According to the Ministry of Industry and Trade (MOIT), 62 wind power projects with the capacity of 3,479MW out of 150 projects with the total capacity of 8,100MW have signed power purchase agreements with the Electricity of Vietnam (EVN), but exact electricity prices have not been set because the FIT (feed in tariff) price expired on November 1, 2021.
In addition, 452 MW has been built and installed, but electricity prices have not been defined yet.
These projects need re-negotiations about electricity prices. However, it will be very difficult to negotiate as many questions must be answered.
How should we deal with projects located next to each other but have different prices? Will projects put into commercial operation first be cheaper than later commercial projects?
The time period for negotiating power-purchase agreements will also lead to a failure to control the opening of wind and solar power projects in the future.
MOIT in the past suggested that EVN negotiate electricity prices and power-purchase agreements with investors under MOIT’s electricity price frames and instructions.
However, EVN said there were difficulties for negotiation and recommended applying a competitive/auction mechanism.
Most recently, EVN proposed an electricity price framework to be applied to wind and solar power projects failing to apply FIT prices.
The maximum solar power price is VND1,187.96 per kwh, and onshore wind power is VND1,590.88 per kwh.
EVN recommended that MOIT continue using independent experts or consultants to consider EVN’s calculations and proposals before approving the framework for determining prices through auctions.
The prices suggested by EVN are much lower compared with the previous - VND2,000 per kwh for wind power and VND1,680-2,200 for solar power (2019-2021).
According to MOIT, wind and power prices are decreasing rapidly and are expected to continue to fall.
Under the eighth national electricity development plan, onshore wind power price would drop from VND1,834 per kwh before 2025 to VND1,504 prior to 2030 and VND1,256 prior to 2050.
Meanwhile, offshore wind power prices would fall from VND2,393 to VND1,990 by 2030 and 1,232 by 2050. As for solar power, the prices would drop from VND1,303 by 2030 and VND804 by 2050.
According to an investor, when the Prime Minister set the preferential purchase wind power price of 8.5 cents per kwh, investors rushed to pour capital into renewable energy projects.
They borrowed money from domestic banks at high interest rates. However, as Covid-19 broke out, banks stopped lending. As a result, investors had to seek high-interest rate sources to continue implementing their projects. The investment rate, therefore, increased sharply. Investors hope this factor is a consideration to help them avoid losses.
When the government’s mission visited a site to survey coastal wind power projects in Hoa Binh district in Bac Lieu province on December 4, Prime Minister Pham Minh Chinh noted that renewable energy investors earn high profits while the state and people had to bear high electricity prices.
It is necessary to reconsider electricity prices and re-negotiate operating wind power project prices to harmonize benefits for investors, the state and people.
In August 2022, MOIT suggested contracts between EVN and investors in order to harmonize benefits of involved parties.
EVN also sent a document to MOIT saying that the power purchase agreement (PPA) signed are sample agreements released by MOIT. Therefore, adjustment of PPA content needs thorough consideration.
An investor said: “We understand that the State wants investors to re-negotiate on a voluntary basis, but it doesn’t force anyone to do this. Investors can agree or disagree on this."