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Saturday, June 22, 2024

Authority clarifies renewable electricity pricing mechanism

By Thai Huy

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HCMC – The Electricity Regulatory Authority of Vietnam (ERAV) said that the transitional framework for electricity prices is based on the actual costs of renewable energy plants and advice from independent consultants.

This followed a petition by 36 investors of transitional wind and solar energy projects proposed the prime minister remove hindrances in the electricity pricing mechanism as the prices were much lower than they expected, likely causing disruptions to their financial plans.

In response to the above petition, ERAV said that they had reviewed and sought advice from experts and relevant agencies.

An independent consulting committee, including nine experts in the sectors of electricity, pricing, finance and State management on energy, had been established to give the commission advice on the framework for electricity prices, according to ERAV.

The electricity pricing mechanism has been calculated based on the indexes provided by local and foreign consultants after they had a reference to the actual costs stated in the feasible study reports and technical design of plants that signed electricity sales agreements with the EVN before the time limits for the entitlement of the feed-in-tariff prices expired.

In principle, the investors’ internal rate of return (IRR) is now 12% but their profit would fall sharply due to the new feed-in-tariff (FiT) prices. For example, the solar energy projects’ IRR will drop from 11.7% to 5% if these projects apply the new FiT, instead of the incentive FiT prices.

More than 84 renewable energy projects lag behind the commercial operation date (COD), of which construction and trial operation has been completed for 34 transitional projects.

These projects’ investors will have to negotiate the electricity prices with the Vietnam Electricity Group (EVN) based on the framework for electricity prices issued by the Ministry of Industry and Trade early this year.

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