Vietnam: Recent Developments On Solar Power Policy And Legislation In Vietnam

Vietnam: Recent Developments On Solar Power Policy And Legislation In
Vietnam

The government of Vietnam has mostly focused its renewable energy plans on
wind energy and biomass production but recently, solar energy is starting to
take center stage, aptly so in a country with high solar irradiation
levels.1 According to the Asian Development Bank, the total technical
potential for solar power generation in the country is around 13,000MW, but
as of 2015, the total installed solar capacity for power generation is only
about 4MW, used mainly in research and rural electrification.2

National targets

Starting 2015, there has been several key developments in the solar energy
sector. On 18 March 2016, the Prime Minister approved the amendments to the
National Master Plan for Power Development in the 2011-2020 period with
vision to 2030 under Decision 428/QD-TTg. For the first time, detailed
targets on solar power were introduced in this legal document: capacity of
850 MW by 2020, 4,000 MW by 2025, and 12,000 MW by 2030; and share of solar
power in total power generation to about 0.5% by 2020, 1.6% by 2025, and
3.3% by 2030.3

Draft decision on solar power development

On 11 May 2016, with the presence of Deputy Prime Minister Trinh Dinh Dung,
key government officials met to discuss the draft decision to be promulgated
by the Prime Minister on the mechanisms to support solar energy development
(the "Draft Decision").4 If the Draft Decision is adopted, this will be the
first ever solar energy-specific regulation with detailed guidelines and
incentives for the industry to be promulgated in the Vietnamese legislation
system. At present, regulations on solar power are only incorporated in the
general laws on energy, environment and renewable energy projects (e.g., Law
on Electricity No. 28/2004/QH11 dated 03 December 2004; Law on Environmental
Protection No. 55/2014/QH13 dated 23 June 2014; Decision on Development
Strategy for Renewable Energy by 2030 with a vision to 2050 No. 2068/QD-TTg
dated 25 November 2015).

The third version of the Draft Decision, which applies to power generation
projects using photovoltaic (PV) method,5 grants investors incentives
existing under current laws, such as:

Allowing investors to raise capital onshore and offshore to invest in solar
power projects,6 and solar power projects shall enjoy preferences regarding
State investment credit and export credit under current laws.7 At present,
the maximum loan amount for each project (from the Vietnam Development Bank)
is 70% of the total investment and the loan term is maximum 12 years. The
preferential loan interest rate will be applicable.8
Exemption from import duties for imported goods forming the fixed assets of
the projects, raw materials, supplies and semi-finished products not
available in Vietnam.9
Exemption or reduction on corporate income tax in accordance with investment
incentives applicable for projects falling into investment incentives under
existing tax laws.10
Solar power projects, transmission lines and substations connected to the
national grid shall also enjoy exemption or reduction in land use fees and
land rent in accordance with incentives applicable for projects entitled to
investment incentives.11

Purchase price

With respect to solar power projects connected to the grid:

Under the third version of the Draft Decision, the Electricity of Vietnam
(EVN) or its authorized units is responsible for purchasing all electricity
produced from solar power projects at the price of 11.2 US cents/kWh (which
is the average of VND 1,800/kWh (around JPY 8.89/USD 0.8) and VND3,500/kWh
(around JPY17.29/USD0.16), respectively, the minimum and maximum regular
electricity rates prescribed under Decision No. 28/2014/QD-TTg on the
structure of electricity retail tariff dated 07 April 2014). This rate only
applies to the solar power projects connected to the grid having solar cell
efficiency higher than 16% and capacity less than 100 MW.12

With respect to solar power projects installed on roofs:

For solar power projects installed on roofs and connected to the grid, the
excess energy shall be purchased by EVN or its authorized units at the rate
of VND 3,150/kWh (VAT excluded) (around 15 US cents). The price shall be
adjusted according to fluctuations in the exchange rate between the
Vietnamese Dong and the US Dollar.13

During the 11 May 2016 meeting, Deputy Prime Minister Dung requested the
Ministry of Industry and Trade (MOIT) to consider the experience of other
countries in establishing incentives for solar power development to learn
from their experience. He also advised the MOIT and local authorities to
identify areas for development of renewable energy resources in their
planning to avoid conflict with other plans. With solar energy's untapped
yet promising potential and investors flocking in this sector, it seems that
the government is very keen to have this draft decision adopted immediately.

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Link to Original Article:
http://www.mondaq.com/article.asp?articleid=555570&email_access=on&chk=20840
72&q=1528502

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com