On 17 July 2020, the Ministry of Industry and Trade issued Circular No. 18/2020/TT-BCT prescribing the development of solar power projects and model of the Power Purchase Agreement applicable to solar power projects (“Circular 18”), whereby providing further guidance on several regulations of Decision No. 13/2020/QD-TTg of the Prime Minister on incentives for development of solar power in Vietnam, taking effect as of 31 August 2020.
1. Circular 18 provides guidance on the development of grid-connected solar power projects as follows:
Guiding the determination of the commercial operation date (COD) for applying the new Feed-in-Tariffs (FIT2), whereby COD is only achieved when a project (i) completes initial tests with respect to the whole or part of the construction, (ii) is licensed by competent authorities to operate in electricity generation, and (iii) make available the power seller and the power purchaser to reach a mutual agreement on power-meters index for payment initiation.
In addition, the Ministry of Industry also imposes requirements on the contents of dossier of solar power projects infrastructure design and sets a margin on the fixed-term land and water surface use area of the project, which is not exceeding 1.2 ha/ 01 MWp.
The model of power purchase agreement applicable to grid-connected solar power projects attached to Circular 18 also supplements several notable contents in comparison to the previous one, including elaborate regulations on inspection to ensure the accuracy of the metering system, prescribing solution for dealing with metering system in case of defects, and narrowing down the deadline for the electricity Seller to officially confirm the modification of the COD is from 01 to 03 months (formerly is 06 to 12 months) prior to the intended COD.
2. Circular 18 also regulated several contents of note to encourage rooftop solar power systems development, including:
Officially recognizing the exemption of the license on electricity operation for the power seller, and expanding the peak capacity of the system up to 1.25 MWp though its capacity shall still not exceed 01 MW.
Additionally, Circular 18 also clarify the procedure of implementation of rooftop solar power projects, in which an grid connection agreement executed with the grid’s owner is required in case the rooftop solar power system is connected to the power grid which is not in the ownership of the power purchaser or the power distribution and retailer.
Moreover, model of power purchase agreement facilitates the involvement of power seller as individuals or households that are unable to issue invoices, thereby only monthly statement and annual “Confirmation minutes of delivered electricity output and electricity bill” are required for payment. The power purchaser is responsible for VAT finalization for individuals and households implementing the project.
In general, Circular 18 has provided detailed guidelines to encourage the development of solar power projects in accordance with the Prime Minister’s direction towards green and sustainable energy generation, recognizes the commercialization of the rooftop solar power projects for the purpose of attracting investment. However, the current new regulations have not yet met the expectations of investors in the competitive electricity market where it fails to furnish criteria to distinguish grid-connected solar power projects and rooftop solar power projects in order to apply FIT2 scheme, as well as keeps the capacity limit of the rooftop solar power system unchanged at just 01MW.