Decision No. 24/2014/QĐ-TTg On Mechanism to Support the Development of Biomass Power Projects in Vietnam

GAZETTE/No. 415 + 416/Date April 4, 2014

Pursuant to …;

On Mechanism for Supporting the Development of Biomass Power Projects in Vietnam

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Electricity Law dated December 3, 2004, the Law Amending and Supplementing Certain Provisions of the Electricity Law dated November 20, 2012;

Based on the Investment Law dated November 29, 2005;

Pursuant to the Construction Law dated November 26, 2003;

At the proposal of the Minister of Industry and Trade,

The Prime Minister issues this Decision on the mechanism for supporting the development of biomass power projects in Vietnam.

PART I
GENERAL PROVISIONS

Article 1. Scope of regulation and applicable subjects

Article 2. Definitions

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

3. Biomass energy used for electricity production includes: By-products and waste from agricultural production, processing of forestry and agricultural products, and other types of crops that can be used as fuel for electricity production.

4. A biomass power project is a power plant project primarily using biomass energy to produce electricity.

5. A grid-connected biomass power project is a biomass power plant project constructed to connect to the national power grid to supply part or all of the produced electricity to the national power grid.

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

7. The point of electricity delivery and receipt is the location of the metering equipment agreed upon in the power purchase and sale contract to determine the amount of electricity sold by the electricity seller.

9. The model electricity purchase and sale contract for grid-connected biomass power projects is the electricity purchase and sale contract issued by the Ministry of Industry and Trade serving as the basis for application in transactions involving electricity produced from grid-connected biomass power projects between the electricity seller and the electricity buyer.

12. The main components of a biomass power plant project include the boiler, turbine, generator, and substation.

13. A combined heat and power biomass power project is a biomass power project that produces and supplies both thermal energy and electrical energy simultaneously.

Chapter II
PLANNING AND DEVELOPMENT OF BIOMASS POWER

1. Planning for the development of biomass power is one of the contents of planning for the development and utilization of biomass energy. Planning for the development and utilization of biomass energy includes national-level planning for the development and utilization of biomass energy and provincial-level planning for the development and utilization of biomass energy. Such planning serves as the basis for investment activities in the development and utilization of biomass energy sources, adjusted appropriately with research and assessment of biomass energy potential at different periods.

2. National-level planning for the development and utilization of biomass energy and provincial-level planning for the development and utilization of biomass energy are established once for the period up to 2020, with a vision to 2030, and are revised and supplemented as necessary. From subsequent planning periods, planning for biomass power development is integrated into provincial-level power development planning and national power development planning.

1. The Ministry of Industry and Trade shall organize the establishment of the national plan for the development and utilization of biomass energy, submit it to the Prime Minister for approval; publish and guide, monitor, and inspect the implementation of the approved plan for the development and utilization of biomass energy.

2. The People's Committee of provinces and centrally governed cities (hereinafter referred to collectively as the Provincial People's Committee) shall organize the establishment of the provincial plan for the development and utilization of biomass energy, 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.

1. The state budget shall allocate funds to implement tasks related to the establishment, review, publication, and adjustment of the Plan for the development and utilization of biomass energy.

2. Encouragement is given to mobilize other legitimate sources of funding for the work of establishing the Plan for the development and utilization of biomass energy.

1. Investment in constructing biomass power projects must be consistent with the Plan for the development and utilization of biomass energy and the power development plans at various levels that have been approved by competent authorities.

2. For biomass power projects not included in the list of the national Plan for the development and utilization of biomass energy and the national power development plan, the investor shall be responsible for preparing the application dossier to supplement the plan, submit it to the Ministry of Industry and Trade for review, and present it to the Prime Minister for consideration and decision.

3. While the Plan for the development and utilization of biomass energy has not yet been approved, investment in biomass power projects requires the consent of the Prime Minister.

4. Investment in constructing biomass power projects shall be carried out in accordance with the laws on construction, fire prevention and fighting, environmental protection, and other relevant regulations.

1. Connecting biomass power projects to the national power grid must comply with the approved power development plan. The connection point shall be agreed upon by the seller and buyer of electricity based on the principle that the seller is responsible for investing in transmission lines to the nearest existing connection point in the provincial power development plan. In cases where the connection point is not included in the power development plan, the investor needs to agree on the connection point with the distribution or transmission company as the basis for supplementing the provincial power development plan according to current regulations. If agreement cannot be reached, the seller shall be responsible for submitting to the Ministry of Industry and Trade for consideration and decision.

2. The investor of the biomass power project shall be responsible for investing in, operating, and maintaining the transmission lines and substations from the power plant of the seller to the agreed connection point with the buyer of electricity.

3. Depending on the voltage level of the connection point, the distribution or transmission company shall be responsible for investing in transmission lines from the connection point to the national power grid according to the approved power development plan and signing the connection agreement with investors of biomass power projects.

4. After completion of investment and acceptance for commercial operation, the system operator and market operator shall be responsible for dispatching biomass power plants according to the principle of prioritizing full utilization of capacity and appropriate generation of energy in line with the biomass energy supply capability of the region.

The investor is only permitted to commence construction of grid-connected biomass power generation projects, in addition to the conditions stipulated in Article 72 of the Construction Law and related regulatory documents, if they have: Investment Certificate, electricity purchase approval document from the electricity purchaser; agreement on grid connection with the Distribution Unit or Transmission Unit (for grid-connected biomass power projects); design opinion from the competent state agency according to the law on investment project management.

Within twelve months from the date of issuance of the Investment Certificate, if the investor does not commence construction of the main components of the project or within a maximum of twenty-four months from the date of operation commitment stated in the Investment Certificate and the biomass power project has not been put into operation, the provincial People's Committee shall be responsible for considering the revocation of the Investment Certificate in accordance with regulations, reporting to the competent state agency to transfer the project to another investor to implement. Except in cases where there are valid reasons and the competent authority accepts the temporary suspension or extension of the project implementation schedule.

1. Within five working days from the date of issuance of the Investment Certificate, the investor is responsible for sending a certified copy of the Investment Certificate to the Ministry of Industry and Trade for monitoring and management.

2. During the construction period of the biomass power project, before the 15th day of the first month of each quarter, the investor must submit a report on the implementation status of the project in the previous quarter and the plan for the next quarter. Annually, before January 15, the investor must submit a report on the implementation status of the project in the previous year and the plan for the next year to the provincial People's Committee and the Ministry of Industry and Trade for management, consolidation, and tracking of implementation, and to the electricity purchaser for coordination in implementation.

Chapter III
SUPPORT MECHANISMS FOR DEVELOPING BIOMASS POWER PROJECTS

1. The electricity purchaser is responsible for purchasing all electricity generated from grid-connected biomass power plants within their jurisdiction.

2. The purchase and sale of electricity shall be carried out through a power purchase agreement established according to the model power purchase agreement applicable to grid-connected biomass power projects issued by the Ministry of Industry and Trade.

3. Within six months from the date the investor of the biomass power project submits a request to sell electricity, the electricity purchaser must proceed to sign a power purchase agreement with the seller in accordance with the regulations.

4. The term of the power purchase agreement for biomass power projects is twenty (20) years from the date of commercial operation. After twenty years, both parties may extend the contract term or sign a new contract in accordance with current laws.

1. Mobilizing Investment Capital:

a) Investors may mobilize capital from organizations and individuals both domestically and internationally to invest in biomass power projects in accordance with current laws.

b) Biomass power projects are entitled to preferential credit investment incentives under current laws regarding investment credit and export credit provided by the State.

2. Import Tax: Biomass power projects are exempt from import tax on goods imported to form fixed assets for the project; goods imported as raw materials, materials, and semi-finished products that are not yet produced domestically for the project's production purposes, in accordance with current laws on export tax and import tax.

3. Corporate Income Tax: Exemption and reduction of corporate income tax for biomass power projects are implemented in the same manner as for projects in priority investment sectors under current laws on taxation.

1. Biomass power projects and transmission lines and substations for grid connection are exempted or reduced from land use fees and land rental fees in accordance with current laws applicable to priority investment projects.

2. Based on the approved planning, the provincial People's Committee is responsible for allocating sufficient land funds for investors to implement biomass power projects. Compensation and support for land clearance are carried out in accordance with current laws on land.

1. For Combined Heat and Power (CHP) projects: The electricity buyer shall be responsible for purchasing the entire surplus electricity from biomass CHP projects at a price of VND 1,220 per kWh (excluding VAT, equivalent to 5.8 US cents per kWh) at the point of delivery. The electricity sale price will be adjusted according to fluctuations in the exchange rate between the Vietnamese dong and USD.

2. For other biomass power projects:

a) Projects using biomass energy to generate electricity but not being CHP projects: The electricity sale price shall be applied according to the avoided cost tariff applicable to biomass power projects.

b) Annually, the Ministry of Industry and Trade shall develop and promulgate the avoided cost tariff applicable to biomass power projects.

3. Biomass power projects applying the electricity sale prices stipulated in Clause 1 and Clause 2 of this Article shall not apply subsidy mechanisms for project electricity production as provided in current regulations.

4. The costs of purchasing electricity from biomass power projects shall be calculated and fully included in the input parameters in the annual electricity sale price plan of Vietnam Electricity Corporation approved by the competent authority.

5. The Ministry of Industry and Trade shall monitor and propose adjustments to the electricity purchase price specified in Clause 1 of this Article, report to the Prime Minister for consideration and decision.

1. Off-grid biomass power projects shall enjoy preferential support as prescribed in Articles 12 and 13 of this Decision.

2. The project investor shall prepare the electricity pricing proposal and determine the total level of support from the state budget to submit to the Ministry of Industry and Trade for review, and report to the Prime Minister for approval. The total level of support from the state budget shall be drawn from the Vietnam Environmental Protection Fund.

Chapter IV
IMPLEMENTATION

1. The Ministry of Industry and Trade shall be responsible for:

a) Guide the content, procedures, and formalities for establishing, reviewing, approving, adjusting, and announcing the planning for the development and utilization of biomass energy.

b) Shall be responsible for organizing, guiding, and coordinating with provincial People's Committees to inspect and supervise the implementation of this Decision.

c) Issue model Power Purchase Agreements for biomass power projects connected to the grid.

d) Develop and promulgate national technical standards for biomass power.

e) Annually issue the avoided cost tariff for biomass power projects.

2. Ministry of Finance: Lead and coordinate with the Ministry of Industry and Trade and the Ministry of Natural Resources and Environment to establish financial support mechanisms for off-grid biomass power projects from the Vietnam Environmental Protection Fund in accordance with current regulations.

3. Provincial People's Committees under the Central Government:

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

b) Supervise, monitor, and inspect the implementation of biomass power projects in their locality within their authority.

c) Perform state management tasks related to biomass power activities in their locality in accordance with current laws.

d) For off-grid biomass power projects, the provincial People's Committee shall apply preferential mechanisms as stipulated in Articles 12 and 13 of this Decision and bear responsibility for managing and supervising to ensure effective investment in biomass energy resources in their locality.

Article 17. Effective Date

1. This Decision shall take effect from May 10, 2014.

2. Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, Chairmen of provincial and centrally-administered city People's Committees; heads of agencies, units, and organizations related to the development of biomass power projects in Vietnam shall be responsible for implementing this Decision./.