Vietnamese government agencies, policymakers, and relevant stakeholders have learnt about international experiences in renewable energy auctions, especially the selection of investors of renewable energy projects, helping them establish a legal framework for renewable energy auctions in Vietnam.
Power Engineering Consulting JSC 3 and the Centre For Procurement Support (Public Procurement Agency, Ministry of Planning and Investment) co-organised an international webinar series (IEREA 2021) on August 17-21 where Vietnamese and international experts shared experience in renewable energy auction.
The five-day IEREA 2021 webinar series focused on renewable energy auction experiences from Denmark, India, the United Kingdom, Germany, and the United States.
At the beginning of her presentation, Camilla Holbech, Energy Counselor Offshore Wind, the Embassy of Denmark in Hanoi, brought all IEREA 2021 delegates back to 1991 when Vindeby, the first offshore wind plant of Denmark and the world, was built.
The development of offshore wind in Denmark, including the development of an auction mechanism, is not only an effort of the Danish government but also a dialogue effort from the enterprises and the scientific community. Establishing an auction mechanism has not been easy, but Denmark has started its journey with dialogue, as Camilla Holbech sincerely shared: “Dialogue, dialogue, and more dialogue.”
For offshore wind auctions, the first important dialogue is about national marine spatial planning. Agreeing with Camilla Holbech, Sebastian Hald Buhl, country manager of Orsted in Vietnam, emphasised the importance of a national strategy to create a national marine spatial planning, especially on cross-sectoral issues.
Danish friends opened the IEREA 2021 dialogue with sincerity and enthusiasm, as in the opening remarks at IEREA 2021 by Malte Möller-Christensen, Deputy Head of Mission, the Embassy of Denmark in Hanoi: “Denmark is a close friend of Vietnam and always stands ready to share our experiences, especially in relation to offshore wind and sustainable development.” And the dialogue on the development of national marine spatial planning will definitely continue to be discussed with support from Denmark.
Poonam Verma, Partner, J. Sagar Associates emphasised that India’s solar power capacity has increased by 15 times from 2.6GW in 2014 to 42.64GW in 2021. One of the reasons for the solar power boom is an effective dispute resolution mechanism (such as a specialised court system), contributing to increasing investor confidence.
One of the effective dialogue channels contributing to India’s solar energy auction dispute resolutions is the National Solar Energy Federation of India (NSEFI). Recently, after cancellation of the 500MW tender by Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA), NSEFI has represented this mishandling of tenders by UPNEDA to the MNRE and sought for MNRE’s urgent intervention as this kind of mishandling by implementing agencies will make the foreign investors extremely cautious in making investments in the energy sector.
The Indian friends did not hesitate to share the obstacles on development of India solar energy auction, but more importantly, those obstacles could not stop India because of“strong commitment to the development of renewable energy”, as in the opening remarks at IEREA 2021 by Mini Kumam, First Secretary (Economics & Commercial), Embassy of India in Hanoi.
Starting in 2002, the UK officially adopted mechanisms to support large-scale renewable energy projects. The UK has taken steps to prepare for the development of renewable energy, including an auction mechanism.
The Department of Business, Energy and Industrial Strategy is the main body responsible for developing the renewable energy auction mechanism. The National Transmission System is the party responsible for receiving the tender documents and the Low Carbon Contracts Company is the party to negotiate and sign the relevant contracts. In addition, the Office of Gas and Electricity Markets is the direct supporter of the entire process.
The fact that the “power trio” of the Department of Business, Energy and Industrial Strategy, the Low Carbon Contracts Company, and the Office of Gas and Electricity Markets all participated in the discussion at IEREA 2021 shows the UK’s strong commitment to supporting Vietnam in developing a renewable energy industry, as in the opening remarks at IEREA 2021 by Sam Wood, Deputy Consul General and Head of the Department for International Trade team at the British Consulate General in Ho Chi Minh City: “The UK is ready to share experiences with Vietnam as a close friend.”
Thomas Krohn, Project and Portfolio Manager, GIZ Energy Support Programme in Hanoi, shared the journey of more than 20 years of renewable energy development in Germany since the 2000s.
In the path of policy transition from FiT to renewable energy auction, Germany faces many challenges in designing the auction mechanism.
One of the hot issues of IEREA 2021 is the calculation of costs related to Germany’s renewable energy auction, specifically related costs when participating in subsidies or the difference between the market prices and the ceiling price policy in Germany.
IEREA 2021 is the first step of a long-term dialogue on determining/calculating renewable energy prices (especially solar and wind prices) in Vietnam, with a commitment to support from German friends, as in the opening remarks at IEREA 2021 by Weert Börner, Deputy Head of Mission and Head of Economic Section, the Embassy of Germany in Vietnam: “Germany is willing to go hand-in-hand with Vietnam in the development of renewable energy.”
As in the opening remarks at IEREA 2021 by Anna Shpitsberg, Deputy Assistant Secretary for Energy Transformation at US Department of State, fighting the impact of climate change, providing reliable and affordable energy, and attracting investment that can help these goals are among cooperation between the US and Vietnam.
With the support of the US Department of State, IEREA 2021 was honored to invite James Bennett, Programme Manager, Office of Renewable Energy Programmes, Bureau of Ocean Energy Management, to share his experiences in offshore wind auction in the US (for which the Bureau of Ocean Energy Management is the government agency that directly administers the auction).
At the same time, Prof. Dr. Carlos Batlle Lopez, a researcher at the MIT Energy Initiative (one of the long-term partners committed to supporting the development of renewable energy in Vietnam) and Associate Professor at Comillas Pontifical University (Spain) shared that the design of a renewable energy auction mechanism should consider a combination of many factors.
IEREA 2021 closed but has opened a new dialogue for a strong Vietnam, as Tran Quoc Dien, deputy general director of Power Engineering Consulting JSC 3, head of the organising committee, shared at IEREA 2021: “We are now in the second year of a global pandemic that has killed more than four million people. Extreme climate events regularly devastate vulnerable communities. However, remember this world is full of miracles. Together we can build a better world.”
The renewable energy industry of Vietnam is facing an important turning point to move to the next stage of development. “The world is often unkind to new talent, new creations. The new needs friends,” as Anton Ego wrote in the Ratatouille.
Therefore, IEREA 2021, with the spirit of “Sharing is caring”, is to bring many sincere friends to Vietnam, to support the renewable energy industry of Vietnam, to not only share the successes but more importantly to discuss the mistakes on the development path of different countries in the world
By Nguyen Tuan Phat (Legal Counsel, Legal Departmentment, PECC3)
The PECC3 webinar series “International Experiences in Renewable Energy Auction” (IEREA2021) concluded its final session at 8 a.m. on August 21st, 2021, with the support of the Center for Procurement Support (CPS), Public Procurement Agency – Ministry of Planning and Investment. In keeping with the session’s theme of “Sharing is caring,” this session discussed the auction theory and case studies of renewable energy auctions in the United States.
Mr. Tran Quoc Dien – Deputy General Director of PECC3 – delivered an welcoming speech on behalf of the organizers. He expressed gratitude to the USA’s government officials and experts, as well as the representatives from ministries, branches, associations and Vietnamese businesses, for their participation. The U.S. provided support to Vietnam’s renewable energy development. In 2015, USAID launched “Vietnam Low Emission Energy Program”, and the U.S. Department of State also supported many renewable energy projects in Vietnam. More importantly, U.S. Vice President – Ms. Kamala Harris would visit Vietnam next week. This marked the first-ever visit to Hanoi by a sitting American vice-president. This webinar series, therefore, provided more timely opportunities for Vietnam to understand how to develop policy frameworks for RE auctions.
Mr. Le Tuan Anh – Director of Industrial Economy Department, Ministry of Planning and Investment – spoke on behalf of the Ministry. He discussed the recent explosive growth of solar power in Vietnam. The Government of Vietnam was promoting the sustainable development of renewable energy and studying the transition from FiT to competitive auctions. He thanked the speakers for sharing their insights in this session, as well as partners and sponsors of the program.
Ms. Anna Shpitsberg – Deputy Assistant Secretary for Energy Transformation at U.S. Department of State – expressed her delight that renewable energy auctions were given a platform to shine today, and that Vietnam was interested in this market. The FiT scheme boosted Vietnam’s development in recent years, and now that the country switched to auctions, the new scheme would strengthen the renewable energy and other manufacturing sectors. In today’s session, besides auction scheme building, the US also expanded on how to gradually achieve the lowest price, increase the degree of competition, accelerate the integration of supply chain, and promote the capacity of Vietnam in certain cases of local requirements. Climate change had a significant impact on the U.S. and other countries, and renewable energy would brace us against the fight. She thanked PECC3 and the Center for Procurement Support for organizing this program.
Mr. James Bennett – Program Manager, Office of Renewable Energy Programs, Bureau of Ocean Energy Management – discussed the US auction policy for renewable energy projects and new wind turbine techniques in shallow and deep water areas. He analyzed the differences between the West and East Coasts of the U.S., as well as the auction promotion policies and PPAs used in East Coast projects. The U.S. Government leased the marine areas to businesses looking to develop projects here. The auction process for seabed areas was organized in rounds, with bidders could place “live” or “exit” bids. The bidder having the highest bid would win the bid. A bidder could only win one lease area. The goal was to create competition and cohesion among project developers. After receiving the lease, the winner began execution. In the U.S., the states would be the contracting parties, determining which marine areas could be leased for offshore wind power production. The lease price gradually increased across 17 of its marine areas.
Ms. Christine Covington – Vietnam Lower Energy Emissions Program – shared more insights on the U.S. trend in solar power. She investigated the differences in the development and management of PPA in the solar power market between states. The U.S. held joint auctions for different RE technologies, which frequently outperformed traditional technologies in terms of price. Battery storage coupling with wind and solar power also rose as a new and competitive trend. To purchase energy generation and storage technologies, the US government used a variety of methods, including competitive auctions, centralized auctions, and bilateral agreements. She described 3 stages of the U.S. competitive auctions and the functions of the entities in each stage. She drew attention to a case study of the U.S. Navy. All stages, such as information requirements, technical document evaluation, bid proposal, bid review and negotiation, and so on, would be given three years to complete. This gave all parties enough time to meet the requirements and analyze the best price. The US Navy’s Joint Base Pearl Harbor Hickam project is an example of this process in action.
Mr. Chu Ba Thi – Senior Energy Specialist, The World Bank in Vietnam – presented about international experience and considerations for Vietnam on renewable energy auctions. Global solar power tariffs decreased significantly by 80% between 2015 and 2021. The World Bank was assisting governments in mitigating risks in the renewable energy industry and leveraging private investments at scale. He proposed eight key questions to be addressed during the process of scheme development to ensure sustainability. Questions covered volume targets, space, time, method and risk allocation. During the planning stage, grid infrastructure would add a layer of difficulty, so Vietnam needed to devise a proper plan for the transmission and storage system. The assigned capacity should be deployed in rounds based on demand at various times. This ensured an even distribution of financial risk and saved time for the completion of infrastructure. The process should be led by centralized operators/regulators.
During the auction stage, it was necessary to balance price and risks while setting out qualifications and requests for proposals. Investors would have more time to focus on project development if the government handled land space and the grid system, as was the case with solar projects. Between site auctions and substation auctions, the latter would be the less risk option. He had two case studies of Argentina and Burkina Faso, both of which used World Bank recommendations to address issues at home. About auctioneer selection, all countries following centralized auctions (e.g., India, Spain, etc.) established task-specialized departments. Other countries (e.g., Germany, Chile, Malaysia, Brazil) used regulators to manage and supervise the auctions. Vietnam, Egypt, the United Arab Emirates, etc. use procurers or utilities, such as EVN in Vietnam. He concluded that nationally-led auctions were generally more successful. Concerning auction capacity per round, each country has its own upper and lower thresholds , making it difficult to reach a universal standard. He discussed PPAs before ending the presentation. To ensure long-term financing, PPA terms for large solar projects were typically 20-25 years.
Mr. Nguyen Thanh Hai – Special Counsel, Baker McKenzie – provided legal insight and advice on the auctioneer roles. He suggested that Vietnam implement government-led centralized auctions. Local governments would assist if issues arose as a result of land sovereignty, and regulators would participate in the development of the legal framework. With little time left, Vietnam needed to tailor the global model to Vietnamese law, and then testing the two least-risky industries, wind power and solar power. The Government shall take charge of land approvals, grid connection and infrastructure. Substation auctions could be a proper option, because investors would be more excited if they could choose areas and capacities best suited their capacity. The government should carefully prepare the pre-qualifications and organize the auctions on a national scale. Depending on the requirements of each project, it may be assigned to a government agency, for example, the Ministry of Industry and Trade, the Ministry of Natural Resources and Environment, etc.
The session concluded with Prof. Carlos Batlle – Researcher at MIT Energy Initiative and Professor at the Florence School of Regulation (European University Institute). He presented on the energy economy in the Latin Souths (Europe and America). South America boasted abundant wind and solar resources, with wind offshore in Columbia and solar power in Chile being standouts. When it comes to wind and solar structures, these countries have one thing in common: precise planning is required prior to project start-up, from location selection to scale evaluation and subsequent steps. Having a mature hydroelectricity market, South America built energy storage systems with great success. However, as seasons (dry or wet) played a bigger part, price volatility remained challenges for many years. It meant that this market had yet to achieve long-term price stability and was forced to auction off new technologies. Southern Europe planned according to the EU’s National Energy and Climate Plans, and as a result, they completed the new scheme faster than South America. In some South American countries, investors opposed the currency codes used in the agreement, or failed to finish the projects on time, or even abandoned the projects. Organizers, therefore, asked the investors to put up their assets as collateral if they wanted to participate in 2-stage auctions. This ensured the projects were performed and completed. In a centralized scheme, auction agencies would take the lead while the government would decide on plans as well as provide instructions and assume overall responsibility.
Organizers needed to consider three following elements when designing requests for proposal, including (1) capacity required for each technology, (2) pre-qualification requirements such as connection, environmental impact assessment, land-use rights and financial qualifications, (3) appropriate auction prices. Agreements in some countries, such as Argentina, set the time for commercial operation based on demand. In general, different measures were taken by governments to reduce cost risks. Methodology intent, in South America over the last 10 years, the market price plummeted, the wind and solar resources overwhelmed and contributed to 40% – 50% of total capacity. Therefore, the target of 30% is achievable, the resources could afford it, and the governments only needed to handle cost risks. Aside from energy structure and price policy, investors were also interested in other methodology elements.
Ms. Vu Quynh Le – Deputy Director General, Public Procurement Agency, Ministry of Planning and Investment: Why does Spain auction technologies in each 1 GW package? This requires dozens of projects to supply this 1GW in a package. With centralized auction, should Vietnam auction on a project basis instead of package?
Prof. Carlos Batlle: Auction capacity would vary depending on system state. Grid systems in Spain are far beyond the current generation level of development. As a result, despite the fact that 27-30 new projects are required to meet the capacity of 1 GW, many investors have indicated their readiness. In Portugal and other South American countries, the grid-connected system poses a real difficulty as investors can only integrate to the system if they can connect with the authorities or security agencies. So, if investors want to enter a market, they must first conduct research to determine the appropriate technology and capacity, as well as, more importantly, whether they can connect with the relevant institutions. On the other hand, each country’s government may hold auctions for each technology or for multiple technologies, depending on its own pace of research and considerations. So, based on the current situation in Vietnam, you can decide how to auction.
Mr. Nguyen Tuan Phat – Legal Counsel, PECC3 – moderated the session and gave the first questions to BOEM.
What are the prerequisites for auction? Should we auction off each project from a few dozen to several hundred MW? Should we limit the number of bidders?
James Bennett – Program Manager, Office of Renewable Energy Programs, Bureau of Ocean Energy Management (BOEM): Our process enables developers to use the lease space and develop projects in collaboration with the government agencies. We do not define the project; rather, we define the project’s location. It is entirely up to the developers to decide what types of projects to pursue in order to leverage the local supply chain and open the door to future expansion. Basically, offshore lease areas can have enough power generation capacity for economic development at scale. They could have up to 100 turbines or more GW. The authorities will define the PPA terms and evaluate the project’s ability to use local resources and supply chains. The federal government will decide which areas of land and sea will be leased. To participate in the auction, bidders must meet prequalification in finance, techniques, and experience. Foreign businesses must establish a subsidiary in the United States and demonstrate their capacity.
Ms. Pham Thi Gam – Deputy Director of Policy and Legal Department, Vietnam Administration of Seas and Islands (VASI), Ministry of Natural Resources and Environment (MoNRE): Based on the U.S. experience, what are the requirements we need to set out for marine spatial planning, right to use or environmental impact assessments, etc.?
Mr. James Bennett – Program Manager, Office of Renewable Energy Programs, Bureau of Ocean Energy Management (BOEM): The regulations for onshore and offshore wind are vastly different. Environmental impact surveys, seabed surveys, and so on all follow similar procedures. The distinction is in the right to lease; onshore wind power is managed by the state government, whereas offshore wind power is managed by the federal government. While conducting marine spatial planning, particularly in the East Coast with 17-18 states, the federal government has to work actively with each state government to streamline the documents, procedures and data flow. The evaluation, review, and reporting of environmental impacts are all the same. Auctions in the United States are based on prices as well as the needs of associations, unions, and communities. I just concentrate on one aspect of the process: lease area allocation. We have other criteria for PPAs.
Ms. Adrienne Fink – Principal Consultant Offshore Renewables, US at Offshore Wind Consultants (OWC): How does the Bureau of Ocean Energy Management determine which marine areas can be leased, which parties can participate, and how does the process get started after all of these steps have been completed?
Mr. James Bennett – Program Manager, Office of Renewable Energy Programs, Bureau of Ocean Energy Management (BOEM): We have been working with the federal and state governments to establish a task force since 2019, when we began this process. We define each party’s roles and responsibilities. We will need the agreement of all relevant states once the marine areas have been determined. Then we design the scheme and assign capacity, among other things, to carry out this process.
Dr. Le Net – Partner, LNT & Partners – added some more information about Vietnam. Land areas under the jurisdiction of the Provincial People’s Committee can be auctioned off based on highest bid, lowest bid or direct scheme. In Vietnam, renewable energy projects are distributed unevenly across the North and the South. The Ministry of Industry and Trade just issued a circular and a draft on auctions, tariffs and prequalification requirements.
How can auctions be made more competitive? Before or after the auctions, how should the ceiling price be disclosed? Should investors propose a fixed price or a price in relation to a known or unknown ceiling price? Should financial parties be allowed to participate in the auctions?
Ms. Pham Thi Thuy Ha – Director of Procurement Management Department, Vietnam Electricity (EVN): Regarding the process of selecting a developer, the Ministry of Industry and Trade has now established the criteria for the auction scheme, in which EVN also participated. From the standpoint of EVN, we want to create a competitive low-price auction system. Policies relating to land, technology, connectivity, auction prices and locations require the support of all relevant parties in order to create a competitive and appealing auction environment. There should be an agency to ensure that auctions are held in a transparent manner, as well as a legal framework to resolve any disputes that arise. In the first draft, the Ministry of Industry and Trade stated that the ceiling price would vary and be announced with requests for proposal. We would prefer that bidders offer a fixed price rather than a percentage. Financial institutions should participate in the auctions to increase transparency over the process. This draft should be used as a test for upcoming renewable energy projects. We encourage new players to participate in order to ensure that the process meets local requirements. The participation must be in accordance with the Procurement Law.
At the end of the seminar, Ms. Vu Quynh Le – Deputy Director General, Public Procurement Agency, Ministry of Planning and Investment – expressed her appreciation to the representatives of the U.S. Department of State, BOEM, USAID, WB and speakers for their contributions to Vietnam’s renewable energy market. She emphasized the roles of the Ministry of Industry and Trade, Electricity Authority and Public Procurement Agency in the development of the competitive auctions framework for renewable energy. Following five sessions jam-packed with the experiences of countries that paved the way. Vietnam is expected to make significant progress in the development of the scheme and the study of the applicability of auctions in the Vietnamese legal and business environment. She hoped that there would be more platforms that allow for genuine and open dialogue in order to broaden the lessons.
PECC3 wishes to express its gratitude to Nishimura & Asahi and LNT & Partners for generously sponsoring the seminar.
The webinar series “International Experiences in Renewable Energy Auction” (IEREA2021) received positive feedback from representatives of ministries and agencies, policymakers, renewable energy businesses, and legal departments. Numerous questions have been submitted via email, and we will post the responses to the speakers’ questions on the PECC3 event page as soon as they are received.
To get an overview of other sessions (Denmark, India, Germany, UK), please find details at the website of Power Engineering Consulting JS. Company 3 (PECC3). We are proud bringing our integrity and trust to our distinguished partners through this webinar series.
The webinar series “International Experiences in Renewable Rnergy Auction” (IEREA2021), hosted by PECC3 with support from the Center for Procurement Support (CPS), the Public Procurement Agency of the Ministry of Planning and Investment, continued its successful run with the 4th session on August 20th, 2021 at 3 p.m. With the theme “Sharing is caring,” the session addressed Germany’s experience in transitioning from FiT to renewable energy auctions and applicability for Vietnam.
Mr. Tran Quoc Dien – Deputy General Director of PECC3 – delivered an welcoming speech on behalf of the organizers. He expressed gratitude to the German Embassy and German experts, as well as the representatives from ministries, agencies, associations and Vietnamese businesses, for their participation. Since 2009, the Government of Germany funded research on wind energy in Vietnam through the initiative “Support to the Up-Scaling of wind power”. GIZ assisted the Government of Vietnam in establishing FiT 1 and FiT 2 schemes for wind energy projects. The transition from FiT to auctions would bring forward opportunities and challenges. He hoped that Germany’s experience and expertise would be shared in abundance today. He also thanked Asia Counsel – the session’s sponsor.
Ms. Vu Quynh Le – Deputy Director General, Public Procurement Agency, Ministry of Planning and Investment – confirmed Vietnam’s appreciation towards the German Embassy and German experts. She also gave an overview on Vietnam policies and guidelines regarding the FiT scheme. She noted that the FiT scheme showed some limitations, including lack of competition and laggard technologies. In order to meet the targets set in “Vietnam’s National Energy Development Strategy to 2030 with a vision to 2045”, which focused on renewable energy and private sector, the Prime Minister of Vietnam required researches on transition to competitive auctions, particularly in light of the upcoming end of FiT scheme for solar and wind energy. She stressed that Germany gained success and had a wealth of experiences in mechanism transition, so it would be grateful if Vietnam could learn numerous actionable insights today.
Mr. Weert Börner – Deputy Head of Mission & Head of Economic Section, German Embassy in Hanoi – thanked the organizers for hosting such a meaningful series of events to promote the renewable energy auction mechanism in Vietnam. He noted that in the face of climate change, this mechanism would rise as a trend and a challenge to the world. In 2021, Vietnam and Germany both set a target of producing 50% of their electricity from renewable energy sources. Germany did not enjoy the same abundance of hydroelectric, solar and wind resources as Vietnam, so Germany made considerable efforts to achieve its targeted energy shares. The Government of Germany valued seamless transition, and an auction mechanism would be the way to strengthen competitiveness, encourage technology advancement, and secure Germany’s success in the landscape. After Germany approached various sectors of the renewable energy industry, the number of small and medium-sized enterprises increased significantly. He emphasized the regulator’s commitment to and engagement with the German government and private sector in the exchange of experience for Vietnamese markets.
Mr. Thomas Krohn – Project & Portfolio Manager, GIZ Energy Support Programme in Hanoi – introduced a renewable energy auction system under the Renewable Energy Sources Act (or EEG) of Germany. He went into deep dives on the transition from FiT to auctions, the auction system and lessons learned. By 2000, before the EEG, the Government of Germany set out FiT principles still applied to this day: (1) all RE projects can be connected to the grid, (2) RE dispatch must be prioritized, and (3) the Government can provide subsidies of up to 90%. By 2003, Germany released EEG. FiT increased at some point in 2004, then gradually decreased as solar and wind power capacity expanded. Between 2009 and 2011, Germany amended its EEG to provide subsidies for offshore wind energy. However, no offshore wind projects had yet to be launched. Since 2013, the Government’s subsidies kept decreasing, except for offshore wind projects (the subsidy showed a slight increase). Offshore wind power also started to play a minor role in total installed capacity. Currently, the FiT rate is set around 5-7 € cents/kWh for all kinds of technologies.
Germany divided the auction framework into four parts: (1) auction demand by category and capacity, (2) winner selection and agreement award process, (3) qualification requirements and documentation, (4) risk allocation and remuneration of sellers. In part (1), Germany identified nine technology categories, each required different auction options. All would be explored in the video. Innovation, such as floating solar power, solar cells, solar power + agriculture, would be granted subsidies. In part (2), he expanded on the auction process in Germany: set volume; standardize pre-qualification requirements; set deadline for submission; check bids by price, volume and then random; announce winner; developers receive deposit and develop the project in about 2 years before asking for subsidies. In part (3) – planning, he stressed that the Government of Germany placed attention on land planning, spatial planning and use permits. Submission deadlines and permit requirements were also addressed specifically and should be strictly followed. In part (4), he talked about how the Government decided project subsidies based on market price, risks faced by the bidders, the grid operators and the grid system. Risks were analyzed in terms of grid connection, grid congestion & curtailment with a focus on offshore wind projects. In Germany, the players were required to follow the rules and stick to the schedule. If compliance were not met, penalties would be imposed according to how far they were behind the schedule.
Before concluding his presentation, Mr. Thomas drew the following conclusions from his German experience. To begin, RE communities in Germany could collaborate with civil organizations to auction up to six 16-MW wind turbines, with the bid starting at the highest bid in the previous auction. This explained why, despite a lack of resources (for evaluation, survey, research, etc.), these communities won almost all bids in 2017, resulting in policy change in 2018. Second, grid connection issues hampered offshore wind expansion. Due to unclear responsibility assignment from the beginning, a new mechanism was required to compensate for the loss. Finally, in terms of economic impact, Germany was able to reduce subsidies by an average of four times.
The session continued with the presentation of Mr. Juan Frias – Assistant to Head of Wind & Site and Principal Consultant at Offshore Wind Consultants (OWC) – presented on his extensive experience in bidding document preparation in Germany. He went through the time when Germany applied the FiT scheme (since 2000) under EEG Law, which helped the government and businesses save money by utilizing stable technologies. After the market went downhill due to various issues caused by the FiT scheme such as unstable connections, unequally planned infrastructure, site disputes, etc., Germany decided to transition to auctions. The Marine Energy Act, which came into force in 2017, stipulated that the FiT scheme should be used in the early stages, and then all wind power projects would be auctioned off in 2021. During this transition period, between 2017 and 2018, Germany installed nearly 3 GW of electricity and some investors even did not require subsidies. In 2019, the basic auction framework was completed and the prices kept decreasing while the capacity surged. In terms of planning, Germany aimed to expand offshore wind to 7.5 GW by 2030 and 13 GW by 2035.
Similar to Denmark, Germany also deployed 1-stage and 2-stage auctions, which address environmental regulations, wind capacity assessment, geodesy, geology, resources and contractor capacity. More importantly, the proposed plan must integrate seamlessly with the infrastructure and grid system without increasing the overall system’s waiting time. Agencies that manage grid systems, as well as other agencies that manage heat, gas, railroads, marine environmental surveys, etc. work together to develop a master integration plan that ensures smooth deployment and proper allocation without overlapping. Characterized by a small sea area, Germany could connect offshore wind projects to the mainland grid and share costs with project developers. In the following phase, Germany began to investigate offshore wind areas in the Exclusive Economic Zone (EEZ) – North Sea. Germany increased its offshore wind expansion target from 20 GW in 2035 to 40 GW in 2040. Emphasis on marine planning and development of a transparent and highly competitive auction process was Germany’s algorithm for success in the renewable energy space.
Due to time constraints, the final presentation of Dr. David Jacobs – Managing Director of IET Consulting (Video) with the topic “Assessing the applicability of wind energy auctions for Vietnam” would be published later on PECC3’s event channel.
Mr. Bui Van Thinh – CEO of Thuan Binh Wind Power JS Co., President of Binh Thuan Wind and Solar Energy Association – moderated the session. He summarized the current state and challenges of the renewable energy industry in Vietnam, as well as concerns about wind power tariffs after 2021, before inviting Ms. Tran Thi My Dung to ask the speakers questions.
Ms. Tran Thi My Dung – Head of Division, Price Management Department, Ministry of Finance: Could you please provide more details on the bid evaluation criteria and process in Germany, as well as the costs associated with subsidy policy? Germany’s tariff and ceiling policy? And do you have any suggestions for Vietnam?
Mr. Thomas Krohn – Project & Portfolio Manager, GIZ Energy Support Programme in Hanoi: In Germany, the lowest bidder wins. If there are multiple lowest bidders, the award will be given to the bidder with the lowest capacity. If there are multiple lowest bidders with the same capacity, we will choose at random. Joining auctions costs businesses between 500 and 700 euros, which includes all related procedures. According to GIZ, if a country wants to use the auction scheme, it must meet four criteria: (1) large market, (2) high competitiveness, (3) complete policy framework, and (4) transparency in the long-term development roadmap. Concerning condition (1), Vietnam can begin with 4-5 GW of wind power and 10 GW of solar power, and solar power in Vietnam is significant enough to conduct some testing. Concerning condition (2) – competitiveness, I believe solar power in Vietnam can meet this requirement, but I am not so sure about wind power. Concerning condition (3) – policy, Vietnam has strengthened its policies, regulations, and legal framework. However, there are numerous tasks that must be completed before we can implement these regulations in a flexible manner. Concerning condition (4) – project roadmap, the soon-to-be-published Power Development Master Plan 8 will reveal the capacity that Vietnam will require in the coming years. My suggestion is that Vietnam should utilise a stepping stone transition, running the FiT regime and the auction scheme simultaneously first, and with the solar market first.
What total capacity should be announced to the public per auction? Should we conduct a full procurement process for EACH project ranging from a few dozen MW to several hundred MW?
Mr. Thomas Krohn – Project & Portfolio Manager, GIZ Energy Support Programme in Hanoi: We can get the total required capacity from the national electricity development plan, then divide it by the number of auction rounds held, we will have the capacity be announced for each round. Before going through plenty of evaluations and considerations, each project must be licensed, planned, and thought through at both the central and local levels. If the project is too small, it will put a strain on the entire system.
How will Germany determine the capacity of each technology (wind, solar, and biomass) in an auction scheme? Who’s responsible? Government or independent organization? Will they bid among the projects or on a specific project in the onshore and offshore wind power auctions? Will the auction price be valid for the next 20 years?
Mr. Thomas Krohn – Project & Portfolio Manager, GIZ Energy Support Programme in Hanoi: According to the most recent EEG Law, the Bundestag will establish output targets for specific milestones such as 2021, 2030, and 2040. As stated in my presentation, auctions in Germany are capacity-based, and bidders must meet pre-qualification requirements to participate in the auctions, such as turbine construction permits, environmental impact assessments, etc. The bid price window is 20 years long, and the government may use a subsidy regime if there is a price difference.
The Global Wind Energy Council’s assessment of the potential and development of wind power in Vietnam?
Ms. Liming Qiao – Asia Director at Global Wind Energy Council (GWEC): The wind market in Vietnam holds great promise, but we need to analyze offshore wind and onshore wind separately. According to the draft of the Power Development Master Plan 8, we believe that the target of 11-12 GW of wind power by 2005 is achievable if the auction process is well-designed, ensuring a smooth transition from the old scheme. In terms of onshore wind projects, a question that remains unanswered is whether Vietnam should maintain the FiT scheme, as many projects were unable to be completed on time due to COVID impacts. Once Vietnam switches to auctions, projects may go unfinished or abandoned, making things worse for parties and eroding their trust. If the targets are to be met on time, Vietnam may consider expanding the project schedule by capacity and urgently prioritizing the issuance of transportation permits and installation permits for seabed survey equipment.
In terms of offshore wind projects, the scheme is not expected to be finalized until 2025 due to the complexity of survey and technical handling. By that time, the FiT will have expired. To avoid delays, we recommend that Vietnam utilise a transition, whose benefits were clarified in the Danish session, or combine both schemes. In Germany’s case, they had a long period of overlapping, meanwhile, the UK, Denmark and even Taiwan all underwent a stepping stone transition and successfully introduced new mechanisms. France is another example, if there is no transition to auction, it will be difficult to get the scheme off the ground. We can learn from other countries’ experiences, and we should set a stepping stone target of 4-5 GW before implementing a full-fledged auction scheme.
As a lawyer, how do you see Vietnam’s current regulations on renewable energy project development, such as PPAs?
Mr. Ross Macleod – Partner, Asia Counsel: Vietnam has made some progress and is eager to clarify standards for investors. After the initial 20-year period of the FiT scheme, we should add a stepping stone transition to test the market before moving to auctions. Auctions are a major source of concern, especially when it comes to bank lending procedures. We can see many problems with the PPAs with EVN, such as the bank lending lacks reliability, the PPA lacks project insurance clauses, and so on. Furthermore, because EVN has complete control over the development of infrastructure such as the grid system, transmission lines, there is a risk of no compensation payable. International banks and investors are also hesitant to settle disputes or enter into EVN-benefiting agreements. The agreement’s termination or compensation is governed by Vietnamese law, and investors bear the entire loss. As the market expands and the project size grows, the legal framework must be better prepared to ensure equal benefits for all parties and attract international investors.
Vietnam needs a post-FiT policy to respond with the investment and development of the RE sector. Based on the German experience, what are the steps and roadmap for Vietnam?
Mr. Jochen Hauff – Director of Corporate Strategy, Energy Policy & Sustainability, BayWa r.e: I agree with Ms. Liming Qiao that we must avoid interruptions during the transition. A good auction system can create confidence in investors, so we should test several small-scale auctions in familiar sectors then moving on to newer areas such as offshore wind power. Vietnam can benefit from other countries’ experiences to accelerate the implementation and avoid the delays encountered by Germany. There is a case study in Germany. 90% of wind projects were located in the North, while key industrial zones gathered in the South and resorted to high radiant solar power. We did not re-plan the site allocation for auction until 2021. It’s a pity that it took us so long to realize and change this situation. I agree that a stepping stone transition is necessary, we should run the FiT scheme and the auction scheme simultaneously. Vietnam does not have much time, it could not build a scheme in 1-2 years and then wait for 7-8 years to see the results. I believe Vietnam should take advantage of this stepping stone transition right away. Taking lessons from Germany, Vietnam should allocate wind and solar power sites by region, because the transmission systems of these two powers can compensate for each other.
What are the minimum infrastructure conditions (supply, transmission and grid systems…) to start the auction scheme?
Mr. Jochen Hauff – Director of Corporate Strategy, Energy Policy & Sustainability, BayWa r.e: In Germany, many discussions with infrastructure managers were conducted to reach an agreement on the volume to be connected to the grid system. As Mr. Thomas stated in his presentation, Germany managed the connection from the beginning. So we focused on building positive relationships with those in charge, and developing supporting platforms such as storage technology. Not until last year did Germany start auctions for new technology such as battery storage, and only with small capacity as a test. Legal and regulatory frameworks are also sources of challenges, so having grid operators on board would make things go more smoothly. This issue was also influenced by the demand for renewable energy, which created a balance with the grid operators. People would benefit more this way. We prioritize sustainable development over project profits. People may express their dissatisfaction if there are too many bidders or too many projects. It means, Vietnam must devise a well-thought-out strategy to prepare for any eventuality that may arise as the market expands.
Is there any requirement on waste treatment after official launch in the proposal for RE projects?
Mr. Pham Anh Dung – Deputy Director General of Environment Impact Assessment and Appraisal Department, Vietnam Environment Administration, Ministry of Natural Resources and Environment: Waste treatment is required by Vietnamese regulations in any manufacturing process. In the case of wind and solar projects, blades or panels present some difficulties. Vietnam is conducting some research on solar cell treatment, but it is the investor’s responsibility to handle waste from renewable energy. This requirement must be incorporated into the proposal.
At the end of the session, Mr. Bui Van Thinh summarized the key findings and expressed concern about the policy that would replace the FiT scheme for wind power, which will expire on October 31, 2021.
Ms. Nguyen Thi Dieu Phuong – Director of Center for Procurement Support noted that: Now the 4th session of the webinar series has come to the end, the lessons to be shared and the questions to be raised are countless. Organizers hope that this series would give a spark to broader activities, assisting the government and regulators in building a suitable auction scheme and legal framework for the next era of renewable energy.
To get an overview of other sessions (Denmark, India, UK, USA), please find details at the website of Power Engineering Consulting JS. Company 3 (PECC3). We are proud bringing our integrity and trust to our distinguished partners through this webinar series.
With the spirit “Sharing is caring”, the 3rd session of the Webinar series “International Experiences in Renewable Energy Auction” (IEREA2021) – co-organized by PECC3 and Center for Procurement Support (CPS), under the Public Procurement Agency, MPI – was held at 3 p.m. on August 19th, 2021, focusing on the UK’s experiences in international renewable energy auctions.
As usual, on behalf of the Organizing Committee, Mr. Tran Quoc Dien – Deputy General Director of PECC3 – kicked off the session by welcoming distinguished guests from the British Consulate General, Ministries, and Branches, as well as UK’s experts and business representatives. In his remark, he also emphasized that the active country-level cooperation was the bedrock of the realization of Vietnam’s National Energy Development Strategy by 2030, with a vision to 2045 for better integration, while quoting meaningful lyrics of John Lenon’s Imagine song.
Updating participants on the current status of Vietnam’s energy supply and the development of the new, clean energy sources policies, Dr. Pham Nguyen Hung – Deputy Director General of Electricity and Renewable Energy Authority (EREA), MOIT – highlighted that Vietnam already reached 17GW of renewable energy (RE) in operation, resulting in the reduction of negative impacts of fossil fuels and economic improvement in poor areas. As the enactment of Resolution 55 came along, the objective on RE-based energy sustainability would soon materialize thanks to a huge amount of domestic and foreign investment – totally estimated at more than USD15 billion. Embarking late on the RE journey, the Vietnamese government has taken the lessons of developed countries by adopting subsidy policy and support schemes to attract investors into this market, deemed to be less competitive than the traditional one, while ensuring time and cost-effective development. This process was well-paid with an achievement of 25% RE in the energy mix. Mr. Hung wished that UK’s experts could provide valuable insights on the sustainable competitive bidding procurement framework for EREA going forward.
In the follow-up remark, Mr. Sam Wood – Deputy Consul General and Head of the Department for International Trade team at the British Consulate General in Ho Chi Minh City – agreed that this was the right time for Vietnam to undergo a transition, in terms of structure and technology, to a Clean energy-based system. As a country that has long positioned itself in this matter, the UK government also appreciated this webinar initiative. Mr. Sam also expressed his confidence in the RE development goals and orientations of Vietnam, as well as showed UK’s support towards the country’s rapid shifting from coal-fired power to clean energy. The UK’s Department of International Trade has actively cooperated with EVN to provide technical support while various domestic enterprises also put the Vietnamese market under their radar. In the end, he hoped that Vietnam could develop a clean energy supply through a sustainable policy framework, and looked forward to an interesting webinar with lots of practical information from the UK’s experts.
The first presenter was Mr. Joshua Roebuck – Head of Policy and Strategy, Department of Business, Energy and Industrial Strategy – with the topic of the UK RE policies, where he explained why the Contracts of Difference (CfD) was gradually introduced and adopted in the country after giving the background of this industry since 1999. As one of the UK SDG priorities, along with climate change combat, RE has undergone a significant change since 2015, attributed to the Government’s proactivity in setting out clear strategies and annual goals, supported by attractive investment schemes for mid-sized projects. These factors are the foundations of a safe environment for potential developers, ensuring the program’s success.
In the UK, there were different renewable support schemes depending on the size of the project, among which, large-scale generation, once supported by RO (Renewables Obligation), is now going through the CfD bidding process. In essence, the CfD price is pre-agreed at a certain level (the Strike Price), based on which the payments for difference would be made by the government-owned company (when the market price is lower) or generator (when the market price is higher). Regarding the bidding process, auctions close as the cumulative spend by projects awarded CfDs reaches the maximum auction budget. After a period of implementation, this scheme has been backed by many successful high-quality projects with low tariffs. Looking forward to Vietnam’s complete RE transition from coal-fired power, he outlined some of the lessons learnt: (1) early long-term ambition determination; (2) integration into transmission; and (3) flexibility in the legal framework to adapt to changing conditions of the market.
The next presentation covered the operation of LCCC – CfD counterparty, shared by Mr. Neil McDermott, CEO of the Low Carbon Contracts Company (LCCC) and the Electricity Settlements Company (ESC). As mentioned, LCCC is an independent privately owned by the government, which shapes and implements schemes enabling low-carbon investment at the least cost to the consumers, while functioning as a power price forecaster to accelerate the delivery of UK Net Zero emissions.
To select the most appropriate bid, there are currently 4 allocation rounds carried out for each technology category, so-called “pot”: onshore wind and solar; remote island wind; fixed bottom offshore wind. These awarded projects, including 40 onshore and 15 offshore wind up till now, are qualified to be developed across the country. Since then, the total capacity and generation in the UK have been dominated by projects under CfD each year as the price of each round is getting lower. In addition, investors also show more confidence in the market due to the security of support levels. After 8 years of implementation, the UK has proved to be more efficient in CfD regulation, which both caters to market needs and protects the interests of investors. In Mr. Neil’s view, this scheme will open lots of potential for long-term clean energy development regardless of the project’s size and can be combined with PPA, depending on developers’ competency.
As the last speaker, Mr. Sam Rea – Senior Manager at the Office of Gas and Electricity Markets (Ofgem) – brought in Ofgem’s experience in tariff support allocation, risk management, or dispute resolution consultancy for each type of policy. For instance, the FiT regime typically includes guaranteed grid access and cost-based purchase prices, thus volatility risk and output planning must be taken into account. It is also worth noting that generators empowered by FiT should be carefully selected. On the other hand, the RO scheme places an emphasis on premium from ROCs. Particularly, developers gain economic benefit by selling these ROCs to suppliers, who are under obligation to obtain a certain number of ROCs. The purpose of this scheme is to create an open and market-based system, in which the extra amount of charge can be predicted by stakeholders.
The OFTO mechanism (Offshore Transmission Owner), as its name, is developed to identify the owner of offshore transmission, through which minimizes the cost of distribution and operation under continuous regulation, as well as provide stable national grid connection to a high standard, ensuring minimum tariff for consumers. In addition to Ofgem, Grid Code Review Panel is another administrative body in charge of the national grid, offering transparency and objectivity in management, as well as support. He finished off the presentation by introducing the UK PACT program – an initiative providing expertise in RE to meet the demand from both public and private sectors.
In the panel discussion, Mr. Nguyen Nam Trung – Director of Legal Department, EVNPECC3 – was in the role of moderator to help deliver questions to the Panelists:
What are the lessons learnt for Vietnam’s RE sector from your successful experiences?
Mr. Ian Hatton – Chairman & Founder Director, Enterprize Energy: We have developed large-scale projects similar to Thang Long Wind 3,400MW in the UK, the USA, and other countries. Taiwan also transitioned from the FiT regime to an auction scheme. Even though the RE sector in Vietnam can benefit from the EU-approved local supply chain of foundation, utility infrastructure, etc., it shouldn’t be viewed as a low-cost source of energy due to price changes in relevant orders. Regarding contract terms and conditions during the auction phase, I think the capital cost is the barrier to project development in Vietnam. For example, the 3,400MW Thang Long Wind project is the real gem for developers, yet still necessitates bank financing due to its enormous investment capital. Cost, hence, should be adjusted to ensure a good rate of return on capacity. Another issue with FiT is that developers can only benefit from it in the early days when the technology is already there. However, Vietnam should consider PPA as a priority in case of FiT reduction like in Thailand. Last but not least, flexibility and adaptability to change is the key to success. For example, the Thang Long Wind project was deemed to be included in Resolution 55, but the transmission line and storage system couldn’t keep up with its generated capacity, while the use of new inventions such as liquid-air or hydrogen-based energy storage for generation or export is totally viable. Overall, a new energy market is necessitated as developed countries have already undergone a transition to a less fossil fuel-dependent period.
What are the ways to limit and handle the risks such as delays in permitting, construction, land allocation, production, etc., or force majeure like the Covid pandemic in this multi-stakeholder approach?
Dr. Tran Dang Khoa – Director of Power Market Department, Vietnam Electricity (EVN): According to our statistics, there are 15GW of solar energy including both ground-mount and rooftop systems, 700MW of other clean energy, and 4GW of small and medium hydropower in operation, not to mention 400 PPAs on nearshore and offshore wind power, of which 1000MW have been signed and 300MW will officially be commenced by the end of November 2021. Due to the difference in auctioneer selection between Vietnam (regulated in Law on Bidding) and the UK (Government agency), the risk is balanced out for both parties as developers don’t own the land or water areas, which is another hindrance to RE development in Vietnam…The risk of site selection and permit-based site allocation is one of the issues that need addressing before handing over to developers. These are matters that ought to be incorporated into planning to streamline the process.
How to determine the auction demand and volume for different technologies? Should an auction be held for each project with a capacity of several to hundreds of MW?
Mr. Joshua Roebuck – Head of Policy and Strategy, Department of Business, Energy and Industrial Strategy: First of all, I want to emphasize that Vietnam should specify its system development strategy. In the UK, there are plenty of schemes to publicly update information on the number and size of ongoing projects, as well as a roadmap for offshore wind with capacity in need. Besides, we always come up with new solutions to ensure on-time project completion for different categories and sizes, in order to enable a competitive bidding procurement process.
Should developers be selected based on expertise and allowed to bids within a disclosed ceiling price (before or after its disclosure)? Under what circumstances, should the number of bidders be limited?
Mr. Neil McDermott – CEO of LCCC and ESC: LCCC is not involved in the developer selection process, which Joshua already mentioned. In my opinion, pre-qualifications and bidding documents must be well prepared by the government as those are the prerequisites for developers to be eligible. They must be ready in terms of financial and technical capacity as approved. Under 12-month CfD, developers must be able to cover permit fees and other payments of relevant contracts such as 10-15% of total capacity, material, maintenance, construction, etc. If not, they would be able to sign CfD with LCCC. Please note that CfD must be signed in combination with PPA, stipulating the reference price, as Sam has shared. There will be a separate auction for seabed identification and allocation for offshore wind projects in round 4, which requires EIA, project design, and so forth to enhance the winning probability of the bid.
What documents need to be standardized in regulations or by expert associations? What documents should developers prepare to deal with uncertainty about grid development or land acquisition?
Mr. Neil McDermott – CEO of LCCC and ESC: In CfD, developers will bear the construction risk and are only paid for the actual generation. Therefore, they can freely negotiate contracts for installation, deployment, financing, or discuss tariffs during the auction, etc. with other parties. These payments will be calculated into the CfD final price. In terms of financial capacity and access, developers can use relevant documents to seek other sources. However, the termination of CfD is likely to happen in case third parties’ standards are not met. In addition, LCCC also offers support regarding some contract provisions such as force majeure provisions, land use, site clearance, etc. As a suggestion, all technical issues need sorting out by developers to limit losses, since the CfD is only based on the amount of electricity produced and the fixed cost.
After introducing a preliminary mechanism such as FiT, is the wholesale price going to be affected?
Mr. Sam Rea – Senior Manager at Office of Gas and Electricity Markets (Ofgem): In my opinion, the wholesale price will increase, so suppliers, consumers, and even external factors such as the environment will be affected. This, in general, may push the electricity bills higher 3-4%. As our goal is to ensure people’s energy consumption at the lowest price, a ceiling price is also applied to protect their interests. In fact, there are businesses willing to pay the green tariff, as long as it is renewable electricity, to compensate for the price difference that consumers have to bear in the UK.
How to ensure competitiveness in the auction process? Should the ceiling price be disclosed before or after the auction process?
Mr. Neil McDermott – CEO of LCCC and ESC: It will depend on the government’s regulation. From my and other investors’ perspective, CfD is a good incentive to attract more developers to participate in the auction, which is also the end goal of it. In the UK, there are counterpart agencies that operate and manage CfD, facilitating a more transparent and efficient market. I believe that investors’ confidence plays a key role in enhancing competitiveness in the market. Plus, CfD should also be developed further to ensure his scheme is the perfect match for the current energy market.
Should investors offer a fixed price or just some ratio to a known or unknown ceiling price? Should financial institutions be involved in the auction process?
Mr. Neil McDermott – CEO of LCCC and ESC: As Joshua mentioned, in addition to price, the developer is also awarded based on technical and financial availability, as well as installed capacity. Financial institutions should be involved to understand the financial picture, not in a direct way, but through thorough discussion with investors.
Should new factors, local job creation, community benefits, among others be included in the bidding documents?
Mr. Neil McDermott – CEO of LCCC and ESC: The UK is currently applying an integrated approach for different projects to ensure the following auction criteria: operation, supply chain, infrastructure requiring huge workforce, local benefits, infrastructure development, maintenance of power plants and systems. Many job opportunities will be created to accommodate the growth of this whole system.
Dr. Tran Dang Khoa – Director of Power Market Department, Vietnam Electricity (EVN): Adding up on Mr. Sam and Mr. Neil’s comments on financial security contracts in Vietnam, even though wholesale electricity market has been implemented for many years, CfD contracts are not reliable enough to ensure bankability in Vietnam. Therefore, the transition from FiT to CfD in our country is a long process that requires great efforts, in which auction and other schemes such as DPPA to promote CfD has currently been discussed by the MOIT. Vietnam also learns from the UK’s experience in offshore wind development as the country has long prioritized this sector and carried out plenty of surveys on site, seabed conditions, metocean, etc., in advance for the investors. Plus, since submarine transmission lines aren’t available in Vietnam, the scheme should focus on inland projects to create an attractive and competitive investment environment.
There were more than 20 questions answered by Speakers in the Q&A function. To conclude the seminar, Ms. Vu Quynh Le – Deputy Director, Procurement Management Department, Ministry of Planning and Investment – has expressed her interest in the insightful content and lessons since day one. She believed that today’s valuable information will soon be factored into the development and approval of important policies in Vietnam’s RE sector going forward.
The organizers would like to thank Enterprize Energy and ACSV Legal as sponsors supporting PECC3 and CPS to successfully organize the seminar today.
To get an overview of other sessions (Denmark, India, Germany, USA), please find details at the website of Power Engineering Consulting JS. Company 3 (PECC3). We are proud bringing our integrity and trust to our distinguished partners through this webinar series.
The webinar series “International Experiences in Renewable Energy Auction” (IEREA2021), organized by PECC3 with the support of the Center for Procurement Support (CPS), the Public Procurement Agency of the Ministry of Planning and Investment, concluded successfully with its second session at 3 p.m. on August 18th, 2021. The session concentrated on India’s experiences with solar auction mechanisms.
Mr. Tran Quoc Dien – Deputy General Director of PECC3 – started his remark by expressing warm welcome to the distinguished guests from the Embassy of India and Vietnamese Ministries, Branches, as well as Indian experts and other business representatives. He also emphasized on the close partnership between two countries, and the importance of the renewable energy market in Vietnam.
Ms. Vu Quynh Le – Deputy Director General, Public Procurement Agency, Ministry of Planning and Investment of Vietnam – also appreciated the participation of Indian representatives in this session to share their experiences on the topic. She briefly summarized Resolution 55 on renewable energy development in Vietnam and expressed her desire to learn from experiences of the Indian Prime Minister in investor-state dispute resolution during the implementation process. Finally, she expressed her gratitude to the Indian Business Chamber in Vietnam (Incham) and Federation of Indian Chambers of Commerce & Industry (FICCI) for having supported PECC3 in launching the event.
On the Indian side, the first speaker to deliver the opening speech is Ms. Mini Kumam – First Secretary (Economics & Commercial), Embassy of India in Hanoi. She led us through Indian power industry restructuring and their renewable energy targets by 2030.
Ms. Malvika Kareer – Senior Assistant Director in International Affairs division of the Federation of Indian Chambers of Commerce & Industry (FICCI) – recognized this webinar series “International Experiences in Renewable Energy Auction ” as a creative initiative. Founded by Mahatma Gandhi as a commercial organization specializing in planning initiatives, FICCI wishes to cooperate with Vietnam in the upcoming activities and projects.
Mr. Devin Narang – Country Head of Sindicatum Renewable Energy (India) – presented that India is quickly restructuring the solar power planning mechanism. India utilised a reverse auction and welcomed all bidders. This approach brought more successful auctions than applying a high FiT scheme 10 years ago.
India is a federal country comprising many states with their own policies. Meanwhile, the projects are run by the federal government, which forms a barrier in land use and electrical transmission issues. At that time, the reverse auction was also hindered by many complicated regulations. If the planning is not correct, solar power investors will suffer heavy losses. In addition, India faces burdens such as interest rate, disparity between investors’ desires, as well as disparity between states’ wishes and government regulation.
In the past, many projects were canceled due to conflicts in tariff policy. This led to the cooperation between the Ministry of New & Renewable Energy and the Renewable Energy Developers Association to timely handle the issues and ensure maximum benefits for investors. In case of ongoing projects, the court may decide in favor of investors. As the solar sector is boosted by plenty of incentives in Vietnam, we recommend paralel task of land-use and transmission planning, to ensure generation to the grid. In terms of finance, regulations on exchange rates, interest rates and profits need to be taken into consideration in each stage.
From the legal perspective, Ms. Poonam Verma – Partner, J. Sagar Associates – pointed out some of the highlights in the Indian renewable energy auction. In the last 6 years, the solar capacity increased by 6 times, exceeding the 4-year plan for renewable energy development, which was attributed to great efforts of the Ministry of New & Renewable Energy. She also briefly shared the evolution milestones of India’s renewable energy. India has allocated an enormous budget ($351 million) for the development of solar power projects, including the power grid. Along with that, the Ministry of New & Renewable Energy also focuses on supporting investors and developing new initiatives. India is renowned for its solar parks, the largest of which has an installed capacity of 30 GW and is currently under construction in Gujarat. States would prepare land, infrastructure, and transmission lines in advance under this solar park model. Additionally, solar equipment manufacturers and importers are provided with incentives in India.
After sharing information about the government’s support for businesses, especially investors, Ms. Poonam emphasized that the government has put in place a mechanism to minimize state involvement in power distribution management after production, maximizing investor opportunities. With the support from the United Nations and World Bank, India exceeded its plan of 100GW wind power and 60GW solar power (targeted by 2022). Thanks to abundant capital and the increasing participation of investors, the price of solar power in India is getting lower.
In India, there are specialized bodies for dispute resolution, namely Central and State Electricity Regulatory Commissions. IThe government also issues Decrees and relevant laws for each auction stage. On top of that, India aims to create an open and supportive environment to ensure sound dispute resolution for relevant parties. Bilateral, multilateral treaties, international treaties, arbitration or international mediation are other alternatives that investors can opt for. She also shared India’s practical experiences on renewable energy dispute resolution (Rewatch the session for details).
Today’s Panel discussion was moderated by Mr. Vaibhav Saxena – Foreign Counsel, VILAF and Vice Chair, InCham.
What are the shortcomings of the current tariff mechanism for investors and how should it be adjusted? If the lowest bidder does not meet the technical qualification, can they proceed with the awarded price or have to renegotiate the contract for a lower price?
Ms. Poonam Verma – Partner, J. Sagar Associates: Investors can still try their best to negotiate with the government. The government has no right to push the price lower. Investors totally have the influence over this. They can even withdraw from the auction if the lower price is out of their capability. In case of going to court, the court tends to be on the investor’s side as they have followed the procedures. However the government, in a few circumstances, may win the case if they have evidence that supports the price reduction.
Is there any risk-proof legal framework for auctions?
Dr. Nguyen Minh Hang – General Secretary, Vietnam International Commercial Mediation Center (VICMC): Investors often plan ahead on how to resolve arising disputes. Today, the Indian experts shared a very effective dispute resolution mechanism for the renewable energy industry. In Vietnam, we have the Law on Bidding 2013 (Article 92), the Law on PPP 2020 (Articles 95, 96). Specifically, in the Decree of 2021 (Articles 73, 74, 75), we already have the Settlement Advisory Council at the national, ministerial and local levels. However, its decisions lack enforceability, so they are just for reference only. Therefore, we recommend that a more robust Council mechanism should be in place to ensure the enforceability of its decisions. Plus, council members must include experts from relevant industries. By doing so, we prove that this Council neither offers advice only nor stands on the side of the government. In addition, the current dispute resolution trend is gravitating towards mediation instead of courts. On that note, we can learn from India in developing dispute resolution guidelines for appropriate methods along every stage of the project.
Ms. Poonam Verma – Partner, J. Sagar Associates: In India, there is also a Committee – including 3 members, one of which is a government official – resolving contractual disputes in the energy industry. Although these decisions are not legally binding, they could be an option, along with other Decrees or Decisions, for relevant parties to proceed in avoidance of a lawsuit. Each state has its own open dispute resolution mechanism to ensure the highest level of enforceability of the contract
How has India developed a mechanism on investor-state dispute settlement?
Ms. Poonam Verma – Partner Lawyer, J. Sagar Associates: The parties, in essence, prefer to have a gentle dispute settlement process whether in court or not. In fact, it took 10 years and billions of dollars for some projects to get the final award from the court. Given the scale of these projects, it would be a lengthy and complicated process. Therefore, we usually recommend that disputes should be solved at the lower level by applying other non-court alternatives if the investor’s interest is still secured. In addition, a choice of law should be made through an agreement or negotiation between parties and depend on a specific case. I wonder if anyone wants to add up on that?
Ms. Vu Thi Chau Quynh – Deputy Director General of Legal Department, Ministry of Planning and Investment of Vietnam: ‘Dispute is inevitable in such a broad and multi-stakeholder energy sector. On the average, disputes occur in 20% of all projects, among which energy projects account for 17% according to ICC. Besides, due to the complicated auction process, there is a high probability that investor-state disputes are first to take place at stages where investment is yet to be made. In some projects, investors even invoke clauses in International Treaties to eliminate the participation of the governments in power transactions, or bring the dispute into international courts and demand damages on different grounds as the auction process is perceived as not transparent. However, these cases rarely happen. What matters is clear regulations on violations.
Ms. Lai Thi Van Anh – Deputy Director General of Department of International Law, Ministry of Justice of Vietnam: The possibility of an investor-state dispute occuring is very low because it is clearly prescribed in the laws and decrees. Even though the energy sector has the highest dispute rate, most of them tend to be in the implementation stage, while bidding process disputes are inconsiderable. Regarding the price adjustment, these requests are mostly made by investors rather than governments. In addition, thorough preparation of the proposal and bidding process is required before both sides sign the contract.
Assoc. Dr. Nguyen Minh Hang – General Secretary, Vietnam International Commercial Mediation Center (VICMC): I totally agree with Ms. Quynh and Ms. Van Anh that there is a small chance that an investor-state dispute is going to happen. However, we need a domestic mechanism to protect investors’ interests. Currently, the operation of the Settlement Advisory Council is not effective enough to resolve disputes over PPA despite the participation of the Electricity Regulatory Agency of Vietnam (ERAV). Therefore, in order to gain the trust of investors, the government needs to think of an objective mechanism with legal binding powers, under which disputes would be resolved faster by a new established Board or through more effective policies, along with detailed guidelines on alternative dispute resolution such as commercial mediation, arbitration or other forms.
What are the suggestions for Vietnam in designing the auction scheme from Indian experience?
Ms. Poonam Verma – Partner, J. Sagar Associates: One of the important factors is the policy makers need to anticipate different scenarios and specify special provisions for force majeure, changes, provisions for force majeure, termination of contract and dispute resolution mechanisms, etc. These elements must be taken into consideration before designing an auction model. After the bid is awarded, the focus should be on the contract management, which requires risk control boards to strictly monitor the implementation so as to limit arising issues.
Ms. Lai Thi Van Anh – Deputy Director General of Department of International Law, Ministry of Justice of Vietnam: In addition to a well-developed auction scheme, the emphasis should be placed on investors’ technical and financial capacity. In some cases, the Government has to terminate the contract as the winner is unqualified, even though agreement on price is reached. Therefore, the top priority is to carefully prepare qualifications in the invitation stage. In addition, bidding documents should clearly inform investors on dispute resolution and price to avoid future problems.
Ms. Vu Thi Chau Quynh – Deputy Director General of Legal Department, Ministry of Planning and Investment of Vietnam: To resolve the RE dispute, the auction policy should be consistent with the applicable laws. The purpose of auctioning is not to find a good price agreement for the EVN or the Government, but to choose a developer meeting technical and financial qualifications for a particular project. I agree with Ms. Van Anh about the preparation of bidding documents. If we want to come up with new auction models, more capacity building programs need to be carried out. In addition, tariff support schemes must ensure both investment attraction and the country’s own resources. For example, the Spanish FiT regime was first applied in unlimited periods, causing financial restraints as equipment was fully depreciated. Hence, the decision on FiT reduction took its toll on investors’s provision. As a result, transparent support schemes, tax policy and planning are the prerequisite for investors’ better financial preparation and dispute avoidance. Plus, dispute resolution alternatives such mediation or arbitration should be encouraged.
What are the lessons learnt and what can Vietnam take from the success story of India for future development?
Ms. Poonam Verma – Partner, J. Sagar Associates: The key lesson we’ve learned over the years is how to speed up the dispute resolution process. In large-scale projects involving various stakeholders from different countries, the longer dispute gets resolved, the more damages relevant parties have to suffer. Therefore, we always prefer to resolve dispute, mainly derived from capital, before resorting to court. If the project deployment, handover and dispute resolution, in which legitimate interests of parties are protected, is carried out in timely manner, the legal framework might be completed in the next 3 to 4 years. In addition, payment methods should be specified in the, for example, 25-year contract as both parties agree on long-term vision. Both Indian government and investors are now benefitting from a robust legal framework.
According to Ms. Pooman, Vietnam seems to be in a better position than India. Is there anything that our Vietnamese panelists want to add up?
Ms. Lai Thi Van Anh – Deputy Director General of Department of International Law, Ministry of Justice of Vietnam: It would be better for the government to have consistent and appropriate investment policies to avoid any unnecessary conflict. I have seen how these types of change result in disputes or make the situation worse for stakeholders.
How can we improve the role of the Settlement Advisory Council and the enforceability of its recommendations?
Assoc. Dr. Nguyen Minh Hang – General Secretary, Vietnam International Commercial Mediation Center: The regulation on the establishment of Settlement Advisory Council at different levels, in both the Law on Bidding and the PPP Law, can come in handy in this current context. However, my recommendations are as follows: (1) the need for the involvement of legal, technical, and financial experts to ensure investors’ interests are best protected; (2) a more robust mechanism in which Council’s recommendations are legally binding. These factors will lay out the foundation for our future support policies based on the PPP Law when the auction scheme is applied.
Ms. Lai Thi Van Anh – Deputy Director General, Department of International Law, Ministry of Justice: ‘We also have article 97 in the PPP Law that can be applied to all disputes between businesses, investors and the government. This provision is not much different from the dispute resolution clause in the Law on Investment, from which we have another approach to settle disputes in PPP projects.
After the panel discussion, on behalf of organizers, Ms. Nguyen Thi Dieu Phuong – Director, Center for Procurement Support delivered a closing remark to conclude today’s session. It is believed that dispute resolution in public investment and PPP projects is the main interest of Vietnam’s National Assembly and the Government. She hoped that Indian experts and representatives would continue to offer their expertise to assist Vietnam agencies in policy planning and development for all projects, particularly in the RE sector.
Mr. Nguyen Tuan Phat – Legal Counsel, PECC3 introduces speakers and presentations in the session
To get an overview of other sessions (Denmark, UK, Germany, USA), please find details at the website of Power Engineering Consulting JS. Company 3 (PECC3). We are proud bringing our integrity and trust to our distinguished partners through this webinar series.
The webinar series “International Experiences in Renewable Energy Auction” (IEREA2021) was successfully launched on August 17th, 2021 at 3 p.m. by PECC3 with the support of the Center For Procurement Support (CPS), Public Procurement Agency – Ministry of Planning and Investment.
Mr. Tran Quoc Dien – Deputy General Director of PECC3 – delivered an welcoming remark, expressing his thankfulness to the Danish Embassy and Danish experts, as well as the representatives from ministries, agencies, associations and Vietnamese enterprises, for their participation.
After Mr. Dien, Dr. Ta Dinh Thi – Director General of Vietnam Administration of Seas and Islands, Ministry of Natural Resources and Environment of Vietnam – delivered an opening speech, regarding the great national benefits from the well-developed offshore wind power, drawing huge attention from the government and stakeholders.
Mr. Malte Möller-Christensen – Deputy Head of Mission, the Embassy of Denmark in Hanoi – briefly shared on Danish offshore wind power well-development and the importance of open dialogue with all stakeholders.
After the opening remark are the presentations of the speakers.
Ms. Camilla Holbech – Energy Counsellor Offshore Wind, the Embassy of Denmark in Hanoi – gave a detailed presentation on the Danish auction design. She emphasized on de-risking strategy for the development of offshore wind projects. Denmark welcomed all the bidders and spent time on understanding them. Basically, Denmark has built a 5-step auction process with specific pre-qualifications, including technical and financial capacity. Preliminary studies on location, geology, environment, etc. are challenging for bidders. Besides, she expressed Denmark’s interest in sustainable development and risk allocation for stakeholders being affected by Covid-19 in the Vietnamese market. With 25 years of experience, Denmark has completed a clear and sustainable auction framework (to be clarified in the presentations).
In the next presentation, Mr. Michael Stephenson – Associate Director at The Renewables Consulting Group, shared his experience in international renewable energy consulting and overview of future offshore wind projects in Vietnam.
He introduced two types of auctions (one-stage or two-stage auctions for exclusivity or offtake) and three types of transition studies, as well as showed the difference between the old and new auction mechanisms. He also pointed out their lessons learned, especially how to leverage CfD auctions to categorize projects through a case study – 2GW project, in the UK. Moreover, he showed how Germany underwent a transition from a scheme where FiT was applied for the 5GW, without having to take on an overlap approach like that in the UK. Meanwhile, the Danish government benefited from the early adoption of the auction scheme without being affected by overlapping mechanisms. In Taiwan, while implementing a stepping stone transition, the government not only focused on price, but also on the feasibility of the project, technical and financial capability of investors.
In the Netherland’s case, the FiT was utilised prior to stepping stone, then competitive auctions were gradually rolled out with some successful commercial strategies. In the last case study, France transitioned to auction without any prior support mechanism such as FiT, which posed a high risk for bidders. This was viewed as one of the reasons for stagnation of this mechanism in France. In summary, the key takeaway for Vietnam is to consider carrying out a sustainable transition as performed in Denmark, to avoid delays and arising problems. Otherwise, it would take plenty of time to complete the framework. Plus, he recommended Vietnam should only apply the stepping stone transition for 4-5GW.
Following up, Mr. Sebastian Hald Buhl – Country Manager, Orsted Vietnam, introduced Orsted as a Danish majority-state owned energy utility, which has developed various large-scale projects in Denmark and the UK. Currently, 25% of global offshore wind is built by Orsted, including North America and Asia.
The site selection will directly affect the cost for some following reasons: wind resources, seabed, water depth, project size and operation. Therefore, he recommended that the developers should still exercise significant influence over the final site selection. He also shared other information such as: Vietnam seabed lease fees (especially after Decree 11 dated February 10, 2021), which are very high while there is no such fee in Germany, Denmark and Japan and a case study of MSP in the North Sea, where there is a high density of overlapping shipping lanes. Here are some of Orsted’s recommendations for Vietnam: Immediate implementation, government’s role enhancement, suitable site selection, investors’ influence over project site, harmonious coexistence between wind projects and other economic activities. (Clarified in the presentation).
Dr. Dinh Van Nguyen – Director of Industry Projects, MaREI National Centre for Energy, Climate and Marine; UCC, Ireland moderated the Panel discussion with interesting and practical questions.
What is the prerequisite for designing the offshore wind auction mechanism in Denmark?
Ms. Camilla Holbech – Energy Counsellor Offshore Wind, the Embassy of Denmark in Hanoi: The secured involvement of the government in a long-term development strategy is very important, in which they have to thoroughly prepare the auction framework before adoption.
From the perspective of the National Border Committee, can you share your viewpoint on offshore wind development in Vietnam?
Mr. Nguyen Manh Dong – Vice Chairman, National Boundaries Commission, Ministry of Foreign Affairs of Vietnam: As a state agency, our main concern is the national border and sovereignty over the sea and islands.
Today’s session will contribute a lot of useful information for the ongoing process of building legal frameworks and relevant policies in this sector. Offshore wind sector in Vietnam, with the participation of foreign investors, will certainly serve the economy well. Vietnam has issued decrees on sustainable development with a vision to 2045. The Resolution 56 specifies that marine economic development should be accompanied by green and sustainable development. Offshore wind power is an industry that is following the direction of the country, as well as receiving a lot of attention from wind investors in Vietnam. Therefore, we also welcome the participation of foreign investors. According to our current calculations, the exploitation area is currently quite close to the coast, so we hope to have initiatives to push the exploitation of offshore wind power.
How can the MSP process be developed in 1 year and implemented in line with international standards in 2-3 years?
Dr. Ta Dinh Thi – Director General of Vietnam Administration of Seas and Islands (VASI), Ministry of Natural Resources and Environment of Vietnam: Currently, the VASI is coordinating with other agencies to submit the National marine spatial planning and sustainable marine development plan to the government in 2021.
What is the legal basis for marine spatial planning? How can we accelerate this process through an interdisciplinary approach?
Ms. Lai Thi Van Anh – Deputy Director General of Department of International Law, Ministry of Justice: As Mr. Sebastian recommended, an integrated and cross-sector approach will be our priority. Legally, it is not difficult. However, when it comes to implementation, we may face some obstacles such as how to create a cooperation framework for relevant units and local authorities, as well as tourism, fishing and seafood industries. This would take a huge amount of time and require the assistance from experts, scientists, economists. Plus, it also necessitates government’s guidance, led by the Prime Minister, to create a coherent and unified process from the central to local levels.
How can Denmark help Vietnam develop a marine spatial planning that meets international standards?
Ms. Camilla Holbech – Energy Counsellor Offshore Wind, the Embassy of Denmark in Hanoi: To answer this question, we need to know the Vietnam government’s priorities. We also suggest that Vietnam should establish a Steering Committee led by the Prime Minister. In general, it is important to set out a strategy that can gain support from the community. Plus, since Vietnam and Denmark share similarities in this sector, we can help.
Is there any local content requirement on installed capacity in Denmark? Normally, when should an auction start?
Mr. Michael Stephenson – Associate Director at The Renewables Consulting Group: I don’t have a specific number yet, but from my experience, the FiT scheme can be a bit higher. Taiwan has also utilised the FiT scheme to enhance localization, but it is not always the other way around as the most competitive bid wins. In Taiwan, their auction qualifications include other technical requirements than just price. Regarding local content, it depends on a specific region. For example, in a developed market such as Europe, the rate is much lower. On the other hand, due to the aim of local supply chain and ancilleries industry in Asia, the regulation of local content shouldn’t be too specific. A general number for the overall development is enough, I think.
Do you have any recommendations for Vietnam to both speed up the auction preparation process while maintaining the investors’ interest?
Mr. Keld Bennetsen – Vice President, Head of Business Development and New Markets at Copenhagen Offshore Partners (COP): We need to make sure the FiT scheme is attractive enough for investors before moving to the auction scheme. From our perspective, a set GW capacity would be a great start for the new adopters like Vietnam. The RE sector in Europe has been through a 10-year journey with government support, and if the Vietnam central and local government can identify a good project to pilot this scheme and attract investors, it would lay out a firm foundation for upcoming projects.
How can we categorize RE projects (wind, solar, etc.) to ensure a fair competition?
Mr. Keld Bennetsen – Vice President, Head of Business Development and New Markets at Copenhagen Offshore Partners (COP): We can categorize these projects based on technology to reduce competition. In the UK, investors only participate in the auction if it is a RE project which is deemed to have attractive ROI in the long term with enough potential resources. We should carefully review the risk factors presented by the previous speakers. If Vietnam has a large enough resource and a robust regulatory framework, they will naturally attract investors.
Are the qualifications and requirements based on investor capacity or other criteria? How to ensure the quality of bidders?
Mr. Michael Stephenson – Associate Director at The Renewables Consulting Group: The winner should be the one that creates the most value from the projects. We should neither limit the number of bidders nor make decisions solely based on documents and prices. Of course, investors will participate and compete mainly on price. Therefore, the council needs to design an auction that includes other qualifications such as financial capacity, ability to meet auction targets, reputation, etc.
How to ensure fair competition in the auction? How should inclusive growth factors (small/new contractors, local employment, community benefits, etc.) be integrated in the preparation process of bidding documents?
Ms. Vu Quynh Le – Deputy Director General, Public Procurement Agency, Ministry of Planning and Investment of Vietnam: Actually, I want to hear the experience from the international side first as the MPI and the MOIT are developing the auction framework. The first three presentations, on how the auction preparation process can enhance competition and the capacity of the bidders, and reports that Michael shared can be of great help to us. We are now in the transition stage of FIT and auction.
Mr. Keld Bennetsen – Vice President, Head of Business Development and New Markets at Copenhagen Offshore Partners (COP): If we attract a large number of domestic and foreign developers to participate in the auction, it will pave the way for more foreign investments, survey and investigations activities, etc.in the market. In addition, it would be a plus for the Vietnamese workforce to learn from international experiences through these projects, not to mention the involvement of universities and stakeholders in operation. In addition, new equipment and technical expertise, among others, are also factored into the development of the market, which, if mature enough, will lay the foundation for quality labors in the offshore wind sector.
How to avoid risks related to delay in commencement, approval, land acquisition, etc.?
Mr. Keld Bennetsen – Vice President, Head of Business Development and New Markets at Copenhagen Offshore Partners (COP): We need to ensure a detailed plan and clear timeline. However, there are things that are more difficult to control such as the seabed, land, etc., which may be delayed by stakeholders. From the experience of Denmark, we prefer the one-stop-shop system, in which the Danish Energy Agency operates as the focal point to ensure transparency and consistency. This approach is also effective in addressing issues derived from force majeure or other unexpected risks.
Ms. Nguyen Thi Dieu Phuong – Director of the Center For Procurement Support closed the webinar by expressing her appreciation to the Danish Embassy and Danish experts, as well as the representatives from ministries, agencies, associations and Vietnamese businesses, for their participation. Currently, the Danish government and experts are ready to support the Vietnamese government.
To get an overview of other sessions (India, Germany, UK, USA), please find details at the website of Power Engineering Consulting JS. Company 3 (PECC3). We are proud bringing our integrity and trust to our distinguished partners through this webinar series.
Law on public-private partnership investment No. 64/2020/QH14 promulgated by the National Assembly on 18 June 2020 (“PPP Law”) takes effect from 1 January 2021. Decree 35/2021/ND-CP issued by the Government on 29 March 2021 detailing and guiding the implementation of the PPP Law (“Decree 35”) takes effect from 29 March 2021.
Petitions settlement arising from investor selection activities and the dispute resolution between the State, investors, PPP project enterprises, or other related stakeholders are specified in the PPP Law and Decree 35 with the following key takeaways:
Reported by Pham Tran Bao Khanh/Nguyen Tuan Phat (Legal Department PECC3)
The Law on Public-Private Partnership Investment 2020 opened the door for auctions to select investors of certain renewable energy projects. Nguyen Tuan Phat, head of the Energy and Infrastructure Working Group of the Vietnam International Commercial Mediation Center, writes about the dispute resolutions and one of the more notable challenges, which policymakers should take into account.
The Law on Public-Private Partnership Investment 2020 came into effect on January 1, helping to facilitate open auctions to select investors of renewable energy projects with a total contribution of at least VND500 billion ($21.7 million), except when investing in power transmission systems.
According to Article 96 of the law, if any dispute cannot be settled amicably by the investors and the procuring entity, the investors can bring the case to the competent authorities and the Dispute Settlement Advisory Board.
Article 74 of Decree No.35/2021/ND-CP states that this board is an ad hoc committee that decides by majority votes and is established within five working days from the receipt of the settlement request from an investor.
The board would be divided into three levels. First is central government level: including the chairman – who is the representative of the Ministry of Planning and Investment (MPI), the members who include other representatives of the MPI, the competent authority, the central agency or another agency, and relevant associations and experts if the chairman deems these necessary.
Second is the ministerial level, including the chairman who is also the head of the agency in charge of the managing investor’s selection, along with other members including representatives of relevant agencies, competent authorities, and associations and experts.
Third is the local authority level: the chairman, who is director of the department of planning and investment; with other members including representatives of the department, competent agencies and representatives of specialised agencies under provincial people’s committee, and relevant associations and experts.
However, the Dispute Settlement Advisory Board will not decide how the dispute shall be settled. The board will send a report on the dispute resolution to competent agencies for consideration and issuance of decisions.
In practice, such a board regarding the investor selection of auction of renewable energy projects has yet to be actually established. Therefore, the risks on applicability and feasibility of the board should be appraised diligently by learning from experiences of other countries, such as India, which is implementing auctions for solar energy projects under public-private partnership (PPP) frameworks.
In March last year, Gujarat Urja Vikas Nigam from the state electricity regulation board of Gujarat (GUVNL), invited bidders for the 700MW solar auction in Dholera Solar Park of the state of Gujarat, which was developed by GUVNL.
Last October, ReNew Power, Tata Power, state-run SJVN Ltd., TEQ Green Power, and Vena Energy Renewables Urja were issued a Letter of Award for capacity at prices up to 3.84 US cent per kWh.
However, in last December, a 500MW solar auction by GUVNL yielded a new record low tariff of 2.72 US cent per kWh.
Therefore, GUVNL ordered the Gujarat Electricity Regulatory Commission (GERC) to re-tender the 700MW Dholera auction because, in light of the latest price trends, the financial implication of higher tariffs offered for a period of 25 years would be substantial.
In February, the GERC approved GUVNL’s order to cancel the 700MW solar auction as it appeared to be for the public and common good, with the beneficiary being the public if the lowest tariffs were found.
This was not the first time the state of Gujarat cancelled solar auctions. Citing winning bids that were too high, the state had cancelled its 500MW auction held in March as well as one in December 2018.
Immediately after the GERC approved GUVNL order to cancel the 700MW solar auction, Tata Power, SJVN, and Vena Energy filed an urgent listing with the Appellate Tribunal for Electricity (APTEL).
APTEL had been established by India’s Ministry of Power to hear appeals against the orders of the adjudicating officer or the Central and State Electricity Regulatory Commissions under the Electricity Act 2003.
In February, APTEL heard the case filed under an emergency listing by Tata Power and others and reserved judgment on the matter. Until an interim order is passed, GUVNL cannot go ahead with its intended re-auction of the same project.
From India’s experience, a dispute settlement advisory board of renewable energy projects under the PPP law of Vietnam might face similar issues of authorisation because the board has no power to decide how the dispute shall be settled. Additionally, the board has no decision-making power in how to mediate between the investors and procuring entity.
Currently, Vietnam’s Ministry of Industry and Trade (MoIT) is developing a mechanism to encourage the development of solar power in Vietnam which might not follow the law on PPP. However, following the open auction mechanism under the law is also an option for the MoIT.
In either case, today’s crisis in India could be the future of Vietnam. Therefore, Vietnamese policymakers should prepare for a potential crisis of dispute resolution.
Decree 15/2021/ND-CP detailing contents on the management of construction projects was issued and took effect from 3 March 2021. This article compares the regulations on the application of foreign standards mentioned in Article 8 of Decree 15/2021/ND-CP on a comparable basis with the provisions under Article 6 of previous Decree 46/2015/ND-CP.
Under previous Decree 46/2015/ND-CP, the application of the standard “shall comply with the provisions of Article 6 of the Construction Law and the relevant regulations issued by the Ministry of Construction“.
Under Decree 15/2021/ND-CP, the selection and application of foreign standards shall comply with “the provisions of the Construction Law and other relevant laws and regulations“. This is a change comparing to Decree 46/2015/ND-CP.
Under previous Decree 46/2015/ND-CP, there are at least 3 documents that shall submit for approval for the application of foreign standards, including:
Under previous legislation, the Employer (together with the Consultant/Contractor/ Supplier) shall prepare a dossier and submit it to the investment decision maker for approval of each foreign standard to be applied. The dossier shall contain a report comparing the foreign standard to be applied with equivalent Vietnamese standards, together with the reasons for not applying the Vietnamese standard. The submission requirement of “full-text standard” also causes copyright infringement in cases the parties have purchased the original standard from an international or foreign organization that contains the requirements have not been allowed to make copies. Providing Vietnamese/English translations of original standards from foreign languages (for example Russian, French, Chinese, German, Japanese, etc.) cause financial and time burden for the parties.
Until Decree 15/2021/ND-CP, the only mandatory requirement for the application of foreign standards is: “The design reports or technical specifications (if any) shall contain the assessment of compatibility, uniformity, and compliance with national technical regulations“. Hence, it is only necessary to add 1 chapter explaining the general assessment in the construction design or technical instructions without containing complicated documents such as Decree 46/2015/ND-CP. It saves time and unnecessary costs in applying foreign standards.
Under Article 8.2 (b) of Decree 15/2021/ND-CP, for the first time the regulation mentioned that “Application of recognized and widely adopted foreign standards shall be priority”. This is a new and progressive point, closer to the government policy on the development of activities in the field of standards under Articles 7 and 8 of the Law on Standard and Technical Regulations: “Encourage domestic and foreign organizations and individuals as well as overseas Vietnamese to participate in formulating and applying standards and technical regulations” and “Encourage expansion of cooperation with other countries, territories, international organizations, regional organizations, foreign organizations and individuals on standards and technical regulations“.
With new materials and technologies being applied for the first time, while Decree 46/2015/ND-CP requires that “shall meet the requirements of relevant technical regulations and legal regulations“, Decree 15 2021/ND-CP only request “shall comply with national technical regulations and relevant standards; ensure feasibility, sustainability, safety, and efficiency“.
With previous Decree 46/2015/ND-CP, to apply new technical solutions, technologies and materials for the first time in Vietnam, it is required that “shall present the basis and documents proving the safety, effectiveness and feasibility of such application to a competent agency for appraisal during the appraisal process of the construction design according to the legislations on construction“.
With Decree 15/2021/ND-CP, this condition is removed providing more favorable conditions for the parties to deploy and apply new materials and technologies in construction activities.
Reported by Nguyen Nam Trung (Legal Department of PECC3)
Decree 15/2021/ND-CP issued by the Government on 3 March 2021 detailing the contents on management of construction projects of the Law on Construction 50/2014/QH13 issued by the National Assembly on 18 June 2014 (amended on 17 June 2020) (“Decree 15”). Decree 15 takes effect from 3 March 2021, replacing Decree 59/2015/ND-CP issued by the Government on 18 June 2015 and Decree 42/2017/ND-CP amending Decree 59/2015/ND-CP issued by the Government on 5 April 2017 on management of construction projects.
Construction practicing certificate for individuals being Vietnamese citizens, overseas Vietnamese or foreigners who legally carry out construction activities in Vietnam to hold certain positions or practice independently (“Practicing Certificate”) is regulated under Decree 15 with the following key takeaways:
Reported by Nguyen Chau Phong/Nguyen Tuan Phat (Legal Department of PECC3)