5/4/2017
Vietnam gets first solar law | InfraAsia
21 Apr 2017 | Vietnam
Oliver Jones
Vietnam gets first solar law
Vietnam’s government released a long­awaited solar development policy last week,
which will enable power generated by solar projects to be sold to the grid.
While applauding the move, market experts have raised concerns about the feed­in
tariff (FIT), continued uncertainty about a standardized power purchase agreement
(PPA) and the exclusion of direct PPAs.
The policy, known as Decision No. 11/2017, sets out a lower than expected feed­in
tariff (FIT) – of VND2,086 (USD 9.35 cents) per kWh. Regional solar experts have
previously said that to attract private investment, projects would require a FIT of
USD 14­17 cents per kWh.
It also excludes direct corporate power purchase deals. The fact that developers still need to sign PPAs with state utility
Vietnam Electricity (EVN) ­ exposing them to the utility’s credit standing ­ “will continue to give sponsors reason to
pause about the bankability of projects,” said a Ho Chi Minh (HCM) City­based partner at a law firm.
A third problem in the policy is the lack of a model PPA, which would speed up project development and encourage
investment in larger­scale projects.
But the government has offered “other incentives ­ such as land use incentives and import duty exemptions – to make
sure that investment in solar power is viable,” argued Mayer Brown JSM associate Van Hai Nguyen.
The Ministry of Industry and Trade (MOIT) must now produce a standard 20­year PPA to implement the new solar law. “I
would expect they’re going to move pretty quickly,” said Nguyen. “If not by the second quarter then the third quarter of
this year.”
“I think that they will take lots of elements from the standard PPA for wind power projects,” he added.
But the first lawyer observed that there is only a standardized PPA for wind projects of below 150MW. “The long­form
PPA for projects over 150MW is subject to negotiation,” he said.
A Ho Chi Minh­based renewables investor said it would likely take over a year to finalise a standard PPA for solar
projects.
The new rule is set to take effect on 1 June, remaining in force until a new tariff due 30 June 2019.
“My guess is that the [new] tariff might be adjusted to reflect any changes to the market while other substantial aspects
such as general investment incentives and standard PPA will stay the same,” added Nguyen.
The first lawyer said market participants assume the FIT would increase in 2019, warning however that there is currently
no provision for this.
The new rule’s FIT only applies if the rate at which solar cells convert sunlight into electricity is greater than 16% or the
rate at which modules do so is greater than 15%. These conditions are aimed at encouraging domestic production of
solar cells and modules in Vietnam and widely perceived as discouraging the use of some Chinese­made panels.
The FIT can also fluctuate according to the VND­USD exchange rate, to maintain a level tariff in US dollar terms.
https://www.infra­asia.com/print/2204776/vietnam­gets­first­solar­law.thtml
1/2
5/4/2017
Vietnam gets first solar law | InfraAsia
Electricity is sold at below the cost of generation in Vietnam, diminishing EVN’s creditworthiness. At the same time,
inflation is expected to rise from 4% to 5% between 2017 and 2018, according to the Asian Development Bank.
Copying without permission from InfraAsia, InfraNews, InfraAmericas, InfraLatinAmerica
or InfraDeals is unlawful. © 2017 Inframation Group
https://www.infra­asia.com/print/2204776/vietnam­gets­first­solar­law.thtml
2/2