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Bidding mechanism to be applied to unfinished solar, wind power projects

The Ministry of Industry and Trade (MOIT) has submitted a statement to the Prime Minister on a bidding mechanism which allows purchase of electricity from solar and wind power projects which remain unfinished.

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The subjects to attend bids are solar and wind power projects that have started but have not finished prior to the deadlines to be able to enjoy the FIT (feed in tariff) mechanism as stipulated in Decision 39/2018 dated September 10, 2018 and Decision 13/2020 dated April 6, 2020.

The projects’ bid prices must be within the electricity price frame set by MOIT.

The organizer of bids is EVN (Electricity of Vietnam). The results of the bids will be applied for the period from 2022 to 2025.

Transitional projects have the right to join the competitive electricity market. If they join the market, they have the responsibility of implementing all the rights, obligations and responsibilities of electricity generators in accordance with the regulation on the electricity market set by MOIT.

The electricity purchase agreement and electricity prices will be applied until the end of 2025. After that, investors will have to attend bids again in accordance with the regulation promulgated by the Government and/or MOIT.

The currency used to calculate prices is Vietnam dong (dong/kwh) which will not be adjusted in accordance with the dollar prices.

As such, the bidding mechanism designed by MOIT is different from the FIT mechanism applied before. The electricity prices will be defined through bidding which will be implemented once every five years instead of fixed prices valid for 20 years as seen in FIT mechanism.

The other difference is that under the FIT mechanism, the electricity prices are adjusted in accordance with the dong/dollar exchange rate, while under the bidding mechanism, the price is fixed in Vietnam dong.

Under the FIT mechanism, EVN committed to buy all the electricity to be put out by projects, but under the new mechanism, EVN doesn’t commit to buy all the electricity output.

Some investors have said they feel ‘insecure’ about the bidding mechanism as investors face high risks as they don’t know how the prices would be after five months, or how the dong/dollar exchange rates will fluctuate. In particular, they are not sure if they can sell electricity as EVN has not committed to buy their electricity.

A report shows that the total wind and solar power capacity accounts for 26 percent of the total installation capacity.

As many plants could not be completed prior to October 31, 2021, they cannot enjoy the FIT price mechanism and are waiting for new policies. Some plants have completed construction, but still cannot operate because selling prices are unclear. 

Luong Bang

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