Energy investors are “in trouble” because of the transition mechanism

Renewable energy investors are bewildered by the Ministry of Industry and Trade’s proposal on a mechanism for wind power and transitional solar power projects.

Sharing with Business Forum, many businesses said that the Ministry of Industry and Trade has just issued Official Letter No. 126/BC-BCT reporting to the Government on the proposal of a mechanism for transitional solar and wind power projects. However, the two options proposed by the Ministry of Industry and Trade have no basis for implementation, causing investors to worry.

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Not feasible yet

Explaining this difficulty, Mr. Bui Van Thinh – Chairman of Binh Thuan Wind and Solar Power Association said that nearly a year has passed billions of dollars of investment in renewable energy in Vietnam are lying to cover the mat. “Because there is no new electricity price mechanism. Of which, there are 5 solar power projects/parts with a total capacity of 452,62 MW, 62 wind power projects with a total capacity of 3.479 MW have signed power purchase and sale contracts with EVN, but due to lack of commercial operation before November 1, 2021 to receive the preferential electricity price according to the Prime Minister’s Decisions 37/2011 and 39/2018 on the mechanism to support the development of wind power projects in Vietnam, so it remains motionless waiting for new price mechanism.

The consequences of the loss are huge, but according to businesses, they are even more disappointed when they recently learned of Official Letter No. 126 of the Ministry of Industry and Trade dated July 21, 2022, reporting to the Prime Minister on the Mechanism for transitional wind and solar power projects. In Official Dispatch No. 126, the Ministry of Industry and Trade submitted to the Government 02 options for transitional wind/solar power projects.

In particular, option 1 stipulates: “The Ministry of Industry and Trade promulgates and stipulates the method and order of establishing and appraising the electricity generation price bracket and stipulating the electricity generation price bracket for wind power and solar power projects as the basis for Electricity of Vietnam (EVN) to negotiate and sign the contract buying and selling electricity with project investors, similar to how other power projects such as hydroelectricity, thermal power, gas turbines …”.

However, according to businesses, this option has not been developed by the Ministry of Industry and Trade for transitional renewable energy projects. Because according to businesses and experts, the problems that have passed for nearly 1 year with wind power and nearly 2 years with solar power have not been completely resolved because there is no new electricity purchase price. According to investors, the policy gap is too long, investors have waited too long, but this year the Ministry of Industry and Trade still announced the plan for investors to negotiate with EVN, while the price for negotiation, the Ministry of Industry and Trade has not yet issued it, although EVN had a written proposal more than 1 year ago.

“One of the important policies to maintain the development of the renewable electricity market is a competitive bidding mechanism, which is issued in the long term to not only be transparent but also create a foundation for sustainable development for the renewable energy market.”

However, according to businesses, this option has not been developed by the Ministry of Industry and Trade for transitional renewable energy projects. Because according to businesses and experts, the problems that have passed for nearly 1 year with wind power and nearly 2 years with solar power have not been completely resolved because there is no new electricity purchase price. According to investors, the policy gap is too long, investors have waited too long, but this year the Ministry of Industry and Trade still announced the plan for investors to negotiate with EVN, while the price for negotiation, the Ministry of Industry and Trade has not yet issued it, although EVN had a written proposal more than 1 year ago.

In addition, for projects in operation, the Ministry of Industry and Trade’s proposal to the Prime Minister to allow this ministry to review and consider to signed Power Purchase Agreements has confused investors. Because businesses have invested at the Government’s price, the price review will cause a legal battle and seriously affect the reputation of the Government and the investment environment in Vietnam.

Mr. Bui Van Thinh – Chairman of Binh Thuan Association of Wind and Solar Energy also said that this proposal of the Ministry of Industry and Trade lacks feasibility when the Ministry has not issued a price frame as a basis for negotiation. Investors are worried that it will take many months, even years to negotiate and approve the power purchase contract, do they still have the strength to wait?

There should be a quick resolution mechanism

According to Mr. Thinh, the transition mechanism needs to be immediately enforceable because the policy gap has lasted too long. Should it still be based on the FIT price mechanism and reduce a certain rate (eg 1-2%/quarter) to save investors. Currently, the FIT price for wind and solar power is currently higher than the selling price of EVN, but the current energy crisis has made input prices higher such as coal and gas which has increased by 300% compared to 2020 renewable energy will continue to more competitive grow in EVN’s electricity price structure.

Mr. Thinh also suggested that the renewable energy market still has many policy gaps. If Vietnam had a pre-built “back-to-back” mechanism for wind and solar power projects to be transferred when the FIT price mechanism expires, these large losses would not occur. “Billions of dollars are still lying motionless, the project is abandoned, it is unknown when it will be commercially operated, hundreds of investors are still hog to pay interest on credit loans… So whose responsibility is it?”, representatives of the businesses ask questions. Vietnam needs to continue to improve policies for the coming time to attract investment resources into the renewable energy market. In which, Vietnam needs to have specific goals, stable and long-term policies to attract investment capital to confidently implement the project.

Source: diendandoanhnghiep.vn