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VILAF - A Leading Law Firm in Vietnam

Update on the Power Sector

Written by Partner Phong Tran and Partner Lam Nguyen

1. PDP8 was just adopted into law finally

On 15 May 2023, the Prime Minister issued Decision No. 500/QD-TTg approving the National Power Development Master Plan for the period from 2021 to 2030 with a vision to 2050 (“PDP8”). Below are key points of PDP8.

1.1 Allocation of power sources for development

Sources of power

2020[1]

2030

2050

Total capacity (excluding exported capacity, existing rooftop solar power and renewable power capacity to produce new energy)

 

150,489 MW

490,529 – 573,129 MW

Onshore wind

538 MW (0.8% capacity, 0.4% output)

21,880 MW (14.5% of the total capacity)

60,050 – 77,050 MW (12.2 – 13.4%)

Offshore wind

6,000 MW (4.0%) or higher capacity subject to new technological development, reasonable tariff and transmission cost

70,000 – 91,500 MW (14.3 – 16%)

Solar

16,506 MW (23.8% capacity, 3.7% output)

12,836 MW (8.5% excluding existing rooftop solar power), including concentrated solar power of 10,236 MW, self-consumption solar power of 2,600 MW. Self-consumption solar power is prioritized for unlimited capacity

168,594 – 189,294 (33.0 – 34.4%)

Biomass/waste

400 MW

2,270 MW (1.5%) or higher capacity subject to availability of materials, efficient land use, environment treatment, grid infrastructure, reasonable tariff and transmission cost

6,015 MW (1.0 – 1.2%)

Hydro

20,993 MW (30.3% capacity, 29.6% output)

29,346 MW (19.5%) or higher capacity if economic and technological conditions permit

36,016 MW (6.3 – 7.3%)

Storage hydro power

0

2,400 MW (1.6%)

30,650 – 45,550 MW (6.2 – 7.9%)

Storage battery

0

300 MW (0.2%)

Co-generation

N/A

2,700 MW (1.8%) or higher capacity subject to the capability and operation of industrial zones

4,500 MW (0.8 – 0.9%)

Coal-fired

21,383 MW (30.8% capacity, 50% output)

30,127 MW (20.0%), excluding 5 delayed projects (please see section 1.2 below)

0 MW (0%), no longer using coal

Biomass/ammoniac

0

0

25,632 – 32,432 MW (4.5% – 6.6%)

Domestic gas

9,025 MW (13.1% capacity, 14.6% output)

14,930 (9.9%)

Converted to LNG: 7,900 MW (1.4 – 1.6%)

Converted to hydrogen: 7,030 MW (1.2 – 1.4%)

LNG

22,400 MW (14.9%)

Combined with hydrogen (partial): 4,500 – 9,000 MW (0.8 – 1.8%)

Converted to hydrogen (entirely): 16,400 – 20,900 MW (3.3 – 3.6%)

Flexible power sources

0

300 MW (0.2%)

30,900 – 46,200 MW (6.3 – 8.1%)

Import

572 MW (0.8% capacity, 1.2% output)

5,000 MW (3.3%), targeted to reach 8,000 MW

11,042 MW (1.9 – 2.3%)

Offshore wind capacity available for production of new energy (hydrogen and green ammoniac)

 

15,000 MW by 2035 (estimated only and no limit of development)

240,000 MW by 2050 (estimated only and no limit of development)

Rooftop solar (for self-consumption by households or corporate consumers)

 

Additional 2,600 MW (estimated only and no limit of development)

No limit of development

Export

 

PDP8 discusses the possibility to generate renewable power for export with estimate of 5,000 – 10,000 MW by 2030

No limit of development

1.2 Coal-fired power projects

(a) Projects which are included in the master plan and under construction are permitted to be developed. Coal-fired power projects will convert to using biomass/ammoniac if reasonable tariff after 20 years of operation. Power projects having more than 40 years of economic life will terminate operation if they cannot convert to using clean fuel.

(b) Coal-fired power projects under development: 5 projects (7,220 MW) (4 BOT coal-fired power projects (6,620 MW) being Quang Tri, Nam Dinh 1, Song Hau 2, and Vinh Tan 3 and Cong Thanh (600 MW)) are under preparation with slow progress and encountering difficulties in financing procurement and shareholder changes. The MOIT will work with the investors and allow extension until June 2024 (for development and financing). In case the investors fail to implement their project within that timeline, the respective project could be subject to consideration for termination in accordance with the laws.

(c) As orientation until 2050, coal will no longer be used for power generation. Power sources will be converted entirely to biomass/ammoniac with the total capacity of 25,632 – 32,432 MW, reaching 72.5 – 80.9 billion kWh.

1.3 Gas-fired power projects

There will be a roadmap for gas fired power projects to convert to using hydro fuel subject to the technology commercialization and reasonableness of relevant tariff. 

(a) Domestic gas

  • Block B – O Mon gas power projects (O Mon II, III, IV) (3,150 MW), Ca Voi Xanh – gas power projects (Dung Quat I, II, III and Mien Trung I, II) (3,750 MW), and Bao Vang – gas power project (Quang Tri) (340 MW)
  • O Mon I gas power project will use gas of Block B;
  • Accelerate the exploration and evaluation of the Ken Bau gas field for gas field development planning and supplementing the downstream power plants in Quang Tri and Thua Thien Hue;
  • Cease to implement Kien Giang I, II since the fuel sources could not be identified;
  • Develop power projects in the Southeast region: prioritize developing the infrastructure facilities connecting the domestic ones and regional ones which facilitates the importation of the natural gases and LNG importation to ensure the fuel supply for domestic gas fired Phu My, Ba Ria, Nhon Trach power plants; and
  • Develop power projects in the Southwest region: implementing options of developing the infrastructure facilities connecting the domestic ones and regional ones which facilitates the importation of the natural gases and LNG importation to ensure the fuel supply for domestic gas fired Ca Mau power projects.

(b) LNG

  • LNG will be limited and replaced if alternative sources are available to minimize the dependence on imported fuel,
  • In addition to those LNG power projects approved in the amended PDP7, new LNG power projects have been approved in PDP8 (in its Appendix II, Table 1) for development by 2030, including Thai Binh (1,500 MW), Nghi Son (1,500 MW), Quang Trach 2 (1,500 MW as converted from coal-fired) and Quynh Lap/Nghi Son (1,500 MW to be identified with a suitable project site). Long Son LNG power project (1,500 MW) as approved in the amended PDP7 is extended for development until 2035.
  • To develop Thi Vai LNG terminal (supplying fuel to Nhon Trach 3 and 4, and supplement fuel to power plants in Southeast region; and Son My LNG terminal (supplying fuel to Son My I, II). The terminals are developed in synchronization with the development of power plants.

1.4 Solar and wind power

Prioritize development solar and wind power for self-consumption (including rooftop solar power of residents and businesses for consumption on the spot and not connecting to or selling power through the national grid).

(a) Solar power

  • Until 2030, total capacity of rooftop solar power is estimated to increase by 2,600 MW and prioritized for unlimited capacity development subject to reasonable cost and utilizing available grid connection facilities without any upgrade;
  • 27 solar power projects which have been included in the amended PDP7 but investors for which have not been selected (as listed in Appendix IV of the PDP 8) are not permitted to implement until 2030 and will be considered after 2030, unless these projects are developed for self-production and self-consumption.
  • The solar projects which have had investment policy approval issued and investors selected will be reviewed by the MOIT following legal regulations during the authority’s preparing the Plan to implement PDP8; and
  • It is targeted that development of solar power projects in the future must include storage battery systems when the cost is reasonable.

(b) Wind power

  • Offshore wind in combination with other renewable power (solar power, onshore wind power, etc.) to generate new energy (hydro, green ammoniac, etc.) will be developed without limitation of capacity for domestic demand and export.
  • PDP8 does not list out specific offshore wind power projects. The MOIT will formulate the Plan for Implementation of PDP8 and during that process, the relevant provinces will propose specific offshore wind power projects to be included in the Implementation Plan.

1.5 Electricity import and export

Increase the import of electricity from ASEAN countries and Greater Mekong Sub-region countries:

  • By 2030, 5,000 MW will be imported from Laos under the bilateral treaty between the two governments, with possibility to reach 8,000 MW; 11,000 MW will be imported by 2050.
  • It is prioritized to develop and generate renewable energy for export without limitation. It is targeted to export 5,000 – 10,000 MW by 2030.

1.6 National grid development

After 2030, it is targeted to develop national transmission lines to connect the most potential offshore wind areas in the Central to the North of Vietnam. It is also under feasibility study for the regional grid connection in Asia Pacific.

2. Amendments of the regulations on development of renewable energy projects under Circular 01/2023/TT-BCT

On 19 January 2023, the MOIT issued Circular 01/2023/TT-BCT (“Circular 01”) terminating the effectiveness of several provisions under Circular 02/2019/TT-BCT of the MOIT dated 15 January 2019 on wind power (“Circular 02”) and Circular 18/2020/TT-BCT of the MOIT dated 17 July 2020 on solar power (“Circular 18”). Circular 01 took effect as of 19 January 2023.

(a) For wind power projects development under Decision 39/2018/QD-TTg guided by Circular 02, Circular 01 abolishes:

  • Several provisions in the PPA template such as the application of the FIT under Decision 39/2018/QD-TTg applicable to the grid connected projects having CODs before 1 November 2021 with the term of 20 years, and the formulas to determine the monthly payments.
  • Several requirements such as:
    • Planning requirements with respect to the timelines, output capacity scale of project phases and the division of a project’s phases;
    • Procedure of supplementing a wind power project into the power master plan;
    • Conditions for construction commencement of a wind power project; and
    • Reporting regime (EVN’s submitting a copy of executed PPA to the Electricity and Renewable Energy Authority) and administration of projects’ operation (local authorities reporting to the MOIT on the status of investment registration and development of wind power projects in the provinces).

(b) For solar power projects under Decision 13/2020/QD-TTg guided by Circular 18, Circular 01 abolishes:

  • Provisions regarding the grid connected projects having CODs from 1 July 2019 until 31 December 2020 such as the application of FIT under Decision 13/2020/QD-TTg, fixed PPA term of 20 years, reference of exchange rate of VND and USD for invoicing and payment of the tariff; and
  • Provisions regarding the rooftop solar power system such as the application of FIT under Decision 13/2020/QD-TTg, fixed PPA term of 20 years and capacity limitation of 1MW and 1.25MWp.

3. Amendments to regulations on issuance of Electricity Operating Licenses under Circular 10

On 21 April 2023, the MOIT issued Circular 10/2023/TT-BCT (“Circular 10”) amending the regulatory framework on the issuance of Electricity Operating Licenses under Circular 21/2020/TT-BCT. Circular 10 will take effect as of 9 June 2023.

  • In case of applying for licensing to conduct concurrently electricity retailing and distribution activities while retailing and distribution are subject to different licensing authorities (local authority vs. Electricity Regulatory Authority of Vietnam (“ERAV”) under the MOIT), ERAV will have the power to issue the license (Article 12.3 of Circular 21/2020/TT-BCT as amended).
  • The developers in electricity generation, transmission and distribution have to fully comply with legal regulations on planning, land, construction, fire protection, environment, connection and other relevant regulations, and obtain the approval on acceptance test results (“văn bản chấp thuận kết quả nghiệm thu” in Vietnamese) of the relevant State authority (if required under the laws on construction) before putting the power construction works into commercial operation.
  • Power developers are required to submit reports on the status of the power operation activities of the preceding year before 1 March every year. If ERAV or the provincial Departments of Industry and Trade (“DOIT”) do not receive the reports on 1 March, the developers will be deemed as not submitting the report on due date. The reports can be submitted by way of (i) direct submission, (ii) postal service or (iii) online submission (through email system BChoatdongdienluc@moit.gov.vn, Public Service Portal of the MOIT, or other methods as instructed by the provincial People’s Committee and provincial DOIT).

[1] According to Official Letter No. 2842/TTr-BCT of the MOIT dated 14 May 2023 to the Prime Minister regarding submission of PDP8 for approval.

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