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Vietnam: Solar power regulation

On April 11 2017, the Prime Minister issued Decision No 11/2017/QD-TTg on the mechanism to encourage the development of solar power projects in Vietnam (Decision 11). Under Decision 11, Vietnam Electricity Group or its authorised member (EVN) is responsible for purchasing the entire power output from solar power projects, including (i) projects with a licence for electrical operations relating to power generation from grid-connected solar power plants; and, (ii) projects that involve structures installed on roofs or attached to construction works (articles 3 and 9.1 of Decision 11).

The sale and purchase of power output must be performed under an agreement based on the standard power purchase agreement form to be issued by the Ministry of Industry and Trade. In order to execute this agreement with EVN, the solar power projects must satisfy certain regulatory conditions on investment into construction within solar power projects. These conditions include having sufficient equipment to satisfy technical regulations, and a quality of power sufficient to satisfy the technical requirements on voltage, frequency and other relevant standards. In addition, investment in constructing grid-connected projects must comply with the electrical development plan approved by the competent authority. The term of the agreement is 20 years, commencing from the commercial operation date. After this period, the parties may extend the term or sign a new agreement in accordance with the law (articles 9.2, 9.4, and 14.1.(a) of Decision 11). On April 25 2017, the Ministry of Trade and Industry issued a draft circular regulating project development and the standard form for the power purchase agreement applicable to solar power projects.

Under Decision 11, EVN is responsible for purchasing the entire power output from grid-connected projects and rooftop-based projects (under the annual net metering scheme) at the purchase tariff of VND2,086 per kWh (excluding value-added tax, equivalent to $9.35 cents per kWh), to be adjusted according to the fluctuations in the VND/USD exchange rate. However, with respect to grid-connected projects, this purchase tariff will only apply to those that have a solar cell efficiency ratio greater than 16% or have a module efficiency greater than 15% (articles 12.1 and 12.2 of Decision 11).

Solar power projects may also be entitled to other incentives generally applicable to a project in preferential investment fields, such as the incentives related to enterprise income tax and use or leasing of land and surface water.

Decision 11 is only in force for a specific period of time, from June 1 2017 to June 30 2019. For the period after June 30 2019, the mechanism for solar power projects is unclear and will be subject to the government's consideration at that time. Nevertheless, investors remain optimistic as there are several large-scale solar power projects taking place in Vietnam, either at the development or implementation stage.

Ha Hoang LocPham Thi Bich Huyen

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