Power projects in confusion waiting for policy

While renewable energy projects are still waiting for difficulties to be resolved or for clear regulations to be issued for further implementation, investors interested in offshore wind power or gas power are contributing many ideas to policies to be able to implement the projects.

While renewable energy projects are still waiting for difficulties to be resolved or for clear regulations to be issued for further implementation, investors interested in offshore wind power or gas power are contributing many ideas to policies to be able to implement the projects.

Two years still struggling with estimated price

“Although 85 renewable energy projects are in transition, despite having full policy mechanisms for negotiation, to date, no project has signed an official Power Purchase Agreement (PPA). It has been nearly 3 years since November 1, 2021 for these wind power projects. It would be strange if the investors were not dying,” a project representative expressed indignation when talking to a reporter from Investment Newspaper.

According to this person, currently, transitional renewable energy projects that have been recognized for commercial operation are still only entitled to a temporary price equal to 50% of the ceiling price according to Decision 21/QD-BCT issued in January 2023. Thus, investors do not have enough to pay the principal and interest on loans.

It is worth mentioning that, with the remaining amount, EVN has not yet paid, and will only pay compensation later, without calculating interest on that part. "Who would be foolish enough to sign an official PPA price with such an advantage?", he commented, and said that if the Ministry of Industry and Trade does not direct a final settlement, investors will become increasingly discouraged.

It is known that only one transitional renewable energy project has been submitted by the Electricity Trading Company to Vietnam Electricity (EVN), but it has also been requested to be recalculated. Not to mention, if EVN approves, it must also be submitted to the Electricity Regulatory Authority for consideration and approval before the official PPA can be signed.

Not only are transitional projects waiting to be resolved, but investors who are interested in self-produced, self-consumed rooftop solar power connected to the national power grid are also waiting for legal regulations being drafted.

Not to mention, the regulation that the total capacity of grid-connected rooftop solar power development in each locality must be consistent with the capacity approved in the National Power Development Plan is causing challenges as the allocated number is quite modest compared to the potential and goals of the locality.

For example, Ho Chi Minh City is allocated 73 MW of rooftop solar power - a small number compared to the City's target of 748 MWp from now to 2025 and 1,505 MWp from 2026-2030.

Hesitancy in power purchase negotiations

Mr. Nguyen Duy Giang, Deputy General Director of PetroVietnam Power Corporation (PV Power) - the unit that is implementing the investment in Nhon Trach 3&4 LNG Power Project, said that according to PV Power's experience, although the draft contract and the principles for calculating electricity prices have been specifically regulated in Circular 07/2024/TT-BCT, the PPA negotiation time will not be less than 2 years, even 5 years, but the official price will not be agreed upon.

It is worth noting that capital arrangements depend largely on PPA.

“Without a government guarantee, capital arrangements are extremely difficult, and credit institutions require investors to have a long-term contract power output commitment (Qc) so that they can evaluate the project’s effectiveness. However, the PPA negotiation process is prolonged and it is not possible to negotiate a long-term gas purchase contract due to the lack of a long-term Qc,” Mr. Giang commented.

In addition, the contracted electricity output is announced monthly by the power system operator, while the input fuel is according to the annual plan, also causing difficulties for investors in LNG gas power plants.

“With the specificity of purchasing LNG, a commitment to use 100% of the purchased gas volume is required, and Qc is a prerequisite for power plant investors to set up a plan to purchase LNG long-term. On the side of the power buyer, concerns about high LNG prices lead to the buyer not wanting to negotiate long-term Qc. However, in the power generation cost of an LNG power plant, the variable price component, adjusted according to LNG costs, accounts for 75-85%. Without long-term Qc, PV Power has no basis to commit to long-term gas volume and can only consider purchasing under a long-term contract with a minimum Qc commitment volume (about 21% of multi-year output) and the rest will be purchased by trip. This will increase electricity prices, affect the Vietnamese power market and not ensure power generation output when the system requires it,” said a PV Power representative.

Regarding offshore wind power projects, Mr. Nguyen Tuan, Head of the Commercial Department (Vietnam Oil and Gas Technical Services Corporation - PTSC) said that Vietnam Oil and Gas Group (Petrovietnam) and PTSC have proposed 17 issues with the aim of clarifying development orientation and policies, but only 4 targets have been accepted.

Recommendations that have not been accepted include orientation and models for development stages; institutionalization of the role of Petrovietnam according to Conclusion No. 76-KL/TW of the Politburo; agreement on management guidelines and the role of the Government; synchronization of land allocation with sea areas; and a clear mechanism for offshore wind power export.

This leads to unclear procedures for offshore wind power, lack of mechanisms to develop sustainable projects; creates legal gaps for offshore wind power exports; and does not create leverage for investment and development of the offshore wind power supply chain in Vietnam.

“Offshore wind power projects are a new field in Vietnam that is in great need of a pilot mechanism, therefore, PTSC recommends that the Draft Law assign the Government and the Prime Minister to decide on the development phases of the industry; criteria for selecting investors, decentralization of authority, procedures for approving policies; and pilot development of offshore wind power projects for domestic use and export,” said Mr. Nguyen Tuan.

Sharing this reality, Dr. Du Van Toan, Institute of Environmental, Marine and Island Sciences (Ministry of Natural Resources and Environment) said that the difficulties of offshore wind power projects as determined by the Ministry of Industry and Trade are unclear about the competent authority to assign sea areas, permit or approve organizations to use sea areas to carry out measurement, monitoring, investigation, exploration and survey activities to serve the establishment of offshore wind power projects.

The national marine spatial planning has not been approved, so there is no basis for implementing the VIII Power Plan.

Source: https://baodautu.vn/du-an-dien-boi-roi-cho-chinh-sach-d227884.html