On 01 November 2023, the Ministry of Industry and Trade has promulgated Circular No. 19/2023/TT-BCT on methods of developing a price frame for electricity generation of solar and wind power plants (Circular 19). This circular is also applicable to Vietnam Electricity (EVN) and entities, individuals engaging in the development of solid waste, biomass power projects. However, in this legal update we will analysis and give in-depth determination on the developing method of the annual price frame for solar and wind power plants (except for transitional renewable power projects specified in Article 1.2(b) of Circular No. 15/2022/TT-BCT)[1].
First of all, it is noteworthy that the generation price bracket of new solar power projects will be calculated on the basis of solar radiation intensity in each region, to prioritize development in the North – where the radiation is low in comparison with other regions in Vietnam. In principle, the price frame for wind and solar power plants is established within a range from the minimum value (0 VND/kWh) to the maximum value, which is determined and promulgated annually according to Circular 19.
The developing method regulated under Circular 19 employs relevant parameters as input for calculating the power price frame. These parameters, with the purpose of ensuring that the price frame will be fair, transparent and optimized, include:
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- installed capacity;
- project economic life;
- debt repayment period;
- equity/loan ratio;
- profit margin;
- standard distribution ratio corresponding to the expected electricity with wind power;
- interest rates;
- operation and maintenance (O&M) costs ratio;
- fixed maintenance costs;
- loan interest (domestic and foreign currency)
- investment cost parameters;
- electricity delivery; and
- other related factors.
We observe that this developing method on the price frame for solar and wind power plants is similar to that applied to transitional renewable power projects. However, there are certain discrepancies in the calculating input parameters between the two methods, to be concrete:
- The investment cost parameters, foreign currency loan ratio, O&M cost ratio, and the average electricity production calculation parameters for wind and solar power plants are chosen based on referencing data from consulting organizations. This is to ensure generality and to be updated with global figures, rather than relying on historical data from power plants.
- The domestic and foreign currency loan interest rates are determined based on statistical data from credit institutions.
EVN is the unit that calculates the price frame on the basis of selecting an appropriate consultant to collect input data (as analyzed above), then submits it to the Ministry of Industry and Trade in November every year for appraisal and issuance. For your information, follow the issuance of Circular 19, on 09 November 2023, EVN has requested Electricity Power Trading Company (EPTC) to calculate and establish the electricity price frame for solar power plants (ground-mounted solar power, floating solar power), and wind power plants (onshore wind power, offshore wind power, and wind power outside territorial waters) in accordance with the Circular.
In case of necessity, especially in years when there are many solar and wind power plants negotiating electricity prices with EVN, the Ministry of Industry and Trade will establish an Advisory Council to appraise the results of calculating the price frame submitted by this group. In the event that the electricity price frame for the following year has not been announced, the latest price frame will be temporarily applicable.
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