The FIT (feed in tariff) electricity pricing policy spurred development of wind and solar power in Vietnam, but solutions to electricity purchase pricing after the FIT ended has caused policy interruption.

This is the conclusion of the National Assembly’s supervisory delegation, shown in the report to the National Assembly’s Standing Committee on implementation of policies and laws on energy development in 2016-2021.

The report emphasized the shortcomings in the issuance of some legal documents guiding policies, which caused investments in renewables to fail to obtain expected results.

The legal documents include Decision 11/2017 on solar power projects in Vietnam; Decision 13/2020 on solar power development; and Decision 39/2018 on the development of wind power.

A series of policies by the state was created to encourage and support the development of renewable sources, and to create favorable conditions to exploit and develop renewables in Vietnam, and encourage domestic and foreign investors to inject money in clean power projects.

The policies stimulated the renewable power market, as they offered preferential electricity purchasing prices to wind, solar and biomass power developers; and activated the renewable power investment market, and finance & banking transactions.

“This helped minimize the risks of electricity shortage in the short term and create considerable spare capacity; reduce coal imports and increase the national energy security index,” the report reads.

Mentioning Decisions 11, 13 and 39 on the FIT for solar and wind power, the National Assembly’s supervisory delegation said this showed the capability of quickly mobilizing financial resources for renewable energy.

However, the decisions did not consider solutions on electricity pricing after FIT was no longer valid, which caused an interruption in policies and made it difficult for investors to make decisions.

The purchasing price of wind and solar power projects with COD (commercial operation dates) after the FIT ended depended on prices set by the Ministry of Industry and Trade (MOIT) for the transitional period, and framework prices lower than the FIT prices. Therefore, it required negotiation of the purchasing price for every project, which took a lot of time.

Also, the supervisory delegation noted that the bidding and auctioning scheme (replacing FIT) to strengthen transparency and healthy competition has not been released yet.

The ‘ask and grant’ risk

Regarding solar and wind power development planning, the delegation noted tardiness in approving plans at the national and provincial levels. As a result, many problems have arisen in approving additional projects, causing difficulties to state management.

This stifles competition in attracting investment and does not ensure transparency, and thus may ignite the ‘ask and grant’ scheme.

In 2016-2020, 557 additional electricity generation project proposals by provincial authorities and investors were approved.

Power pricing scheme 

The report said that current electricity price policies contain unreasonable regulations, and electricity prices cannot cover input costs and ensure reasonable profits for investors. Meanwhile, market signs are not reflected in the prices applied to the final consumers.

The retail electricity pricing framework designed under the Electricity Law does not suit the real consumption of groups of clients, and the cross clearing scheme is still maintained. The electricity prices for daily household consumption are even higher than  prices applied to production and business consumers.

This is not in line with the purpose of encouraging electricity-intensive production enterprises in some business fields to use power economically and effectively. 

Meanwhile, the formula for calculating and determining the fluctuations of basic input factors that have impact on electricity prices has not been perfected. There is no specific roadmap to apply two-component electricity pricing. The electricity transmission prices are too low, which makes it difficult to attract investors to develop transmission lines.

Viet Nam Net