Vietnam Increases Feed-in-Tariffs for Wind Projects

Posted by Written by Koushan Das Reading Time: 2 minutes

According to Decision No.39/2018/QD-TTg (“Decision 39”) issued on 10 September 2018, the feed-in-tariffs (FiTs) for wind energy projects have been increased from US cents 7.8/kWh to VND 1,928/ kWh (US cents 8.5 per kWh) for onshore wind power projects and VND 2,223/kWh (US cents 9.8 per kWh) for offshore wind power projects. The new FiTs which are in effect since 1 November 2018, will have a positive impact on the industry as previous tariffs were not commercially viable for developers.

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The new rates are based on the exchange rate of USD 1= VND 22,683, which can be adjusted based on the exchange rate fluctuations.

Tariff validity

Existing projects

Wind energy projects that commenced operations prior to 1 November 2018 with the previous FiTs will be eligible for the new tariffs from 1 November 2018 for the remaining period of their power purchase agreements (PPAs).

New projects

The new FiTs are already in effect since 1 November 2018 and will be applicable for projects that commence operations before 1 November 2021. The tariffs will be valid for a period of 20 years from the commercial operation date (COD).

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Commercial operation date

The COD for wind projects is the date on which a part or the whole of a wind power plant connected to the grid can sell the electricity. It also needs to meet the following conditions:

  • the wind power plant has already completed the initial testing for a part or the whole power plant and its connection equipment;
  • the power plant has a power generation license from the relevant authorities; and
  • the electricity seller and buyer, in this case, the Vietnam Electricity (EVN) have already agreed on the electricity meter reading to commence payment.
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Wind power industry

Vietnam’s potential for wind energy is one of the highest in the region, at about 27 GW. However, previous FiTs were the biggest obstacle for project developers as the tariffs were not commercially viable.

As of September 2018, only 200 MW of wind power has been installed, while close to 100 MW is currently under construction.

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Going forward

The new tariffs will make current and future projects more commercially viable for developers, allowing them to secure financing, as earlier, lending entities and investors were not too keen on funding wind power projects due to the low tariffs.

However, the tariffs are still low compared to neighboring countries in Southeast Asia and the government will increase the tariffs after 1 November 2021. The government can shift completely from FiTs to auctions or a combination of FiTs and auction schemes after 2021.

Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices in China, Hong Kong, Indonesia, Singapore, Vietnam, India, and Russia. 

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