Vietnam Legal Update: Draft Decision 3 and Vietnam’s Solar Future from July 2019

On 12 April 2019, the Ministry of Industry and Trade of Vietnam (the “MOIT”) released a new draft Decision (the “Draft Decision 3”) that will replace Decision No. 11/2017/QD-TTg issued by the Prime Minister of Vietnam dated 11 April 2017 (“Decision 11”) on mechanisms to encourage the development of solar power projects in Vietnam. Introducing a number of changes, Draft Decision 3 modifies the previously issued draft dated 22 February 2019. Subject to final approval by the Prime Minister, the Draft Decision 3 is expected to be in full force from 1 July 2019.

KEY CHANGES

1. Direct power purchase agreements (“DPPAs”) will be permissible and the parties will be free to use their own PPA terms and tariff, etc., however the PPA template and feed-in solar tariff are mandatory for any generation sold to Vietnam Electricity (“EVN”);
2. The feed-in tariff (“FiT“) for “floating solar power projects” is increased;
3. Eliminates the prior draft’s FiT for solar with a storage component;
4. The policy mechanism for encouraging the development of solar power projects (including by stipulating a FiT) has been extended by a further two-and-a half years, from 1 July 2019 until 31 December 2021; and
5. Allowing solar power projects in Ninh Thuan Province that have an actual commercial operation date by the end of 2020 to be eligible for the current FiT of 9.35 US cents per kWh.

Future of energy storage:

• EVN is required to research and invest into energy storage solutions for the power systems to ensure stable operation when connecting and integrating power from renewable energy resources; and
• The MOIT is required to develop regulations and standards on energy storage.

FiTs per type and region:

The following FiT schedule is intended to be applied from 1 July 2019 to 31 December 2021:

(Note: Exchange rate based on the central exchange rate of Vietnam Dong against US Dollar announced by the State Bank of Vietnam on 09 December, 2018. We understand the VND/kWh exchange rate will be updated annually.)

Rooftop solar structures:

Rooftop projects, having 1 MW or less of capacity, will be classified under the following structures:

• Structure 1: The rooftop owner develops the solar project for self-consumption and any excess generation can be sold to EVN (via connection to the national transmission system);
• Structure 2: A facility owner leases its rooftop to an investor. This investor develops the solar project to sell electricity to the consumer and to EVN (via connection to the national transmission system);
• Structure 3: An investor develops the solar project to sell electricity wholly to EVN (via connection to the national transmission system); and
• Structure 4: The rooftop owner or the investor develops the solar project to sell electricity solely to a private consumer (without connection to the national transmission system).

The information provided in this article is for information purposes only and is not intended to constitute legal advice should be obtained from qualified legal counsel for all specific situations.

DFDL Contacts

Hoang Phong Anh
Partner, DFDL Vietnam
phonganh.hoang@dfdl.com

Angus Mitchell
Partner & Head of Regional Energy Mining & Infrastructure Practice, DFDL Vietnam
angus.mitchell@dfdl.com

Dave Seibert

Senior Legal Adviser, DFDL Vietnam

dave.seibert@dfdl.com