Vietnam's Updates On New Circular On Application For Power Generation Licenses For Power Plants And Its Impacts On Solar Power Projects.

Legal News & Analysis - Asia Pacific - Vietnam - Energy & Project Finance

29 December, 2018

 

Recent developments

 

Effective from 6 December 2018, Circular No. 36 of the Ministry of Industry and Trade (MOIT) provides updated procedures for applications for power operation licenses, including power generation licenses for all types of power plants in Vietnam.1

 

In relation to solar power projects specifically, given that many solar power projects for which PPAs have been executed with Vietnam Electricity (EVN) in Vietnam are aiming to achieve their commercial operation dates by June 2019 to get them secured for the current feed-in-tariff (FiT) of 9.35 UScent per kWh, the developers of these solar projects need to take into account the new requirements under Circular No. 36 in terms of, amongst others, application timeline and documentation requirements for power generation license and achievement of commercial operation date (COD).

 

Procedure for application of power generation licenses for all power projects with installed capacity of 1MW or larger

 

a) Responsible Authority

 

For all types of power projects with installed capacity from 1MW to less than 3MW in one province or city, the developer is required to apply for a power generation license at the People's Committee or authorized Department of Industry and Trade of the relevant province or city where the project is located.

 

For power projects with installed capacity of 3MW or larger, the developer is required to apply for a power generation license at the Electricity Regulatory Authority of Vietnam (ERAV) under the MOIT.

 

b) Timeline

 

Under Circular No. 36, power developers are required to submit the full application dossier for the Power Generation License no later than 15 working days before the expected official COD of the power plant. This applies to all types of power projects in Vietnam.

 

In addition, in relation to solar power projects specifically, based on solar power purchase agreements (PPA) EVN actually executed, 90 (ninety) days prior to the proposed COD as specified in the Appendix B of the PPA, the project company as power seller is required to submit its draft procedures and process for commissioning and testing for acceptance of the power plant to EVN in accordance with current regulations, technical and technological standards of the solar power plants so that the parties can agree on the specific COD and calculate the power output to be generated during the testing for commissioning of the power plants.

 

In comparison with current regulations, Circular No. 36 clarifies that the following additional requirements will also need to be completed by power developers before the expected official COD:

 

  • Execution of a PPA in accordance with the laws (except for hydro power plants under the list of major power plants having important impacts on the social-economy, defense, and security approved by the Prime Minister and the list of power plants operating together with major power plants having important impacts on the social-economy, defense, and security approved by the MOIT; and hydro power plants with their accounting recorded dependently on Vietnam Electricity (EVN)'s Power Corporations in accordance with the proposal of Vietnam Electricity);
  • The Supervisory Control and Data Acquisition (SCADA") system serving operation of the power systems in accordance with Vietnamese regulations; 
  • The information technology infrastructure system, telecommunication infrastructure system serving the operation of the power market (applicable to power plants participating in the power market); and 
  • Compliance with other regulations on the management and operation of power plants in accordance with the relevant legal documents.

 

c) Required Documents

 

Compared to the current regulations, Circular No. 36 requires more supporting documents, especially for solar power projects, given that many solar power projects are aiming to achieve commercial operation dates by June 2019 to secure the current feed-in-tariff of 9.35 US cent per kWh.

 

Specifically, Circular No. 36 requires solar power Developers to submit, amongst other things:

 

  • Copies of the pre-acceptance testing minutes for installation of power plant's solar equipment and facilities; and
  • Copies of documents indicating main specifications of the power plant (specifications of power plant's equipment, generators, main transformers).

 

For all power projects, Circular No. 36 adds the following documents requiring power developers to submit, amongst other things as required under the current regulations:

 

  • Agreement on provision of management and operation (O&M) services;
  • For any power plant developers who are permitted to sell electricity directly to power consumers, then the application dossiers for Power Generation License must include the following additional contents: List of power consumers; and diagram of the grids to deliver electricity to power consumers.

 

Requirement for participation in competitive power markets

 

In respect to the model power generation license, Circular No. 36 adds a requirement that the power developer is obligated to "participate in the power market in accordance with the regulations on operation of the power market issued by the MOIT".

 

However, Circular No. 36 is not clear as to whether this will impact BOT power projects or renewable power projects for which it is currently arguable that the participation in the competitive power markets is optional rather than compulsory.

 

Cases of exemption from power generation license requirement

 

In terms of the capacity threshold for requiring a power generation license requirement, Circular No. 36 maintains the 1MW threshold unchanged with a clarification for solar power projects.

 

Specifically, for solar power projects, Circular No. 36 clarifies that the exemption from the power generation license requirement applies to those with installed capacity of less than "1 MWp (i.e., DC capacity) and installed at one (1) location and with one (1) connection point" for selling electricity to other entities (i.e., not only for self-consumption purposes).

 

In addition, Circular No. 36 inherits the previous regulation that electricity generation for self-consumption purpose without selling electricity to other organizations and individuals is also exempt from the power generation license requirement.

 

Baker McKenzie

 

For further information, please contact: 

 

Frederick Burke, Partner, Baker McKenzie
frederick.burke@bakermckenzie.com 

 

1. Circular No. 36/2018/TT-BCT of the Ministry of Industry and Trade dated 16 October 2018 on the procedure and order for issuance and withdrawal of power operation licenses ("Circular No. 36").