Vietnam: Final version of new circular on power operation license requirements

In brief

On 9 September 2020, the Ministry of Industry and Trade of Vietnam (MOIT) issued Circular No. 21/2020/TT-BTC ("Circular No. 21") to replace the current Circular No. 36/2018/TT-BCT, disappointing certain investors who hoped the threshold for power generation licenses would be raised to facilitate market entry. Circular No. 21 takes effect from 26 October 2020, and it provides updated procedures for applications for power operation licenses, including power generation licenses for all types of power plants in Vietnam.1

We have highlighted some of the key takeaways and key provisions below.

Power generation license application procedure for all power projects with an installed capacity of 1MW or larger

  1. Responsible authority
  • For large power plants of particular socio-economic importance or significance in terms of national defense and security on the list approved by the Prime Minister, the developer is required to apply for a power generation license at the MOIT. Such a requirement is also updated to make it consistent with the recently issued Decree No. 17/2020/ND-CP of the Government, dated 5 February 2020, amending and supplementing a number of articles of decrees related to business investment conditions in the fields subject to the management of the MOIT.
  • For all types of power projects with installed capacity from 1MW to less than 3MW in one province or city, the developer is required to apply for a power generation license at the People's Committee or the authorized Department of Industry and Trade of the relevant province or city where the project is located.
  • For a power project with an installed capacity of 3MW or larger, the developer is required to apply for a power generation license at the Electricity Regulatory Authority of Vietnam (ERAV) under the MOIT.
  1. Timeline

Under Circular No. 21, power developers are still required to submit the full application dossier for the Power Generation License no later than 15 working days before the expected official COD of the power plant, as stipulated in Circular No. 36. Accordingly, such a requirement applies to all types of power projects in Vietnam.

In relation to solar power projects specifically and based on solar power purchase agreements (PPA) that EVN actually executed, the project company as power seller is required 90 days prior to the proposed COD, as specified in Appendix B of the PPA, to submit its draft procedures and process for commissioning and testing for acceptance of the power plant to EVN in accordance with current regulations and technical and technological standards of the solar power plants. This is so that the parties can agree on the specific COD and calculate the power output to be generated during the testing for commissioning of the power plants.

Circular No. 21 does not change any of the following requirements of Circular No. 36 that will need to be completed by power developers before the expected official COD:

  • Execution of a PPA in accordance with the laws (except for hydropower plants on the list of major power plants having an important impact on social economy, defense and security approved by the Prime Minister as well as the list of power plants operating together with major power plants having an important impact on social-economy, defense and security approved by the MOIT; and hydropower plants with their accounting recorded dependently on the accounting of Vietnam Electricity (EVN)'s Power Corporations in accordance with the proposal of Vietnam Electricity) 
  • Completion of the Supervisory Control and Data Acquisition (SCADA) system serving the operation of the power systems and the power market in accordance with Vietnamese regulations
  • Completion of the information technology infrastructure system and telecommunication infrastructure system serving the operation of the power market (applicable to power plants participating in the power market)
  • Compliance with other regulations on the management and operation of power plants in accordance with the relevant legal documents
  1. Required documents

Compared to the previous regulations of Circular No. 36, Circular No. 21 requires no new supporting documents, especially for solar power projects.

Specifically, Circular No. 21 retains the dossier that power developers have to submit, which contains the following, among other things:

  • Copies of the pre-acceptance testing minutes for installation of the power plant's solar equipment and facilities
  • Copies of documents indicating the main specifications of the power plant (specifications of power plant's equipment, generators, main transformers)
  • List of technical managers and shift leaders of the power plant

In addition, Circular No. 21 has abolished the requirement for the submission as supporting documents of: (i) a copy of the agreement on the provision of operation and management (O&M) service and the list of power consumers; and (ii) the diagram of the grids for delivering electricity to power consumers.

For the power generation sector, Circular No. 21 requires power developers to submit certain other documents, including a copy of employment contracts between individual operators and the project company/investor or operating management entity/O&M contractor, as part of the application dossier.

On the other hand, Circular No. 21 has abolished the following application documents from the list of required application documents:

  • List of equipment with strict requirements regarding employment safety that must be tested
  • Copy of the document regarding evaluation and approval of fire prevention and fighting items; copy of the minutes of verification and acceptance of the installation of the fire prevention and fighting system
  • Report on dam inspection (for hydropower dams requiring periodic inspection)

For the power transmission and distribution sector, a copy of the documents assuring the satisfaction of conditions regarding fire prevention and fighting are no longer required by Circular No. 21.

Requirement for participation in competitive power markets

With respect to the model power generation license, Circular No. 21 retains the provision that the power developer is obligated to "participate in the power market in accordance with the regulations on the operation of the power market issued by the MOIT."  However, Circular No. 21 is not clear as to whether this will impact BOT power projects or renewable energy projects, as it is currently debatable whether participation in the competitive power markets is optional rather than compulsory.

Cases of exemption from power generation license requirement

In terms of the capacity threshold for requiring a power generation license, Circular No. 21 retains the 1MW threshold, with a clarification on solar power projects.

Specifically for solar power projects, Circular No. 21 clarifies that the exemption from the power generation license requirement applies to those with an installed capacity of up to 1 MW (AC capacity) for selling electricity to other entities (i.e., not only for self-consumption purposes).

In addition, Circular No. 21 retains the prior rule that electricity generation for "self-consumption" purposes without selling electricity to other organizations and individuals is also exempt from the power generation license requirement.

Timeline to implement project operation

Circular No. 21 supplements certain obligations of power generators/developers after being issued with a power operation license. The licensed power developers are required to, among other things, commence project operation within six months from the date of issuance of a power operation license.

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If you would like to discuss the potential impacts of Circular No. 21 to specific projects, necessary steps going forward, as well as opportunities for investment in power projects in Vietnam, please do not hesitate to contact us.

1 Circular No. 36/2018/TT-BCT of the Ministry of Industry and Trade dated 16 October 2018 on the procedure and order for issuance of power operation licenses.

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