Explained: Vietnam’s FiT Rates for Solar and Wind Power Projects
The Ministry of Industry and Trade has finalized the feed in tariffs (FiTs) for solar and wind projects that came online after December 31, 2020, and November 1, 2021, respectively. These add to a complex mosaic of FiT’s in Vietnam.
On January 7, the Ministry of Industry and Trade (MoIT) announced feed in tariffs (FiT) for solar and wind projects that failed to meet operational deadlines outlined in previous Decisions.
These new rates provide renewable energy producers and investors, and the state electricity provider, Vietnam Electricity (EVN), the framework for negotiating power purchase agreements (PPA).
This ends an extended period of uncertainty for some renewable energy projects that failed to meet the FiT deadlines due to construction delays and problems acquiring land. This article outlines the tariffs for these projects and tracks changes to Vietnam’s FiT programs.
In order to drive investment in wind and solar power in Vietnam, the government has offered relatively high feed in tariffs (FiT) at several intervals. These have been very successful at driving investment in Vietnam’s renewable energy sector – by the end of 2020, Vietnam’s installed wind power capacity had reached 600 MW and its installed solar power capacity had reach 17.6 GW.
Each of these renewables have their own feed-in tariffs, which have been developed and altered through a series of government Decisions and Resolutions.
Vietnam’s rapid uptake of wind power began in 2011 with Decision 37/2011/QD-TTg. Issued by the Prime Minister, this decision laid the foundation for Vietnam’s transition to renewable energy. It came into effect August 20, 2011.
As a part of this decision wind power projects were offered 1,614 VND/kWh (7.8 US cents/kWh), excluding VAT and to be adjusted in line with exchange rate fluctuations.
These rates were then increased in 2018 through Decision 39/2018/QD-TTg. This Decision also divided wind power projects into two categories:
Inland wind power projects would be given a feed-in tariff of 1,928 VND/kWh or 8.5 US cents/kWh, excluding VAT and to be adjusted in line with exchange rate fluctuations.
Offshore wind power projects would be given a feed-in tariff of 2,223 VND/kWh or 9.8 US cents/kWh, excluding VAT and to be adjusted in line with exchange rate fluctuations.
To qualify, these projects needed to be operational by November 1, 2021.
In 2017, the government announced Decision No.11/2017/QD-TTg to promote the development of solar power projects.
This Decision offered new solar power developers a rate of 2,086 VND/kWh or 9.35 US cents//kWh, excluding VAT and to be adjusted in line with exchange rate fluctuations.
These projects had to be operational by June 30, 2019.
These feed-in tariffs were then extended for Ninh Thuan province only, in August of 2018 by Resolution No. No.115/NQ-CP. This allowed for projects in Ninh Thuan to receive these rates as long as solar power plants were operational by December 31, 2021.
Renewable energy projects that failed to qualify
A number of projects failed to meet the FiT deadlines outlined above. This was due to a broad range of reasons, including land acquisitions taking longer than anticipated and construction delays.
As a result, these projects have been in limbo and in some instances unable to sell power produced to the grid.
These new tariffs will now provide some certainty for these enterprises, though tough decisions may need to be made.
Businesses will need to carefully assess these new rates and their operating costs and ascertain whether or not they can still operate profitable renewable energy businesses.
Foreign invested renewable energy projects in Vietnam
Big projects currently underway include a 3.5 GW offshore windfarm in Binh Thuan province to the tune of US$10.5 being developed by Copenhagen Infrastructure Partners, alongside Vietnam’s Asia Petroleum Energy Corporation and Novasia Energy Company Limited (Novasia).
Nami Solar, a subsidiary of SK Ecoplant, a member of the Republic of Koreas SK Group also inked a US$200 million deal with Vietnam’s Nami Energy to develop greater solar power capacity in Vietnam. The money is earmarked for a rooftop solar power project that is designed to generate 250 MW.
These are among a range of renewable energy projects in Vietnam that will be monitoring the outcomes of these new FiTs and the impact they have on the renewables sector.
Notably, in 2020, foreign invested enterprises were responsible for about half of the renewable energy projects in Vietnam, according to the Mekong Infrastructure Tracker.