Vietnam likely extends the current feed-in tariff (FiT) for wind power projects to March 31, 2022, five months more than the original schedule, to support investors who suffered the delay due to Covid-19.

72MW Hoa Dong 2 wind farm in Soc Trang, EPC Contractor: IPC Group

The intention was revealed on November 6 by Vuong Dinh Hue, chairman of the National Assembly (NA), the highest legislative body. He said that the NA’s Standing Committee has agreed with the government’s proposal on the extension.

“The extension of the current wind power FiT can be one of the solutions in the economic recovery plan. It is necessary to put it in such a context to tackle problems facing businesses,” Hue said at a meeting with authorities in Ninh Thuan, the wind and solar hub of Vietnam.

Covid impact and concerns

Covid-19 ravaged Vietnam in the fresh outbreak that flared up in late April. The months-long widespread transmission has put brakes on the production and construction of wind projects in particular.

Concerning the impact caused by Covid-19, the Ministry of Industry and Trade (MoIT) over the past time has received various suggestions on the extension of the current wind power FiT. “It prompted us to submit solutions for the ongoing projects,” according to Hoang Tien Dung, head of the MoIT’s Electricity and Renewable Energy Authority (EREA).

He said that the MoIT has built different plans on calculating the prices of wind power to comply with Law on Investment, Law on Bidding, Law on Price, Law on Electricity with the possibility of bidding.

It means that wind power may move to an auction-based competitive bidding system to replace FiT.

For that reason, German and Danish representatives in Vietnam have suggested that more time should be given to projects that had taken certain steps in the investment process but were delayed due to Covid-19 like transporting turbines and the mobility of foreign experts. The extension can be three to six months.

It’s necessary to have concrete support from the government and extending the application of FiTs is one of the best support, Mai said, adding that the FiT plays an important role in navigating the market prices for wind power and is a crucial factor for investors to keep running their projects.

In a broader move, the tariff enables them to pursue their investment portfolios. In other words, it helps maintain the appetite for Vietnam’s wind power market.

As Covid-19 attacked many parts of Vietnam in May-September, the Global Wind Energy Council (GWEC) has expressed concerns that the pandemic restrictions caused significant delays for wind project construction in the context that they were rushing to complete ahead of the expiry of the FiT in late October.

Without a Covid-19 relief measure to extend the FiT for wind projects by at least six months, these projects will become collateral damage of the pandemic and almost 21,000 potential jobs at risk, GWEC said in a request released on September 9.

This will translate into lost investment and tax revenue for local governments, delayed progress towards Vietnam’s renewable energy aims in Resolution 55, and a “bust” cycle in Vietnam’s wind market which may take years to recover, it stressed.

The covid-caused impact will likely leave US$6.7 billion investment in 4,000 MW wind power projects in Vietnam at risk, it stated.

Given the deadline by October 31, 2021, investors rushed to run for the time limit. According to Vietnam Electricity (EVN), more than half (69 plants with a total capacity of 3,298 MW) of 106 wind power projects have been officially recognized for commercial operation (COD) since October 2021, and are eligible for the FiT according to the regulations of the Government of Vietnam.

Minister of Industry and Trade Nguyen Hong Dien at a parliament’s interpolation on Nov 9. Photo: Hoang Phong

State’s perspective

Concerning the extension of FiT, MoIT Minister Nguyen Hong Dien on November 9 said at the ongoing National Assembly’s sitting that the extension, if prolong, is unreasonable as it will not be true to the limited nature of the support policy, causing inequality with other projects under the same mechanism but have been implemented on schedule.

Meanwhile, the input prices of materials and equipment in wind power are now lower than at the time of issuing the supporting policies and continue the downward trend. If this policy persists, there may cause legal consequences, causing economic losses. In addition, the MoIT did not receive an agreement from relevant agencies on the issue.

“The MoIT shares difficulties with investors and localities where wind power projects are behind schedules. However, the FIT is a support price mechanism applied only in a certain period of time to encourage investments in some needed fields. For that reason, it is not reasonable to maintain it for a long time,” Dien said in a statement.

He noted that the ministry is building a plan on developing wind and solar power projects under the public-private partnership (PPP) with a focus on bidding and auction mechanism to select investors and determine electricity prices.

Accordingly, investors will negotiate with Vietnam Electricity (EVN) on the electricity prices within the rates issued by MoIT. Unfinished projects will be solved based on the ministry’s regulations.