Policies and regulations over the last few years have enabled Vietnam to write the solar success story that makes it the leading hub in terms of solar power capacity in Southeast Asia.
Moritz Sticher, senior advisor at globally transaction advisory and strategy consulting firm Apricum GmbH, said the regulations are expected to drive further growth in the solar industry in Vietnam.
The expert has taken feed-in-tariff (FIT) programs as an example for the operations of the sector in which the Ministry of Industry and Trade (MoIT) works as the market supervisor.
|Da Mi floating solar power plant in Vietnam's central province of Binh Thuan. Photo: V.H|
Feed-in tariff programs
FIT Phase 1: After Vietnam had been drafting a potential support mechanism for years, finally an initial program with 850 MW overall capacity was announced in 2016, with a rather generous feed-in tariff over 20 years of VND2,086 (9.35 US cents/kWh) and subject to annual adjustments of fluctuations in the VND/USD exchange rate.
The program allowed for on-grid, rooftop, insular, off-grid and net-metering models and was heavily oversubscribed with around 4,460 MW being commissioned by June 31, 2019, which constituted the end of phase 1 of the FIT program.
An exemption for Ninh Thuan Province was granted, allowing projects to still obtain the FIT phase 1 tariff that can reach a commercial operation date (COD) by December 31, 2021, accounting for 30 solar power projects with a total capacity of 1,932 MW included in the master plans.
FIT Phase 2: After many developers’ and investors’ painful wait, in April 2020, phase 2 of the FIT program as an extension of the FIT phase 1 (also further referred to as FIT phase 2), came into effect, with a tariff over 20 years of VND1,758 VND/kWh (7.69 US cents/kWh) for floating solar and VND1,620/kWh (7.09 US cents/kWh) for ground-mounted solar projects and subject to annual adjustments of fluctuations in the VND/USD exchange rate.
Criteria for eligibility included grid-connected solar power plants, reaching COD between July 1, 2019 and December 31, 2020 and investment policy decisions issued by the authorized agencies before November 23, 2019).
Transition to competitive selection processes
Announcement of a pilot auction scheme for floating solar: In February 2020, a pilot auction scheme for floating solar on hydropower plant dams of around 400 MW in two phases for 2020 was announced.
The first engineering-procurement-construction (EPC) auction is anticipated to be held over 50–100 MW and a second EPC procurement round over 300 MW are planned for 2021. Both projects will be located at hydro facilities belonging to the Da Mi Hydropower Joint Stock Co, a division of EVN.
Announcement of a pilot synthetic direct power purchase agreement (DPPA) scheme: Another announcement in February 2020 included a pilot synthetic DPPA scheme of 400–1,000 MW for 2020 (eligibility for registered projects >30 MW in areas with no grid congestion and developers with proven technical and financial capabilities) with certain registered private sector buyers.
Eligibility of projects in competitive selection processes: Ground-mounted and floating solar projects in the master plan that are not eligible in the FIT phase 2 remain eligible to bid for the to-be-announced auctions post the pilot auction scheme, and to participate in the pilot synthetic DPPA scheme or later envisioned synthetic DPPA or on-site “behind-the-meter”/ “sleeved” DPPA models, or sell to the wholesale market (Vietnam Wholesale Electricity Market or VWEM).
Publication of the draft for the future competitive selection process: In September 2020, the MOIT published the draft proposal presented to the prime minister together with the draft decision from the prime minister on the pilot program for the competitive selection of solar power projects.
Eligible projects must be in the relevant master plans, not be eligible for FIT phase 1 or FIT phase 2 and reach COD before July 1, 2021. A pilot phase from November 2020 until May 2021 (to be adjusted) is foreseen and key criteria for the selection is anticipated to be the lowest price per kWh with the FIT phase 2 tariff as the ceiling.
According to Moritz Sticher, other proposed legal restrictions for the pilot program include the maximum program capacity to be 60% of all projects participating in the program, the maximum capacity for project(s) of one investor to be 20% of selected projects, a restriction on project transfer before COD, and a 5% tariff reduction penalty per quarter of delay in COD post July 30, 2022.