19 September 2011
The Prime Minister issued the long-awaited Decision No. 37/2011/QD-TTg (Decision 37) on 29 June 2011 under which the State for the first time set out mechanisms for supporting and developing wind power projects in Vietnam. With a view to boosting up foreign and domestic investments in the wind power sector, Decision 37 requires the Ministry of Industry and Trade (MOIT) to prepare a 10-year national wind power development plan for the Prime Minister’s consideration and the Electricity of Vietnam Group (EVN) to purchase all electricity generated by on-grid wind plants at the VAT-excluded price of VND 1,614/kWh (approximately 7.8 US cents/kWh) and introduces a number of financial and land incentives for wind power investors. Decision 37 already took effect on 20 August 2011.
Wind Power Planning and Development
A. Winder Power Development Plans
Under Decision 37, MOIT is required to prepare and submit the national wind power development plan to the Prime Minister for approval and the People's Committees of provinces that have wind power development potential are also required to submit provincial wind power development plans to MOIT for approval. The national and provincial wind power development plans will be prepared only once for the 2011-2020 period with a vision towards 2030 but may be adjusted and supplemented when necessary.
MOIT is entrusted with the duty to notify the public of the approved wind power development plans and to guide, monitor and inspect the implementation of the approved plans. For wind power projects that have not been included in the list of approved national wind power development plans and national electric power development plans, the investors will need to send their request to supplement the development plan to the MOIT for review and the Prime Minister for consideration.
B. Wind Power Projects
Decision 37 provides that, for an investor to commence construction of wind farms, it must obtain the required investment certificate, enter into an electricity purchase and sale contract with the electricity purchaser and a connection agreement with power distribution or transmission unit and make a report on wind-measuring data during a period of at least 12 months. The provincial People’s Committee can revoke the investor’s investment certificate if it fails to commence the construction of main works of the wind power projects (such as constructing the wind towers, turbines, generators and transformer stations) within 12 months after obtaining the investment certificate. Decision 37 further stipulates that investors must invest, operate and maintain transmission lines and transformer stations for voltage increase (if any) from the power plant to the connection points of the electricity purchasers.
Mechanism to Support the Development of Wind Power Projects
A. Responsibility to Purchase Electricity from Wind Power Projects
Article 11.1 of Decision 37 may be considered as one of the most important assistance mechanisms for wind power development. It provides that EVN or its authorised subsidiary must purchase all electricity generated by on-grid wind power plants at the price of VND 1,614/kWh (approximately 7.8 US cents/kWh, exclusive of value added tax) at an electricity delivery point. The purchase price will be adjusted according to the VND/USD exchange rate. The State will then provide an electricity price subsidy of VND 207/kWh (approximately 1 US cent/kWh) for all electricity purchased by EVN from wind power plants.
The electricity purchase contract between the investor and EVN must be made in accordance with the model electricity purchase contract formulated by the MOIT with a contract term of 20 years from the commencement date of commercial operation. The contract will also provide the base electricity purchase price, the principle for price adjustment and the arrangement on connection, metering and operation of the wind power plant.
B. Incentives For Wind Power Projects
Decision 37 introduced various financial and land incentives for investors in wind power projects:
- Investment Capital: Investors may raise capital from domestic or foreign organisations and individuals for investment in wind power projects and enjoy incentives under current regulations on the State's investment credit.
- Import Duty: Wind power projects are exempt from import duty for goods imported for manufacturing their fixed assets, materials that are not available in Vietnam, and supplies and semi-finished products imported for their production under the Export Duty and Import Duty Law.
- Corporate Income Tax: Wind power projects will enjoy the same corporate income tax rates and corporate income tax exemption or reduction as applicable to projects in sectors eligible for special investment incentives under the Law on Investment, the Law on Corporate Income Tax and documents guiding the implementation of these laws.
- Land Incentives: Wind power project, transmission lines and transformer stations for connection to the national power grid are eligible for land use fee and rent exemption or reduction under current regulations applicable to projects in sectors eligible for special investment incentives. Provincial People's Committees will allocate land to investors with approved land use plans for implementing wind power projects. The payment of compensations and provision of supports for ground clearance will comply with the current land law.
With great potential for the development of wind power, the State hopes that the introduction of electricity tariff and a series of financial and land incentives under Decision 37 will attract more and more investors to invest in this type of renewable energy.
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