The Vietnamese government has launched a feed-in tariff programme and initiatives to support investments in a bid to encourage the development of solar energy in the country.
Open to domestic and international investors, the scheme will see state-owned VietNam Electricity (EVN) acquire all electricity produced by ground-mounted and rooftop solar projects under 20-year power purchase agreements issued by the Ministry for Industry and Trade.
The purchase price is currently set at 2,086 Vietnamese dong ($0.0917; €0.084) per kWh, only applicable to grid-connected projects with a solar-cell efficiency higher than 16 percent. It is subject to fluctuations in the Vietnamese dong/US dollar exchange rate.
“PPA payments are not pegged to the dollar,” commented London-headquartered law firm Eversheds. “The tariff offered for ground-based solar projects remains much higher than those seen recently in other comparable markets.”
Rooftop projects will have a separate solar power tariff, involving net metering and the use of bidirectional meters to calculate the volume of power to be sold to the purchaser on the expiration of the PPA.
Incentives set to be rolled out to attract private capital include import tax exemptions on materials imported for the projects. Corporate investors can also benefit from corporate income tax reductions and other exemptions. In particular, a corporate income tax rate of 10 percent will apply for the first 15 years of the investment, together with a four-year exemption from the first profitable year and a 50 percent reduction in corporate income tax for the 9 years following the end of the exemption period.
Other measures include exemptions or reductions in land-related fees and assistance from local committees.
“Whilst the announcement is a significant and positive step in the right direction and is welcomed, there are some key areas of concern,” said Eversheds in an email statement. “The reference to a model PPA means that bidders will be required to bid without the benefit of a definitive PPA. This may create a significant challenge.”
“The bankability of the programme may be impacted by the absence of a state guarantee from the Vietnamese government,” the firm added. “Clarification will also be required around what safeguards, if any, will be offered to ensure the convertibility of the Vietnamese dong into US dollars and the interaction with foreign exchange control mechanisms.”
Grid connection and transmission between the plant and the grid will be investors’ responsibility, the law firm noted. Investors will have to bear power losses in case of a connection point not being correctly located to where the metering equipment is installed.