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Currently there are more than 200 solar power projects with total registered capacity of 17 GW. Photo: Nguyen Thanh

Electricity price calculated by radiation area

On April 11, 2017, the Prime Minister issued Decision 11/2017 / QD-TTg on mechanisms to encourage the development of solar power projects in Vietnam. The decision takes effect in June 2019.

To encourage the development of solar power, the Ministry of Industry and Trade has contributed to the draft Decision of the Prime Minister on the mechanism to encourage the development of solar power in Vietnam.

According to the Dispatch of this draft Decision, after Decision 11 was issued, by March 2019, there were five solar power projects in operation with total capacity of 240 MW, about 8 GW of solar power was approved for development planning by 2020 and about 12 GW for by 2025. In addition, there are more than 200 solar power projects with a total registered capacity of 17 GW.

In fact, the FIT policy stipulated in Decision 11 has created a driving force for the development of a new solar technology market in Vietnam, promoting the new and young market by long-term commitments on responsibility and purchase price. However, during the implementation, Decision 11 revealed shortcomings.

The international consultancy has proposed developing different FIT Schedules according to potential radiation areas for the following reasons: Reducing grid congestion, easily integrating grid; raising community consensus; avoiding excessive land competition; and allowing projects in low radiation areas to be as effective as projects in high radiation areas.

The draft Decision proposed radiation areas to calculate FIT price as follows: Zone 1: 3,36-3,98 kWh per m2 per day; Area 2: 3,99-4,61 kWh per m2 per day; Area 3: 4.62-5.23 kWh per m2 per day; Area 4: including 6 provinces Ninh Thuan, Binh Thuan, Khanh Hoa, Phu Yen, Gia Lai and Dak Lak, which are currently overloaded with the grid, so the FIT price is proposed 5, 1 kWh per m2 per day. Low radiation areas have a higher incentive price.

The Ministry of Finance has proposed consideringeconomic efficiency when encouraging investment in low radiation areas.

According to the EVN, before June 30, the FIT price mechanism has attracted far beyond the Government's target. At the same time, with the expensive cost of this energy source, the EVN doesn’t need to encourage investment in all ways. Therefore, the price of electricity in region I, where the radiation is low, EVN proposed keeping the current FIT price.

The Ministry of Industry and Trade explained that grid-connected solar power projects are being developed in high radiation localities in large scale, with fast construction progress for quick operation, leading to the possibility of local grid overload and affecting safety of the power supply system.

To solve this problem, the international consultancy proposed developing different FIT Schedules according to radiation areas (using experience from Germany, France, Switzerland, Denmark and China) to ensure encouragement across the country, capacity release and stable operation of the system.

The highest electricity price is 10.87 cents per kWh

According to the Draft Decision, the FIT Schedule is based on the electricity production cost which is calculated based on investment costs, operating costs and financial costs. FIT reflects the estimated electricity production cost of some renewable energy technology based on key input assumptions.

The schedule of purchasing price of solar electricity is as follows:

Floating solar power projects: area 1 (VND 2,281 per kWh); area 2 (1,963 VND per kWh); area 3 (VND 1,758 per kWh); area 4 (1,655 VND per kWh), equivalent to 9.98 cents per kWh; 8.95 cents per kWh; 7.69 cents per kWh; 7.24 cents per kWh respectively.

Ground solar power projects: area 1 (VND 2,102 per kWh); area 2 (1,809 VND per kWh); area 3 (VND 1,620 per kWh); area 4 (1,525 VND per kWh), equivalent to 9.20 cents per kWh; 7.91 cents per kWh; 7.09 cents per kWh; 6.67 cents perkWh.

Rooftop solar power projects: area 1 (VND 2,486 per kWh); area 2 (VND 2,139 per kWh); area 3 (VND 1,916 per kWh); area 4 (1,803 VND per kWh), equivalent to 10.87 cents per kWh; 9.36 cents per kWh; 8.38 cents per kWh; 7.89 cents per kWh.

The applicable exchange rate is the central exchange rate of Vietnamese dong and the US dollar announced by the State Bank of Vietnam on the end day of the previous year to calculate the electricity price for the next year. The parties are responsible for complying with the provisions of the current law on taxes and fees.

The purchasing price is applied to the rooftop solar power system which has a commercial operation date between July 1, 2019 and December 31, 2021 and applied for 20 years from the date of commercial operation. The electricity purchase cost from rooftop solar power projects is calculated and included in the input costs of the annual purchase price plan of the EVN.

Regarding the application time and calculation of electricity prices, the Ministry of Finance stated that the Draft’s regulations on purchase price for 20 years are not consistent with the electricity market roadmap.The Ministry of Industry and Trade is building a mechanism for auction of solar power. Therefore, the Ministry of Finance proposed an appropriate time.

In response, the Ministry of Industry and Trade gave an explanation: the Draft’s regulations on purchase price shall be valid for two years, until the end of 2021. Projects which were put into operation during this period are applied the purchase price specified in the draft for 20 years. This is an incentive mechanism that has been successfully implemented in Decision 11.

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The application time for the preferential purchase price for projects operating during the validity period of the Decision is necessary for investors to calculate economic efficiency and decide on investment. Across the world, this policy is widely applied to new power production markets like in Vietnam. After 2021, following the direction of the Prime Minister, the Ministry of Industry and Trade shall work with ministries and sector to study and propose a mechanism for auction of solar power projects.