Decision No. 11/2017/QD-TTg On Mechanism to Encourage the Development of Solar Power Projects in Vietnam

Pursuant to …;

ON INCENTIVE MECHANISMS FOR THE DEVELOPMENT OF SOLAR POWER PROJECTS IN VIETNAM

Pursuant to the Law on Government Organization dated June 19, 2015;

On the basis of Decree No. 17/2020/NĐ-CP dated February 5, 2020 of the Government amending and supplementing certain articles of related Decrees concerning investment and business conditions within the scope of management under the Ministry of Industry and Trade;

Pursuant to the Investment Law dated November 26, 2014;

Pursuant to the Construction Law dated June 18, 2014;

At the proposal of the Minister of Industry and Trade;

The Prime Minister issues this Decision on incentive mechanisms for the development of solar power projects in Vietnam.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decision stipulates the incentive mechanisms for the development of solar power projects in Vietnam.

Article 2. Applicability

The objects subject to this Decision include organizations and individuals participating in the development of solar power projects in Vietnam and other related organizations and individuals.

Article 3. Explanation of Terms

In this Decision, the following terms shall be understood as follows:

1. Electricity buyer means the Vietnam Electricity Corporation or its authorized units.

2. Electricity seller means organizations and individuals with a license for electricity operation in the field of generating electricity from grid-connected solar power plants; organizations and individuals with rooftop solar power projects selling excess electricity to the electricity buyer.

3. Solar power project means a project producing electricity from solar panels based on the principle of converting solar energy into electrical energy.

4. Rooftop solar power project, hereinafter referred to as rooftop project, means a solar power project installed on rooftops or attached to construction works and directly connected to the electricity grid of the electricity buyer.

5. Grid-connected solar power project, hereinafter referred to as grid-connected project, means a solar power project connected to the national electricity grid or the electricity grid of the electricity buyer, except for projects specified in Clause 4 of this Article.

6. Connection point means the location where the power line of the electricity seller connects to the electricity grid of the electricity buyer.

7. Metering point means the location where the metering equipment is placed as agreed upon in the electricity purchase and sale contract to determine the amount of electricity sold by the electricity seller.

8. Model electricity purchase and sale contract for grid-connected projects and rooftop projects means the electricity purchase and sale contract issued by the Ministry of Industry and Trade serving as a basis for application in electricity purchase and sale transactions between the electricity seller and the electricity buyer.

9. Solar power project electricity price (FIT - Feed-in Tariff) means the fixed tariff that the electricity buyer must pay to the electricity seller.

Chapter II

PLANNING AND CONSTRUCTION OF SOLAR POWER PROJECTS

Article 4. Planning for the Development of Solar Power

1. Planning for the development of solar power includes national planning for the development of solar power and provincial planning for the development of solar power. Such planning serves as a basis for activities related to investment in developing solar power and is adjusted accordingly with research and assessments of solar potential at different periods.

2. National planning for the development of solar power and provincial planning for the development of solar power are established once for the period up to 2020 with a vision to 2030 and are adjusted and supplemented when necessary. From subsequent planning phases, planning for the development of solar power will be integrated into provincial power development planning and national power development planning.

3. Planning for the development of solar power only applies to grid-connected projects and does not apply to rooftop solar power projects.

Article 5. Establishment, Approval, and Announcement of Planning for the Development of Solar Power

1. The Ministry of Industry and Trade organizes the establishment of national planning for the development of solar power, submits it to the Prime Minister for approval; announces and guides, monitors, and checks the implementation of the approved national planning for the development of solar power.

2. Provincial People's Committees (hereinafter referred to collectively as provincial-level People's Committees) in areas with potential for developing solar power organize the establishment of provincial planning for the development of solar power, submit it to the Minister of Industry and Trade for approval.

3. The announcement and adjustment of planning shall be carried out in accordance with current regulations.

4. Main contents of planning for the development of solar power

a) National planning for the development of solar power includes the following main contents:

- Solar energy potential of localities;

- List of solar power projects;

- Orientation for connecting solar power projects to the national electricity system.

b) Provincial planning for the development of solar power includes the following main contents:

- Solar energy potential of the province;

- Area and boundaries of zones for developing solar power projects;

- List of solar power projects;

- Capacity scale of each solar power project and connection schemes to the national electricity system.

5. The Ministry of Industry and Trade shall specify the contents, procedures, and formalities for establishing, reviewing, and approving planning for the development of solar power.

Article 6. Funding for the development of solar power planning work

1. The central budget shall provide funding to carry out tasks related to the preparation, review, announcement, and adjustment of the national solar power development plan.

2. The provincial and centrally-administered city budgets shall provide funding to carry out tasks related to the preparation, review, announcement, and adjustment of the local solar power development plan.

3. Encouragement is given to mobilize other legitimate sources of funding for the work of developing solar power planning.

Article 7. Investment in constructing solar power projects

1. Investment in constructing grid-connected projects must be consistent with the approved electricity development plan by the competent authority.

2. Investment in constructing solar power projects shall be carried out in accordance with current laws on investment, construction, fire prevention and fighting, environmental protection, and other relevant regulations.

3. The main equipment of solar power projects must meet technical standards for solar power; the quality of electricity from solar power projects must comply with technical requirements concerning voltage, frequency, and other related provisions currently in force.

4. The seller of electricity shall be responsible for investing in and installing electricity metering equipment; organizing calibration, testing, and inspection of electricity metering equipment in accordance with current legal provisions on measurement.

5. Organizations and individuals investing in constructing solar power projects shall be responsible for ensuring that solar power equipment is installed safely in terms of structure and construction according to current regulations.

6. Investment in constructing rooftop projects must meet the following requirements:

a) The roof or building structure where solar panels are attached must be able to bear the weight and structure of the solar panels and accompanying accessories.

b) Ensuring electrical safety regulations as stipulated by law.

c) Ensuring preservation of the landscape and surrounding environment.

Article 8. Connecting solar power projects to the power grid

1. The seller of electricity shall be responsible for investing in, operating, and maintaining transmission lines and step-up substations (if any) from the seller's power plant to the point of interconnection with the buyer's power grid.

2. The point of interconnection shall be agreed upon by the seller and the buyer based on the principle of being the nearest point to connect to the buyer's existing power grid, ensuring the transmission capacity of the seller's power plant, and aligning with the approved electricity development plan. In cases where the point of interconnection differs from the location of the metering equipment, the seller shall bear the loss of electricity on the interconnection line and the transformer step-up loss of the power plant. The Ministry of Industry and Trade shall specify the method for calculating losses on the interconnection line.

Chapter III

INCENTIVE MECHANISMS FOR DEVELOPING SOLAR POWER PROJECTS

Article 9. Obligation to purchase electricity from solar power projects

1. The buyer of electricity shall be responsible for purchasing all electricity generated from solar power projects; prioritizing the full utilization of the capacity and electricity production of solar power projects put into commercial operation.

2. Electricity trading shall be conducted through a solar power purchase agreement established according to the model power purchase agreement applicable to solar power projects issued by the Ministry of Industry and Trade.

3. Within thirty days from when the seller of electricity has completed all necessary documents and submitted a request to sell electricity, the buyer and seller of electricity shall proceed to sign the power purchase agreement in accordance with the regulations.

4. The term of the power purchase agreement for solar power projects is twenty years from the date of commercial operation. After twenty years, both parties may extend the contract period or sign a new contract in accordance with current laws.

Article 10. Investment capital and tax incentives

1. Capital mobilization: Organizations and individuals participating in developing solar power projects are permitted to legally raise capital from organizations and individuals both within and outside the country to invest in implementing solar power projects in accordance with current laws.

2. Import tax: Solar power projects are exempted from import tax on goods imported to form fixed assets for the project; this shall be implemented according to the current laws on export tax and import tax for goods imported to serve production of the project which are raw materials, supplies, semi-finished products that have not yet been produced domestically.

3. Corporate income tax: The exemption and reduction of corporate income tax for solar power projects shall be carried out in accordance with the provisions of current laws on tax for investment projects in preferential sectors.

Article 11. Land incentives

1. Solar power projects, transmission lines, and substations for grid connection are exempted or reduced from land use fees, land rental fees, and water surface rental fees in accordance with the current laws applicable to investment projects in preferential sectors.

2. Based on the approved master plan, the People's Committee of the province shall create conditions to arrange land funds for investors to implement solar power projects. Compensation and support for land clearance shall be carried out in accordance with the current laws on land.

Article 12. Electricity prices for solar power projects

1. For grid-connected projects

a) The electricity purchaser is responsible for purchasing the entire electricity output from grid-connected projects at the point of delivery price of 2,086 VND/kWh (excluding VAT, equivalent to 9.35 US cents/kWh, based on the central exchange rate of the Vietnamese dong against the US dollar published by the State Bank of Vietnam on April 10, 2017, which is 22,316 VND/USD). The selling price of electricity will be adjusted according to fluctuations in the VND/USD exchange rate. This price only applies to grid-connected projects with photovoltaic cell efficiency greater than 16% or module efficiency greater than 15%.

b) Adjustments to the purchase and sale electricity price according to fluctuations in the VND/USD exchange rate for grid-connected projects shall be carried out according to the model Power Purchase Agreement issued by the Ministry of Industry and Trade.

2. For rooftop projects

a) Rooftop projects shall implement a net metering mechanism using a two-way meter system. In a billing cycle, excess electricity generated from rooftop projects over consumption will be carried forward to the next billing cycle. At the end of the year or upon termination of the Power Purchase Agreement, surplus electricity will be sold to the electricity purchaser at the price specified in Clause 1 of this Article.

b) Annually, based on the central exchange rate of the Vietnamese dong against the US dollar published by the State Bank of Vietnam on the last day of the previous year, the Ministry of Industry and Trade shall issue the purchase and sale electricity price for rooftop solar projects for the following year.

3. The cost of purchasing electricity from the solar power projects mentioned in Clauses 1 and 2 of this Article shall be calculated and fully included in the input parameters of the annual electricity selling price scheme of the Vietnam Electricity Corporation.

4. The Ministry of Industry and Trade shall monitor and propose adjustments to the electricity purchase price stipulated in Point a Clause 1 of this Article, reporting to the Prime Minister for consideration and decision if necessary.

Chapter IV

IMPLEMENTING PROVISIONS

Article 13. Responsibilities of State Management Agencies

1. Ministry of Industry and Trade

a) Organize, guide, and coordinate with People's Committees of provinces and centrally governed cities to inspect and supervise the implementation of this Decision.

b) Issue model Power Purchase Agreements applicable to grid-connected projects, rooftop projects, and provide guidance on their implementation.

c) Issue methods for calculating losses on transmission lines in cases where the metering point does not coincide with the connection point.

d) Issue technical standards for solar power, regulations on measuring electricity consumption for solar power projects, and provide guidance on procedures for connecting, installing meters, and calculating net metering mechanisms for rooftop solar power projects.

đ) Study bidding procedures for solar power projects and organize their implementation with appropriate timelines to enhance investment efficiency and reduce costs of solar power projects.

e) Study and propose incentive mechanisms to promote the development of solar power projects applicable after June 30, 2019.

g) Organize meetings with People's Committees of provinces and centrally governed cities to unify land funds allocated for solar power projects, ensuring that projects are implemented according to approved plans.

h) Issue prices for power purchase agreements for solar power projects based on fluctuations in the exchange rate between the Vietnamese Dong and the US Dollar for the following year.

i) For solar power projects not included in the Solar Power Development Plan and the Power Development Plan already approved, the Ministry of Industry and Trade shall consider and approve supplementary planning for solar power projects with capacity up to 50 MW; submit to the Prime Minister for approval of supplementary planning for solar power projects with capacity over 50 MW.

2. Ministry of Planning and Investment

Take the lead in coordinating with relevant ministries and sectors to develop incentive mechanisms to encourage investment in the production of solar power equipment in Vietnam, and submit to the Prime Minister for consideration and approval.

3. Ministry of Finance

Take the lead in studying and supplementing tax exemption regulations for rooftop projects (with installed capacity not exceeding 50 kW), and submit to competent authorities for consideration and approval.

4. People's Committees of provinces and centrally governed cities

a) Coordinate and support investors in compensation, land clearance, infrastructure, and human resources for the implementation and development of solar power projects within their jurisdiction.

b) Allocate and publicly announce land funds designated for solar power projects in the land use plan.

c) Monitor, supervise, and inspect the implementation of solar power projects within their jurisdiction according to their authority.

d) Perform state management responsibilities related to solar power activities within their jurisdiction in accordance with current laws.

đ) By January 31 each year, People's Committees of provinces and centrally governed cities report to the Ministry of Industry and Trade the total installed capacity of grid-connected solar power projects and rooftop solar power projects constructed within their province as of December 31 of the previous year.

Article 14. Responsibilities of Related Organizations and Individuals

1. Vietnam Electricity Group or authorized units

a) Agree and sign power purchase contracts with the seller according to the model power purchase agreement and the selling price specified in Article 12 of this Decision if the seller meets the conditions for investing in solar power projects as stipulated in Article 7 of this Decision.

b) Vietnam Electricity Group is responsible for fully calculating the cost of purchasing electricity from solar power projects and incorporating it into the input parameters in the annual pricing scheme of Vietnam Electricity Group, and submitting to the competent authority for approval.

c) By January 31 each year, Vietnam Electricity Group reports to the Ministry of Industry and Trade the total installed capacity of solar power projects as of December 31 of the previous year.

2. The Seller

a) Agree and sign power purchase contracts with the buyer according to the model power purchase agreement and the selling price specified in Article 12 of this Decision.

b) Install measurement systems and meters in compliance with current regulations to measure electricity consumption for billing purposes.

c) Submit one copy of the signed power purchase contract to the Ministry of Industry and Trade within thirty days from the date of signing for grid-connected projects.

d) Comply with regulations on system operation, transmission system regulations, distribution system regulations, metering systems, and other related regulations issued by the Ministry of Industry and Trade.

Article 15. Transitional Provisions

For grid-connected projects and rooftop projects with power purchase contracts signed before the effective date of this Decision, both parties are responsible for negotiating and signing amended contracts in accordance with this Decision.

Article 16. Effective Date

1. This Decision takes effect from June 1, 2017 to June 30, 2019.

2. Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairmen of People's Committees of provinces and centrally governed cities; Heads of agencies, units, and organizations involved in the development of solar power projects in Vietnam are responsible for implementing this Decision./.