CIRCULAR

METHODS FOR DETERMINING ELECTRICITY GENERATION PRICE RANGE OF SOLAR POWER PLANTS AND WIND POWER PLANTS

Pursuant to the Law on Electricity dated December 3, 2004;

Pursuant to Law on amendments to Law on Electricity dated November 20, 2012;

Pursuant to the Law on amendments to the Law on Public Investment, the Law on Public-Private Partnerships Investment, the Law on Investment, the Law on Houses, the Law on Bidding, the Law on Enterprises, the Law on Excise Tax, and the Law on Civil Judgment Enforcement dated January 11, 2022;

Pursuant to Decree No. 98/2017/ND-CP dated August 18, 2017 of the Government on functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade;

Pursuant to Decree No. 137/2013/ND-CP dated October 21, 2013 of the Government on elaborating to Law on Electricity and Law of amendments to Law on Electricity;

Pursuant to Decision No. 13/2020/QD-TTg dated April 6, 2020 of Prime Minister on regulations incentivizing development of solar power in Vietnam;

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Pursuant to Decision No. 39/2018/QD-TTg dated September 10, 2018 of the Prime Minister on amendment to Decision No. 37/2011/QD-TTg;

At request of Director of Electricity Regulatory Authority of Vietnam;

The Minister of Industry and Trade promulgates the Circular on methods for determining electricity generation price range of solar power plants and wind power plants.

Chapter I

GENERAL PROVISIONS

Article 1. Scope and regulated entities

1. This Circular prescribes the methods and procedures for developing, promulgating electricity generation price range for ground-mounted solar power plants, floating solar power plants, onshore wind power plants, and offshore wind power plants.

2. This Circular applies to:

a) Vietnam Electricity (hereinafter referred to as “EVN”);

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These power plants or these parts of power plants must adequately comply with regulations and law on investment, construction, adhere to absorption capacity of the national electrical grid and the ability to release capacity of electrical grids; strictly comply with electricity price structures at the time of operation, and assume responsibilities for project effectiveness according to approved regulations. Violations found via inspection or investigation shall be met with strict punitive actions as per the law. Serious violations can be met with revocation of investment registration certificate and/or suspension of the project in accordance with regulations and law on construction investment.

Article 2. Definition

In this Circular, terms below are construed as follows:

1. “a standard solar power plant” means a power plant selected for the purposes of calculating electricity generation price range of all ground-mounted solar power plants and floating solar power plants with installed capacity of 50 MWp.

2. “a floating solar power plant” means a grid-connected solar power plant where solar panels are installed on a floating structure.

3. “a ground-mounted solar power plant” means a grid-connected solar power plant other those described under Clause 2 of this Article.

4. “a standard wind power plant” means a wind power plant selected for the purpose of calculating electricity generation price range of onshore wind power plants and offshore wind power plants with installed capacity of 50 MW.

5. “an onshore wind power plant” means a grid-connected wind power plant equipped with wind turbines, built, and operating on land and/or coastal areas whose outer border is the lowest average sea level of multiple years (18,6 years).

6. “an offshore wind power plant” means a grid-connected wind power plant equipped with wind turbines, built and operated seaward beyond the lowest average sea level of multiple years (18,6 years).

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Chapter II

METHOD FOR DEVELOPING ELECTRICITY GENERATION PRICE RANGE

Article 3. Rules for developing electricity generation price range

1. Electricity generation price range of ground-mounted solar power plants, floating solar power plants, onshore wind power plants, and offshore wind power plants refers to prices from the minimum value (0 VND/kWh) to the maximum value.

2. The maximum value applicable to solar power plants shall be electricity generation price of the standard solar power plant determined using methods under Article 4, Article 5, and Article 6 hereof.

3. The maximum value applicable to wind power plants shall be electricity generation price of the standard wind power plant determined using methods under Article 7, Article 8, and Article 9 hereof.

Article 4. Method for determining electricity generation price of the standard solar power plant

Electricity generation price P^MT (VND/kWh) of the standard solar power plant shall be determined using the following formula:

P^MT = FC^MT + FOMC^MT

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FC^MT: Average fixed costs of the standard solar power plant determined in accordance with Article 5 hereof (VND/kWh);

FOMC^MT: Fixed operation and maintenance costs of the standard solar power plant determined in accordance with Article 6 hereof (VND/kWh).

Article 5. Method for determining average fixed costs of the standard solar power plant

1. The average fixed costs FC^MT (VND/kWh) of the standard solar power plant serves as a component for the purpose of investment recovery and is determined using the formula below:

In which:

TC^MT: Annual converted investment capital for construction of the standard solar power plant (excluding VAT) is determined in accordance with Clause 2 of this Article (VND);

: Average electricity yield of the standard solar power plant over multiple years: determined in accordance with Clause 5 of this Article (kWh).

2. Annual converted investment capital of standard solar power plant TC^MT (VND) is determined using the following formula:

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In which:

SDT^MT: Investment unit cost of the standard solar power plant determined in accordance with Clause 3 of this Article (VND/kWp). kWp measures peak capacity of a solar panel in standard condition and is published by manufacturers;

P^MT: Installed capacity of the standard solar power plant (kWp) and is determined to be 50.000 kWp;

n_MT: Economic life of the standard solar power plant is specified under Appendix attached hereto (year);

i: Discount rate of the standard solar power plant is determined in accordance with Clause 4 of this Article (%).

3. Investment unit cost refers to investment required for 1 kWp of installed capacity of the standard solar power plant and is determined based on:

a) total investment of solar power plants that have entered into power purchase agreement with the EVN or solar power plants where the EVN act as project developers before January 1, 2021;

b) Data of counseling organizations.

4. Discount rate i (%) applying pre-tax weighted average cost of capital of the standard solar power plant is determined using the formula below:

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In which:

D: Percentage of borrowed capital in total investment is prescribed under Appendix attached hereto (%);

E: Percentage of owner’s equity in total investment prescribed under Appendix attached hereto (%);

n_MT: Economic life of the standard solar power plant is specified under Appendix attached hereto (year);

n_D: Average debt repayment period is prescribed under Appendix attached hereto (year);

r_d: Borrowed capital interest rate is determined in accordance with Point a of this Clause (%);

r_e: Pre-tax interest rate of owner’s equity is determined in accordance with Point b of this Clause (%).

a) Interest of cost of capital rd (%) is calculated using weighted average interest of capital borrowed in VND currency and capital borrowed in foreign currency using the formula below:

r_d = D_F x r_d,F + D_D x r_d,D

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D_F: Percentage of capital borrowed in foreign currency over total borrowed capital is determined on the basis of composition of borrowed capital of solar power plants according to Point b Clause 2 Article 1 hereof (%);

D_D: Percentage of capital borrowed in VND over total borrowed capital is determined on the basis of composition of borrowed capital of solar power plants according to Point b Clause 2 Article 1 hereof (%);

r_d,F: Interest rate of capital borrowed in foreign currency is determined on the basis of: interest rate of capital borrowed in foreign currency of power plants entering into power purchase agreements during the period of 2017 - 2021 (%/year) or interest rate of capital borrowed in foreign currency of solar power plants in accordance with Point b Clause 2 Article 1 hereof;

r_d,D: Interest rate of capital borrowed in VND is determined on the basis of: interest rate of capital borrowed in VND of power plants entering into power purchase agreements during the period of 2017 - 2021 (%/year) or interest rate of capital borrowed in VND of solar power plants in accordance with Point b Clause 2 Article 1 hereof.

b) Pre-tax interest rate of owner’s equity r_e,pt (%) is determined using the formula below:

In which:

r_e,pt: Post-tax interest rate of owner’s equity (%) is determined to be 12%;

t: Average rate of corporate income tax during economic life of solar power plants is determined in accordance with applicable laws of the State (%).

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In which:

A: Total solar panel installation area (m²) is determined in accordance with Clause 6 of this Article;

H: Average annual radiant intensity of the standard solar power plant (kWh/m²/year);

r: Solar panel efficiency (%);

PR: Standard solar power plant efficiency (%).

6. Total installation area of solar panels (m²) is determined as follows:

In which:

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P^TP: Nominal capacity of solar panel (Wp);

S^TP: Surface area of solar panel (m²).

7. PTP, STP, r, H, PR parameters under Clause 5 and Clause 6 of this Article are determined on the basis of:

a) Appraised feasibility study, technical design of solar power plants which have entered into power purchase agreements before January 1, 2021;

b) Data of counseling organizations.

Article 6. Method for determining fixed operation and maintenance costs of the standard solar power plants

Fixed operation and maintenance costs FOMC^MT (VND/kWh) of the standard power plant serves as a component to recover major repair costs, personnel costs, and other costs annually and is determined using the formula below:

In which:

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: Average electricity yield of the standard solar power plant over multiple years is determined in accordance with Clause 5 Article 5 hereof (kWh).

2. Total fixed operation and maintenance costs  (VND) of the standard solar power plant are determined using the formula below:

In which:

SDT^MT: Investment unit cost of the standard solar power plant is determined in accordance with Clause 3 Article 5 hereof (VND/kWp);

P^MT: Installed capacity of the standard solar power plant (kWp) and is determined to be 50.000 kWp;

k_MT: Percentage of fixed operation and maintenance costs included in investment unit cost of the standard solar power plant is specified under Appendix attached hereto (%).

Article 7. Method for determining electricity generation price of the standard wind power plant

Electricity generation price P^G (VND/kWh) of the standard wind power plant is determined using the formula below:

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In which:

FC^G: Average fixed costs of the standard wind power plant determined in accordance with Article 8 hereof (VND/kWh);

FOMC^G: Fixed operation and maintenance costs of the standard wind power plant are determined in accordance with Article 9 hereof (VND/kWh).

Article 8. Method for determining average fixed costs of the standard wind power plant

1. The average fixed costs FC^G (VND/kWh) of the standard wind power plant serves as a component for the purpose of investment recovery and is determined using the formula below:

In which:

TC^G: Annual converted investment capital for construction of the standard wind power plant (excluding VAT) is determined in accordance with Clause 2 of this Article (VND);

: Average electricity yield of the standard wind power plant over multiple years is determined in accordance with Clause 5 of this Article (kWh).

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In which:

SDT^G: Investment unit price of the standard wind power plant is determined in accordance with Clause 3 of this Article (VND/kW);

PG: Installed capacity of the standard wind power plant (kW) is determined to be 50.000 kW;

n_G: Economic life of the standard wind power plant is specified under Appendix attached hereto (year);

i: Discount rate of the standard wind power plant is determined in accordance with Clause 4 of this Article (%).

3. Investment unit price is the cost invested in 1 kW of installed capacity of the standard wind power plant and is determined on the basis of:

a) Total investment approved of wind power plants that have entered into power purchase agreements with the EVN before November 1, 2021;

b) Data of counseling organizations.

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In which:

D: Percentage of borrowed capital in total investment is prescribed under Appendix attached hereto (%);

E: Percentage of owner’s equity in total investment prescribed under Appendix attached hereto (%);

n_G: Economic life of the standard wind power plant is specified under Appendix attached hereto (year);

n_D: Average debt repayment period is prescribed under Appendix attached hereto (year);

r_d: Borrowed capital interest is determined in accordance with Point a of this Clause (%);

r_e: Pre-tax interest rate of owner’s equity is determined in accordance with Point b of this Clause (%).

a) Interest of cost of capital r_d (%) is calculated using weighted average interest of capital borrowed in VND currency and capital borrowed in foreign currency using the formula below:

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In which:

D_F: Percentage of capital borrowed in foreign currency over total borrowed capital is determined on the basis of composition of borrowed capital of wind power plants according to Point b Clause 2 Article 1 hereof (%);

D_D: Percentage of capital borrowed in VND over total borrowed capital is determined on the basis of composition of borrowed capital of wind power plants according to Point b Clause 2 Article 1 hereof (%);

r_d,F: Interest rate of capital borrowed in foreign currency is determined on the basis of: interest rate of capital borrowed in foreign currency of power plants entering into power purchase agreements during the period of 2017 - 2021 (%/year) or interest rate of capital borrowed in foreign currency of wind power plants in accordance with Point b Clause 2 Article 1 hereof;

r_d,D: Interest rate of capital borrowed in VND is determined on the basis of: interest rate of capital borrowed in VND of power plants entering into power purchase agreements during the period of 2017 - 2021 (%/year) or interest rate of capital borrowed in VND of wind power plants in accordance with Point b Clause 2 Article 1 hereof.

b) Pre-tax interest rate of owner’s equity r_e,pt (%) is determined using the formula below:

In which:

r_e,pt: Post-tax interest rate of owner’s equity (%) is determined to be 12%;

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5. Average annual electricity yield  (kWh) of the standard wind power plant is determined using the formula below:

In which:

E^G,P50: Average forecasted energy yield of 50% of the standard wind power plant is determined in accordance with Clause 6 of this Article (kWh);

k_bd: Total variability of the standard wind power plant (%);

k_pb,P75: Normal distribution factor corresponding to average forecasted energy yield of 75% of the standard wind power plant is specified under Appendix attached hereto.

6. The average forecasted energy yield of 50% of the standard wind power plant (kWh) is determined as follows:

E^G,P50 = 8760 x P^G x k_CF

In which:

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k_CF: Capacity factor of the standard wind power plant (%);

7. k_CF and k_bd under Clause 5 and Clause 6 of this Article are determined on the basis of:

a) Appraised feasibility study, technical design of wind power plants which have entered into power purchase agreements before November 1, 2021;

b) Data of counseling organizations.

Article 9. Method for determining fixed operation and maintenance costs of the standard wind power plants

Fixed operation and maintenance costs FOMC^G (VND/kWh) of the standard power plant serves as a component to recover major repair costs, personnel costs, and other costs annually and is determined using the formula below:

In which:

: Total fixed operation and maintenance costs of the standard wind power plant are determined in accordance with Clause 2 of this Article (VND);

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2. Total fixed operation and maintenance costs  (VND) of the standard wind power plant are determined using the formula below:

In which:

SDT_G: Investment unit price of the standard wind power plant is determined in accordance with Clause 3 Article 5 hereof (VND/kW);

P^G: Installed capacity of the standard wind power plant (kW) is determined to be 50.000 kW;

k_G: Percentage of fixed operation and maintenance costs included in investment unit cost of the standard wind power plant is specified under Appendix attached hereto (%).

Chapter III

PROCEDURES FOR DEVELOPING, APPRAISING, AND PROMULGATING ELECTRICITY PRICE RANGE

Article 10. Procedures for developing, appraising, and promulgating electricity price range

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2. On the basis of documents under Clause 1 of this Article, the EVN has the right to hire consultant to select specifications, calculate, and determine electricity generation price range of the standard solar power plants in accordance with Article 4, Article 5, and Article 6 hereof and standard wind power plants in accordance with Article 7, Article 8, and Article 9 hereof.

3. Within 45 days from the effective date hereof, the EVN is responsible for developing electricity generation price range of ground-mounted solar power plants, floating solar power plants, onshore wind power plants, and offshore wind power plants in accordance with Article 11 hereof and send to Electricity Regulatory Authority of Vietnam.

4. Procedures for appraising electricity generation price range:

a) Within 5 working days from the date on which documents on calculating electricity generation price range under Article 11 hereof are received, the Electricity Regulatory Authority of Vietnam are responsible for inspecting the documents for their contents, adequacy, and legitimacy.

b) In case the documents are inadequate or illegitimate, the Electricity Regulatory Authority of Vietnam is responsible for requesting the EVN in writing to revise or clarify contents of the documents.

c) Within 45 days from the date on which adequate documents on calculating electricity generation price range are received, Electricity Regulatory Authority of Vietnam is responsible for appraising the electricity price range using methods prescribed in this Circular.

d) If necessary, the Electricity Regulatory Authority of Vietnam shall consult independent experts gather feedback pertaining to the price range via a Board of counsel established by the Ministry of Industry and Trade.

The Board of counsel has up to 9 members, including a Chairperson, a Vice Chairperson, a Secretary, and representatives of relevant entities of Ministry of Industry and Trade with sufficient specialty and comprehensive understanding in electricity generation.

5. Within 10 working days from the date on which appraisal results of electricity generation price range under Clause 4 of this Article are produced, the Electricity Regulatory Authority of Vietnam are responsible for finalizing documents and requesting the Minister of Industry and Trade to approve electricity generation price range applied to the aforementioned power plants and publicize on website of the Ministry of Industry and Trade and Electricity Regulatory Authority of Vietnam.

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The written request for approval of electricity generation price range for ground-mounted solar power plants, floating solar power plants, onshore wind power plants, and offshore wind power plants under Clause 2 Article 1 hereof consists of:

1. Presentation and calculation of the EVN pertaining to electricity generation price of standard solar power plant and standard wind power plant.

2. Specifications and documents on calculating electricity generation price for standard solar power plant and standard wind power plant in accordance with Article 4, Article 7, and the Appendix attached hereto.

3. Documents pertaining to specifications used in calculating electricity generation price of ground-mounted solar power plants, floating solar power plants, onshore wind power plants, and offshore wind power plants.

Chapter IV

IMPLEMENTATION

Article 12. Responsibilities of Ministry of Industry and Trade

1. Assign independent experts or establish a Board of counsel to appraise the electricity generation price range in accordance with Point d Clause 4 Article 10 hereof. If necessary, the Ministry of Industry and Trade shall gather feedback of ministries and relevant authorities pertaining to electricity generation price range.

2. Promulgate electricity generation price range of ground-mounted solar power plants, floating solar power plants, onshore wind power plants, and offshore wind power plants after appraising.

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1. Take charge and cooperate with designated independent experts or the Board of counsel in accordance with Point d Clause 4 Article 10 hereto in appraising calculation results of electricity generation price range.

2. Request the Minister of Industry and Trade to sign and promulgate electricity generation price range in accordance with this Circular.

Article 14. Responsibilities of the EVN

1. Promulgate documents and send to investors of ground-mounted solar power plants and floating solar power plants that have entered into power purchase agreements before January 1, 2021 and onshore wind power plants and offshore wind power plants that have entered into power purchase agreements before November 1, 2021 regarding appraised provision of feasibility study and technical design.

2. Present the documents on calculating electricity generation price range of ground-mounted solar power plants, floating solar power plants, onshore wind power plants, and offshore wind power plants to the Electricity Regulatory Authority of Vietnam in accordance with Article 10 and Article 11 hereof.

Article 15. Entry into force

1. This Circular comes into force from November 25, 2022

2. If the legislative documents extracted in this Circular are amended or superseded by other legislative documents, the new documents shall prevail.

3. Difficulties that arise during the implementation of this Circular should be reported to the Ministry for consideration./.

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PP. MINISTER
DEPUTY MINISTER




Dang Hoang An