The government of Vietnam has mostly focused its renewable energy plans on wind energy and biomass production but recently, solar energy is starting to take center stage, aptly so in a country with high solar irradiation levels.1 According to the Asian Development Bank, the total technical potential for solar power generation in the country is around 13,000MW, but as of 2015, the total installed solar capacity for power generation is only about 4MW, used mainly in research and rural electrification.2
Starting 2015, there has been several key developments in the solar energy sector. On 18 March 2016, the Prime Minister approved the amendments to the National Master Plan for Power Development in the 2011-2020 period with vision to 2030 under Decision 428/QD-TTg. For the first time, detailed targets on solar power were introduced in this legal document: capacity of 850 MW by 2020, 4,000 MW by 2025, and 12,000 MW by 2030; and share of solar power in total power generation to about 0.5% by 2020, 1.6% by 2025, and 3.3% by 2030.3
Draft decision on solar power development
On 11 May 2016, with the presence of Deputy Prime Minister Trinh Dinh Dung, key government officials met to discuss the draft decision to be promulgated by the Prime Minister on the mechanisms to support solar energy development (the "Draft Decision").4 If the Draft Decision is adopted, this will be the first ever solar energy-specific regulation with detailed guidelines and incentives for the industry to be promulgated in the Vietnamese legislation system. At present, regulations on solar power are only incorporated in the general laws on energy, environment and renewable energy projects (e.g., Law on Electricity No. 28/2004/QH11 dated 03 December 2004; Law on Environmental Protection No. 55/2014/QH13 dated 23 June 2014; Decision on Development Strategy for Renewable Energy by 2030 with a vision to 2050 No. 2068/QD-TTg dated 25 November 2015).
The third version of the Draft Decision, which applies to power generation projects using photovoltaic (PV) method,5 grants investors incentives existing under current laws, such as:
- Allowing investors to raise capital onshore and offshore to invest in solar power projects,6 and solar power projects shall enjoy preferences regarding State investment credit and export credit under current laws.7 At present, the maximum loan amount for each project (from the Vietnam Development Bank) is 70% of the total investment and the loan term is maximum 12 years. The preferential loan interest rate will be applicable.8
- Exemption from import duties for imported goods forming the fixed assets of the projects, raw materials, supplies and semi-finished products not available in Vietnam.9
- Exemption or reduction on corporate income tax in accordance with investment incentives applicable for projects falling into investment incentives under existing tax laws.10
Solar power projects, transmission lines and substations connected to the national grid shall also enjoy exemption or reduction in land use fees and land rent in accordance with incentives applicable for projects entitled to investment incentives.11
With respect to solar power projects connected to the grid:
Under the third version of the Draft Decision, the Electricity of Vietnam (EVN) or its authorized units is responsible for purchasing all electricity produced from solar power projects at the price of 11.2 US cents/kWh (which is the average of VND 1,800/kWh (around JPY 8.89/USD 0.8) and VND3,500/kWh (around JPY17.29/USD0.16), respectively, the minimum and maximum regular electricity rates prescribed under Decision No. 28/2014/QD-TTg on the structure of electricity retail tariff dated 07 April 2014). This rate only applies to the solar power projects connected to the grid having solar cell efficiency higher than 16% and capacity less than 100 MW.12
With respect to solar power projects installed on roofs:
For solar power projects installed on roofs and connected to the grid, the excess energy shall be purchased by EVN or its authorized units at the rate of VND 3,150/kWh (VAT excluded) (around 15 US cents). The price shall be adjusted according to fluctuations in the exchange rate between the Vietnamese Dong and the US Dollar.13
During the 11 May 2016 meeting, Deputy Prime Minister Dung requested the Ministry of Industry and Trade (MOIT) to consider the experience of other countries in establishing incentives for solar power development to learn from their experience. He also advised the MOIT and local authorities to identify areas for development of renewable energy resources in their planning to avoid conflict with other plans. With solar energy's untapped yet promising potential and investors flocking in this sector, it seems that the government is very keen to have this draft decision adopted immediately.
1 Asian Development Bank, Renewable Energy Developments and Potential in the Greater Mekong Subregion (2015), page 120, available at http://www.adb.org/sites/default/files/publication/161898/renewable-energy-developments-gms.pdf.
2 Asian Development Bank, Energy Sector Assessment, Strategy, and Road Map (2015), pages 8 to 9, available at http://www.adb.org/sites/default/files/institutional-document/178616/vie-energy-road-map.pdf.
3 Article 3(a), Decision No. 428/QD-TTg dated 18 March 2016.
4 The Draft Decision (version 3) can be found at: http://icon.com.vn/Portals/0/654-quyet dinh Thu tuong ve dien mat troi.doc (in Vietnamese only).
5 Article 1.2, Draft Decision.
6 Article 11.1(a), Draft Decision.
7 Article 11.1(b), Draft Decision.
8 Articles 7 and 8, Decree 75/2011/ND-CP on State Investment Credit and Export Credit dated 30 August 2011. For the precise interest rate of State Investment Credit and Export Credit: (i) Interest rate of the investment credit loans granted by the State in Vietnam dong (VND) is 8.55% per year; (ii) Interest rate of the export credit loans granted by the State in VND is 6.9% per year (Article 10 of Decree 75/2011/ND-CP on State Investment Credit and Export Credit dated 30 August 2011; Articles 1 and 2 Circular No. 76/2015/TT-BTC providing the interest rates of the investment credit loans, export credit loans granted by the state and post-investment support for difference of the interest rates dated 19 May 2015).
9 Article 11.2, Draft Decision.
10 Article 11.3, Draft Decision.
11 Article 12.1, Draft Decision.
12 Article 2.1 and Article 13.1, Draft Decision.
13 Article 13.2, Draft Decision.
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