Vietnam's Long-Awaited Draft Policy For New 2-year Solar Power Feed-In-Tariff Mechanism.
Legal News & Analysis - Asia Pacific - Vietnam - Energy & Project Finance
25 February, 2019
Vietnam's Long-Awaited Draft Policy for new 2-year Solar Power Feed-in-Tariff Mechanism from 1 July 2019 until 30 June 2021 Released
On 29 January 2019, the Ministry of Industry and Trade of Vietnam ("MOIT") released the first draft of Decision of the Prime Minister on the mechanism for encouraging the development of solar power projects in Vietnam, for application from 1 July 2019 ("Draft Decision").
Given that the current Decision 11 of the Prime Minister providing for the Feed-in-Tariff ("FiT") of US cents 9.35 per kWh is in effect only until 30 June 2019, the proposed new Decision will provide for new FiT mechanisms for 2 additional years from 1 July 2019 through 30 June 2021 for grid-connected solar power projects, as well as new tariff mechanism guidelines for development of rooftop solar power projects in Vietnam.
However, unlike the first format of FiT (establishing one FiT rate for all solar power projects), the Draft Decision proposes varying levels of tariffs, classified by 3 different irradiation regions of Vietnam and involving 4 different solar power technologies. Specifically, the tariffs will vary in the range from UScents 6.59 per kWh to UScents 9.85 per kWh. The tariffs will also vary between the first year (1 July 2019 to 30 June 2020) and the second year (1 July 2020 to 30 June 2021), with a gradual reduction of tariffs in the second year compared to the first.
In addition, the MOIT proposes higher tariffs for provinces with lower solar irradiation and potential (mostly northern provinces of Vietnam) or in other words, lower tariffs for provinces with higher solar irradiation and potential (mostly southern provinces and central highlands of Vietnam). This indicates the Government's policy to diversify solar investments in different regions of Vietnam. However, this may have a significant impact on many on-going solar power projects under development or construction in Vietnam given the fact that the majority of on-going projects are being developed in southern provinces and central highlands of Vietnam with high solar irradiation and potential.
For further information, please contact:
Frederick Burke, Partner, Baker McKenzie