It is necessary to develop an appropriate electricity purchase price mechanism

There is a need for a more equitable electricity sale mechanism among power generation sources through an bidding model.

In the context of moving towards a green economy, circular economy and implementing Vietnam’s commitment to achieve net zero emissions by 2050 at COP 26, our country is making great efforts to follow the roadmap to move energy in a more sustainable direction, reduce the proportion of coal power and increase the share of renewable energy (RE) to reduce gas emissions causing environmental pollution (as in the Power Plan VIII). However, to achieve that goal, Vietnam needs huge resources from many sectors of the economy, and needs breakthrough mechanisms to attract investment and promote and maintain the RE market.

There should be operational mechanisms to attract investment and promote and maintain the renewable energy market

Over the past few years, Vietnam has recorded a leap in investment in wind and solar power development, becoming a global bright spot in renewable energy development. In 2018, these two renewable power sources only accounted for 1% of the national electricity generation structure, but by 2021, the installed capacity of renewable energy will account for 29% of the total installed capacity of power sources, opening a new trend in the beginning. investment in power source development in Vietnam.

The biggest force created this dynamic investment market is the government’s breakthrough policy decision. The preferential pricing mechanism (FIT) for solar and wind power has contributed to activating the momentum of renewable energy development. However, after the boom period of the past 3 years, now this growth is slowing down, billions of dollars worth of electricity is languishing to wait for a new mechanism. Thereby also revealing gaps in mechanisms and policies that Vietnam needs to continue to improve in the coming time to attract investment resources into the RE market.

One of the important policies to maintain the development of the renewable electricity market is the competitive bidding mechanism for renewable electricity prices.

Experts say that Vietnam needs to have specific goals, stable and long-term policies to attract investment capital and feel secure to implement the project. One of the important policies to maintain the development of the renewable electricity market is the competitive bidding mechanism for renewable electricity prices (electricity price bidding) to not only be transparent but also create a foundation for sustainable development for the RE market.

A study conducted by the Vietnam Initiative for Energy Transformation (VIETSE) in 2021 shows that a transparent, competitive bidding process will be a tool to attract investment and manage assets effective for renewable energy investment. The research team also recommends applying the method of organizing electricity selling price bidding by rarea/region to control the development of power sources in accordance with the power grid to avoid the hot development of renewable energy projects that do not guarantee the quality of the electricity reasonable power generation rate leads to wasted investment. Implementing these bidding methods also minimizes the situation that investors and localities register for projects to reserve space, or zone out all land or sea surface, making it difficult for investors to come later. This method does not disrupt the master plan, does not put pressure on inter-regional transmission requirements, and at the same time helps the state choose the most optimal project and deployment location for each period, buy electricity at the most suitable price for the whole area, not for one project.

Another benefit of the bidding mechanism proposed by VIETSE for RE power plants is to create transparent competition among contractors in many localities. The selection of investment project locations not in the form of a collection of project lists submitted by the locality will create a premise for the balance of supply and demand between regions. Since then, the locality will also have to make efforts to improve the spirit of accompanying businesses and investors in project preparation, solving problems related to land, water surface, sea surface, and improving efficiency in planning and use of land and resources, harmonizing the interests of stakeholders. This also means that projects will be deployed more efficiently, making the best use of land and other resources such as wind and radiation.

From the perspective of policy and legal regulations, VIETSE’s experts believe that the electricity selling price bidding mechanism ensures healthy competition among investors and transparency for solar power development activities and wind power, without causing conflicts between laws and still maintaining the spirit of encouraging the development of clean energy and renewable energy in accordance with the policies and laws of the Party and the State as stated in Resolution 55 of the Politburo, Law Electricity, Investment Law, Land Law… In addition, this is also the closest mechanism to the Regulation on “purchasing prices of electricity from grid-connected solar power projects… determined through a competitive mechanism” in Clause 4. Article 5 Decision No. 13 dated April 6, 2020 of the Prime Minister.

Applying the electricity selling price bidding mechanism, all the preparation and approval processes for RE investment projects are still carried out in accordance with the law (Investment Law, Electricity Law, Construction Law, Land Law, etc.) without conflicting with applicable laws. Therefore, this mechanism will ensure continuity in the implementation of investment project procedures now and in the future, without requiring amendments to the Electricity Law and guiding decrees and circulars to building a legal corridor for investor selection bidding.

In the context of rapidly increasing prices of fossil energy (coal, gas, oil), renewable energy development is a necessary and sustainable step for national energy security, but policies need to be highly flexible and up-to-date according to market trends. The electricity price bidding mechanism will create opportunities for stakeholders to access investment projects in a fairer manner, transparently in the project development process, which is an important premise to promote non-state investment sources into the clean electricity market, helping Vietnam build a low-carbon economy.