36 investors of solar power and wind power jointly signed a document to petition the Prime Minister about the shortcomings in the electricity generation pricing mechanism, making 34 power plants that have completed investment but cannot sell electricity to EVN, reflecting EVN's unreasonable price valuation.
34 renewable plants are waiting for the final decision
Due to the impact of the COVID-19 epidemic, 84 renewable energy projects with a total capacity of 4,676 MW have been delayed in commercial operation, making it difficult for projects to enjoy fixed electricity prices (FIT). Especially a group of 34 transition projects with a total capacity of 2,090.97 MW (including 28 wind power projects with a total capacity of 452.62 MWac) have completed construction and completed the testing work to ensure eligibility to mobilise (according to updated information until March 2023).
Earlier, in early 2023, the Ministry of Industry and Trade issued a new electricity generation price bracket for these transitional projects. Accordingly, the ceiling price of transitional solar power projects is 1,185-1,508 VND/kWh ($0.05 - $0.064/kWh) and wind power 1,587-1,816 VND/kWh ($0.067 - $0.077/kWh), depending on the type.
According to project investors, up to now, 6 solar power plants have been waiting for the mechanism for more than 26 months, and 28 wind power plants have had to wait for the mechanism for about 16 months. The total investment capital of 34 wind and solar power projects that have been completed but cannot be sold to the national power system according to investors' calculations is about VND 85 trillion (~$3.5 billion), of which VND 58 trillion (~$2.5 billion) is bank loan. Therefore, project investors are facing the risk of project financial plan failure, bad debts of enterprises increasing, and difficulties for banks to recover capital.
Investors also pointed out inappropriate points in promulgating the electricity generation pricing mechanism for transitional projects. Specifically, the process of promulgating Decision 21 seems to be too hasty, not ensuring thorough appraisal and consultation. The above 36 investors reflected that it is not practical to assign EVN/EPTC to do the price determination and use the proposed results without consulting with an independent consultant.
At the same time, the calculation method of EVN has many inappropriate points in using the total investment of the project excluding 10% of the contingency cost to calculate the electricity price bracket, justification of the average annual values of solar power plants based on the area with the highest radiation intensity, or selecting Phuoc Thai 2 solar power plant with a capacity higher than the standard factory definition in Decree 15 as the basis for price proposal.
As a result, the calculation results of EVN's proposed electricity generation price do not guarantee the principle of 12% profit after tax for investors, the correlation between the electricity generation price of the wind power project and the actual EVN's average retail price of electricity has recently increased.
Complications along the development of renewable energy plants in Vietnam
To remove obstacles for 34 wind and solar power plants, investors proposed to the Prime Minister to direct the Ministry of Industry and Trade to study and issue a new electricity generation price bracket, promulgate new circulars on model power purchase and sale contracts applicable to transitional wind power projects and transitional solar power projects. In addition, it is recommended that the Ministry of Industry and Trade will hire an independent consultant to calculate the electricity generation price bracket and comply with the consultation requests from the advisory council, the Ministry of Finance to ensure objectivity, and to calculate the electricity price bracket based on the after-tax profit margin for investors of 12%.
For power purchase and sale contracts, investors also recommend that the policy to encourage the development of renewable energy should be retained such as the time limit for applying electricity purchase prices for transitional projects is 20 years, allowing conversion of prices into USD currency and be adjusted according to the fluctuations of the VND/USD exchange rate, having regulations on the rate of price slippage in power generation, and stipulating the responsibility to purchase all renewable electricity output.
Investors recommend promulgating a decree providing specific guidance on Power Purchase Agreements for conversion projects. Investors affirm that the investors of the transition projects are the investors who have actually mobilised capital and spent investment costs to implement the project to the next stage. Finally (signing project contracts, purchasing necessary equipment from 2020 with Solar Power Projects, from 2021 with Wind Power Projects), the above policies will help investors feel secure, hence continue to invest and develop transition projects and avoid economic losses, which may even cause project collapse and increase the impact of bad debt on the banking system because the return target is not feasible.
The community of solar and wind power investors also proposed to the Prime Minister to direct ministries and sectors to soon complete and issue a direct electricity trading mechanism so that investors of renewable power plants can sell electricity directly to parties with large demand for electricity who are ready to buy electricity from factories.