ELECTRICITY GENERATION PRICE GUIDELINES PUBLISHED

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Electricity Generation Price Range Guidelines Published

On 3 October 2022, the Ministry of Industry & Trade (“MOIT”) published new guidelines setting out the method to build electricity generation price range ranges for transitional solar and wind plants. Circular 15/2022/TT-BCT (“Circular 15”) covers the following power plants – known as “transitional projects”:

  • Solar power projects which entered into a power purchase agreement (“PPA”) with Electricity of Vietnam (“EVN”) before 1 January 2021 but which fail to meet the conditions to apply electricity prices in Decision 13/2020QD-TTg.
  • Wind power plants which entered into a PPA with EVN before 1 November 2021 but which fail to meet the conditions to apply electricity prices in Decision 39/2018/QD-TTg.

Pursuant to Circular 15, the price range for these transitional projects will be from 0 to a maximum value equal to the electricity generation price (“GP”) of a ‘standard’ solar and wind power plant. These are defined as plants with an installed capacity of 50 MW. Meanwhile, the GP will be determined as follows: Average Fixed Price + the Average Fixed Operation and Maintenance Cost of a Standard Power Plant.

  • The Average Fixed Price is the component to recover the investment cost. This is determined by the calculations in Circular 15 based on the investment capital of the transitional project.
  • The Average Fixed Operation and Maintenance Cost is the component to recover the cost of major repairs, labour, and other annual costs. It is also determined by the calculations in Circular 15 based on the cost of the transitional project.

The price ranges above will be issued based on the sequence below:

  1. 15 days from the effective date of Circular 15 (i.e., from 25 November 2022) – transitional project developers will provide EVN with their feasibility study reports and technical designs.
  2. 45 days from the effective date of Circular 15 – EVN will study and develop the price ranges and submit them to the Electricity Regulatory Authority of Vietnam (“ERAV”) for their appraisal.
  3. 45 days from EVN’s submission – ERAV will study and appraise the proposed price ranges, collecting opinions from independent specialists or an MOIT Advisory Council, to be established.
  4. 10 days from from ERAV’s completion – ERAV will submit the price ranges for approval by the Minister of MOIT and publish the price ranges on the websites of both bodies.

It appears that the authorities intend, on top of Step 4 above, that each transitional project will negotiate a specific price. This will have to be within the published range. At this stage, it is not clear how EVN will conduct this negotiation and it is possible that a further Circular will be issued on this topic.

The above provisions mean that the price range could be published on 5 March 2023 – at the earliest – assuming that the process above is conducted in a straightforward way and without delay. Further to Circular 15, MOIT has also issued Document No.6015/BCT-DTDL. This directs EVN to send a written request to investors of solar/wind power plants which signed PPAs before 1 November 2021 to provide feasibility study reports and appraised technical designs to support the calculation of the electricity generation price ranges.


For more information about Circular 15, just contact our office on: contact@apflpartners.com

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