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Vietnam Energy Forum

The viewpoint of EVN on mechanisms for the transitional wind and solar power projects

 - Implementing the direction of the Ministry of Industry and Trade (MOIT) on the comments for the transitional wind and solar power projects, Electricity of Vietnam (EVN) has just issued a document to comment upon "the mechanisms for the transitional and next implemented wind and solar power projects. The Vietnam Energy Review would like to quote the content of this document to the readers.

Firstly, the proposal of MOIT to assign EVN negotiating electricity prices and power purchase agreement (PPA) with the investors in the electricity framework and guideline issued by MOIT for the transitional and next implemented projects is not feasible in conditions of Vietnam due to the time would be last and the transitional projects having invested in many different stages with the non -re -accused electricity framework before negotiation for the following reasons:

1/ Determining the average annual electricity output of wind and solar power projects to determine the electricity price will be more complicated than traditional energy projects and it is unclear which agency to confirm and take responsibility for the accuracy of this data.

2/ The negotiation in accordance with the total investment declared by the investors and the average electricity output as mentioned above will generate difficult problems and be outside the control of EVN.

For example: the projects located next to each other with the different prices? Which project earlier putting into commercial operation would have electricity price cheaper than the project putting into commercial operation later?

3/ Not controlling the time of PPA negotiation will lead to un-controlling progress of wind and solar power projects in commercial operation with the demand in each time in future that affect the power system security supply.

Almost international countries transmit to the bidding mechanisms after a fixed period to apply FIT mechanisms.

According to the document "Renewable Energy Auctions - Status and Trend Beyond Price) of the International Renewable Energy Agency (IRENA) in 2019: General trend on bidding for renewable energy projects is wide bidding by the each round without bidding for selecting the investor for a existing project. Bidding includes 4 steps:

The first step, determining the bidding demands for each RE technology beside Brazil case (bidding for energy buying without distinguishing technological types).

The second step: Requirements for the Tenders: The investors must take care of the land, connecting to the grid and assessing the environmental impact.

The third step: Organization for selecting the contractors based on bidding prices (from 50 - 70%) and other index as contributing to the society, localization - local content (from 30-50%).

The fourth step: Signing and implementing PPA.

The proposals of EVN:

From the practical and international experiences in negotiations and the Party policies expressed in Politburo Resolution No 55 NQ/TW dated 11/2/2020 on RE “Developing the breakthrough mechanisms, policies for encouraging and promoting strong development of RE sources to maximally replace the fossil sources and developing synchronous and interconnected energy markets between the energy sub-sectors as electricity, coal, gas and RE to link with the regional and world markets and removing all the barriers to ensure transparent energy prices, determined by the markets.

EVN proposes:

1/ Immediately allowing the transitional wind and solar power projects to participate in the electricity market, to be paid by the prices of electricity spot market and not to be exceed the electricity generation price of the correlative power project approved by MOIT (offering the prices and announcing the capacities in each transaction cycle must comply with the regulations on electricity market operation). EVN proposes MOIT not to assign EVN to negotiate electricity prices and PPA for these projects.

2/ In long-term period, EVN proposes the bidding mechanisms in two steps:

(i) Selecting the investors in accordance with the new investment law with the decision of investment policy with a certain term. After a prescribed period, if the investor does not implement the project, the competent state agency has the right to collect the project for assigning the other investors.

(ii) Investors should be selected to participate in the electricity market, or participate in bidding for signing PPA and developing the project; The bidding unit is MOIT.

Secondly, regarding MOIT proposal on reviewing the contracts between EVN and the investors in order to harmonize the benefits between the electricity seller, buyer, consumer and the state for the projects in commercial operation.

EVN considers that PPAs currently signed are the sample PPAs issued by MOIT with basing the Commercial, Electricity and Civil Laws, EVN proposes to cancel or regulate content of PPA must base the clauses of signed PPA and the above laws.


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