Renewable energy market – Negotiating electricity purchase price is difficult feasibility

The Ministry of Industry and Trade proposes a mechanism for transitional wind power and solar power projects that have no basis for implementation, which makes investors frustrated and may affect the investment and business environment.

According to investors, at present, there are still many projects/parts of wind power and solar power projects with capital backlog of up to billions of USD being cover to the mat because they have to wait for the new electricity purchase price mechanism. In addition to 5 solar power projects/partitions with a total capacity of 452,62 MW awaiting determination of new electricity prices, there are 62 wind power projects with a total capacity of 3.479 MW that have signed power purchase contracts with EVN but due to failed to start commercial operation before November 1, 2021 in order to receive the preferential electricity price according to the Prime Minister’s Decision 37/2011 and 39/2018 on the mechanism to support the development of wind power projects in Vietnam, so now we are still waiting for the new electricity price.

The transition mechanism needs to be implemented immediately because the policy gap has lasted too long

In fact, nearly 1 year has passed, and many unfinished projects have the same fate as the above projects and are lying motionless to wait for a new mechanism. This difficulty causes investors of solar and wind power projects to have no revenue, face many difficulties in production and business, affecting the obligation to repay loans to credit institutions and risk of becoming bad debt, caused great pressure on Vietnam’s financial industry.

Such is the reality of the loss, but according to businesses, they are even more disappointed when they recently read Official Letter No. 126 of the Ministry of Industry and Trade dated July 21, 2022, reporting to the Prime Minister on the Mechanism for enterprises on wind power projects, transitional 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. Specifically:

Option 1 (stated in report 17) “The Ministry of Industry and Trade promulgates and stipulates the methods and procedures for establishing and appraising the electricity generation price bracket and stipulating the electricity generation price bracket for wind power and solar power projects to have the basis for Electricity of Vietnam (EVN) to negotiate and sign power purchase and sale contracts with project investors, similar to how other power projects such as hydroelectricity, thermal power, gas turbine ,…”.

Negotiating electricity purchase price has no basis for implementation

Option 2 (stated in Report 1513): “Development of the Prime Minister’s Decision stipulating the mechanism for bidding to purchase electricity from wind power and transitional solar power projects. Accordingly, it is expected that the electricity buyer, EVN, will organize a bidding for electricity purchase in a period of 3 years, within the price bracket promulgated by the Ministry of Industry and Trade.

However, according to investors, both of options proposed by the Ministry of Industry and Trade, a development roadmap for transitional renewable energy projects has not been built, especially option 1, which is considered the best feasible by the Ministry of Industry and Trade, the Government’s proposal for implementation still has many bottlenecks and has no basis for implementation.

Because, according to businesses and experts, the announcement No. 126 of the Ministry of Industry and Trade issued recently compared to the decision of the past 1 year, still has no new points. The reason why it has been nearly 1 year with wind power and nearly 2 years with solar power (wind power project from October 31, 2021, for solar power from December 31, 2020) has not yet had a new purchase electricity price.

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 to negotiate, the Ministry of Industry and Trade has not yet issued, although EVN had a written proposal more than 1 year ago.

For projects in operation, the Ministry of Industry and Trade’s proposal to the Prime Minister to allow this ministry to review and review the signed Power Purchase Agreements has confused investors, because they have invested in electricity according to the price issued by the Government, the review of the price will cause a legal battle and seriously affect the reputation of the Government and the investment environment in Vietnam”, representatives of businesses tired to explain.

Assessing the feasibility of the announcement No. 126 of the Ministry of Industry and Trade, Mr. Bui Van Thinh – Chairman of Binh Thuan Wind and Solar Energy Association said that investors have been waiting for a long time, but this proposal of the Ministry of Industry and Trade is nothing new compared to a year ago, lack of feasibility when the Ministry has not issued a price frame as a basis for negotiation. “Investors are worried that it will take months or even years to negotiate and approve the power purchase contract, not understanding if they still have the strength to wait anymore?”, Mr. Thinh said.

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?

Before the above inadequacies, businesses said, to cause great losses of social resources and investors like the above situation because the renewable energy market still has many policy loopholes. If Vietnam had a pre-built “back-to-back” mechanism for wind and solar power projects to be transferred when the FIT pricing mechanism expires, the situation would not have happened today.

“Billions of dollars are still lying motionless, abandoned projects do not know when they will be commercially operated, hundreds of investors are still hog to pay monthly credit loan interest while the economy is still going. So whose responsibility is it?”, asked by representatives of businesses.

Source: diendandoanhnghiep.vn