Four price framework options for transitional wind and solar power projects

Vietnam Electricity (EVN) performs four options for calculating price frameworks for transitional wind and solar projects based on input data such as investment rate; average forwarding power; corporate income tax; foreign currency/local currency loan ratio; interest rates on domestic and foreign currency loans… of projects provided by investors.

Option 1‘s total investment value is smaller than the total investment value based on the basic design and technical design. The investment rate is calculated as 90% of the investor’s investment rate (minus 10% of the reserve value). The EVN calculated ratio of foreign currency/local currency loans is 20-80%, and the interest rate of foreign currency/local currency loans of power plants that have signed power purchase contracts for the period 2017-2021 (%/year) is 4.62-9.87%.

The calculated corporate income tax rate after applying all tax incentives is 8.25%, with preferential tax rate conditions of 10% for the first 15 years; tax exemption for 4 years (0%), tax reduction of 50% (5%), the next 2 years impose a tax rate of 10%, and the following years apply a tax rate of 20%.

The average energy generating price per kWh with a ground mounted solar power plant is around 1,482.74 VND; floating solar power is 1,740.84 VND; onshore wind power is 1,590.88 VND; and offshore 1,971.12 VND, according to this option.

The generating price framework for the transitional solar and wind power plants has been submitted by EVN to the Ministry of Industry and Trade (Illustration)

Option 2, EVN calculates with input parameters similar to option 1, except for the investment rate related to the type, which is determined by the average of the calculated investment rate of the related power plants. The power generating price per kWh for ground mounted solar power is about 1,508.39 VND; floating solar power is 1,569.83 VND; onshore wind power is 1,597.55 VND; and offshore wind power is 1,944.91 VND in this option.

Option 3, EVN calculates with input parameters similar to option 1 except for investment rates and power output, which are assumed to vary according to the Gauss standard distribution, and is determined as the value supplied by the investor closest to the expected value. The power generating price per kWh with ground mounted solar power is 1,508.76 VND; onshore wind power is 1,630.21 VND; offshore wind power is 1,973.99 VND; and floating solar power does not have enough calculation data.

Option 4, EVN calculates the price of the Phuoc Thai 2 and 3 solar power plants using the investment rate, which is updated with the total investment value after bidding and the cost value of sharing the 220 kV substations of the three Phuoc Thai solar power plants 1,2,3. As a result, the cost of producing energy per kWh with these two solar power plants is VND 1,187.96 and VND 1,251.66 per kWh, respectively.

On this basis, EVN proposes to the Ministry of Industry and Trade that the power generating price framework of each type be set at the lowest level in the calculation results of the four options:

The calculating parameters, according to EVN, are only assumptions of EVN and must be verified and decided by the Ministry of Industry and Trade. Furthermore, due to the Ministry of Industry and Trade’s urgent request, EVN did not have enough time to hire independent consultants to calculate the price framework as a basis to submit to the management agency. EVN recommends that the Ministry of Industry and Trade continue to use independent experts or advisory councils as prescribed to investigate this corporation’s calculations and proposals carefully before making an approval decision as the basis for determining electricity prices via a competitive/auction mechanism.

Previously, the Ministry of Industry and Trade issued Circular No. 15/2022/TT-BCT, effective 11/25/2022, prescribing the method of constructing a power generating price framework for transitional solar and wind power plants. Investors of ground mounted solar power plants and floating solar power plants who signed power purchase contracts before January 1, 2021 and onshore wind power plants and offshore wind power plants who signed power purchase contracts before January 1, 2021 are responsible for providing feasibility study reports or technical designs to EVN within 15 days of the Circular’s effective date.

EVN has sent information requests to over 240 renewable energy plants. EVN has received feedback from investors of 208 power plants that have signed power purchase contracts with EVN, including 95 ground mounted solar power plants, 4 floating solar power plants, and 109 wind power plants, up to the 16th of November. EVN has determined that it would temporarily utilize the data from these 208 plants to construct the power generating price framework and submit it to the Electricity Regulatory Authority (Ministry of Industry and Trade) for evaluation.

Vu Phong Energy Group

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