on the method of determining the price bracket for power generation applicable to new solar and wind power plants (“Circular 19”) will come into force. 

Current Regulations

Prior to Circular 19, the Prime Minister promulgated Decision 37 (1), Decision 39, Decision 11 (2), Decision 02, and Decision 13(3) to regulate the preferential Feed-in-Tariffs (FIT) price for renewable energy projects (i.e. US cents 8.5/kWh and US cents 9.8/kWh for wind power projects; US cents 7.09/kWh and 9.35/kWh for solar power). These tariffs apply only to solar power projects having a commercial operation date (“COD”) before 30 June 2019, or from 1 July 2019 to 31 December 2020, and wind power projects having COD before 1 November 2021. 

Afterward, considering several solar and wind power projects failed to achieve the due date as above (“Transitional Projects”), these Transitional Projects have not been entitled to enjoy the above FIT price as prescribed in the signed power purchase agreements (“PPA”) with the Vietnam Electricity (“EVN”). Given this situation, the Ministry of Industry and Trade (“MOIT”) has then issued Circular 15 (4), Decision 21 (5), and Circular 01 (6) to provide a mechanism for formulating the price bracket and the ceiling price for Transitional Projects.  

Notwithstanding the above, up to now, there has been no regulation providing the pricing mechanism to establish power prices for new solar and wind power projects. Consequently, the issuance of Circular 19 creates an official mechanism to formulate the power generation price bracket for new solar power plants and wind power plants.

Key Takeaways of Circular 19

Circular 19 applies to new renewable energy projects with COD after 31 December 2020 (for solar power projects) or after 31 October 2021 (for wind power projects), which have not executed PPA with EVN. Either transitional solar and wind power plants having COD respectively after 31 December 2020 and 31 October 2021 subject to Circular 15 or wind and solar power plants subject to the abovementioned corresponding FIT price shall not be regulated by Circular 19. 

According to Circular 19, the power price of new solar and wind power projects shall depend on a price bracket with a ceiling price re-issued annually instead of a fixed price by a statutory PPA under the previous regulations. This new price bracket mechanism will facilitate flexibility in negotiation between the investors and the EVN, while ensuring the power prices do not exceed the statutory bracket. The price bracket will be set in VND. 

In particular, annually, the price bracket shall be re-evaluated by the Electricity Regulatory Authority of Vietnam (“ERAV”) and re-issued by MOIT in accordance with the below procedure: 

1. Prior to 1 November every year, EVN is responsible for:

• Proposing the selection of standard solar power plant and standard wind power plant to calculate the power generation price bracket.
• Calculating parameters and calculating the power generation price of the standard solar power plant and the standard wind power plant. The EVN may engage a suitable consulting organization to collect the input parameters for formulating the price bracket.
• Preparing dossiers to calculate the power generation price bracket for the power plant (“Dossier”) and submitting such Dossier to the ERAV for appraisal.

2. Within 05 working days of the receipt of the Dossier, the ERAV shall evaluate the content, completeness, and validity of such Dossier.

In case of necessity, ERAV may request EVN to amend, supplement, or clarify the contents of the Dossier. No later than 15 working days from the receipt of the above request, the EVN shall submit a written explanation report to ERAV.

3. In case of receiving the valid Dossier and a report explaining and clarifying the contents of the Dossier, within 20 working days from the receipt of the Dossier, the ERAV shall appraise the power generation price bracket. The MOIT may establish an advisory council to provide opinions on EVN's calculations, if necessary.

4. No later than 15 working days from the date of appraising the power generation price bracket, the ERAV shall request the MOIT to approve the price bracket for the next year.

In case the power generation price bracket for the following year has not yet been announced, the latest effective power generation price bracket may be temporarily applied in the interim.

Pursuant to Circular 19, the power generation price bracket shall be calculated in line with the solar features radiation in each northern, central, and southern region. In particular, Circular 19 requires the price bracket for ground-mounted, floating, and standard solar power projects must be formulated in accordance with the respective average annual solar radiation intensity of each region. By setting potentially higher ceiling prices, this mechanism aims to promote solar power investments in the northern regions, in compliance with the goal of the National Power Development Plan for the period of 2021 – 2030, with a vision to 2050 (Power Development Plan VIII) which states that solar power development shall be encouraged and prioritized in the northern regions where the intensity of solar radiation may be at risk of power shortage, in comparison with central and southern regions. From this approach, the variety of solar radiation intensity across different regions is significantly emphasized and acknowledged in promoting solar power investment and formulating the power price bracket.

Note:

1. Decision 37/QD-TTg of the Prime Minister dated 29 June 2011 (“Decision 37”) as amended by Decision 39/TTg-QD of the Prime Minister dated 10 September 2018 (“Decision 39”).
2. Decision 11/2017/QD-TTg of the Prime Minister dated 11 April 2017 (“Decision 11”), as amended by Decision 02/2019/TTg-QD of the Prime Minister dated 8 January 2019 (“Decision 02”).
3. Decision 13/2020/QD-TTg of the Prime Minister dated 6 April 2020 (“Decision 13”).
4. Circular 15/2022/TT-BCT of the MOIT dated 3 October 2022 (“Circular 15”).
5. Decision 21/QD-BCT of the MOIT dated 7 January 2023 (“Decision 21”).
6. Circular 01/2023/TT-BCT of the MOIT dated 19 January 2023 (“Circular 01”).