The Ministry of Industry and Trade of Vietnam (MOIT) recently proposed a draft decision amending decision No. 24 of 2014 on support mechanisms for the development of biomass power projects in Vietnam. The draft decision, among other revisions, proposes increasing feed-in-tariffs (FiT) for biomass power projects.
Under the draft decision, tariffs at the delivery point are to be amended as follows:
- For combined heat and power (CHP) biomass power projects: 6.77 US cents per kilowatt hour (kWh), exclusive of VAT, increased from 5.8 US cents kWh under the current decision No. 24; and
- For other biomass energy projects: 8.47 US cents kWh, exclusive of VAT, instead of the avoided cost tariff under the current decision No. 24.
The proposed FiT shall be adjusted in accordance with the fluctuation of the VND-USD exchange rate on the date of issuance of the relevant invoice. The proposed FiT is to be applied throughout the power purchase agreement (PPA) term of 20 years from the commercial operation date.
MOIT explains draft decision
According to the MOIT, there are about 10 CHP biomass power projects operating in Vietnam. Most of these are active in utilizing bagasse from sugar mills for self-consumption, and were established before the issuance of decision No. 24 on 24 March 2014. However, throughout decision No. 24’s approximately six-year implementation, no other grid-connected biomass power projects have been constructed or operated.
Further, the amended Power Development Plan VII previously set a target of power production from biomass energy to constitute 1% in 2020, 1.2% in 2025, and 2.1% in 2030 of the country’s total energy mix.
In order to achieve this target, the MOIT proposed this draft decision to increase the FiT for biomass power projects and encourage investment.
The proposed changes were still in draft form at the time of publication, and therefore still subject to the final approval of the prime minister.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing Danian Zhang at danian.zhang@bakermckenzie.com.
