Vietnam is considering retroactively adjusting the Feed-in Tariff (FIT) rates for solar energy projects raising significant concerns among foreign direct invested (FDI) enterprises. The FIT rate, initially set at 9.35 cents per kilowatt-hour (kWh) could potentially be reduced to 7.09 cents or even 4.8 cents per kWh, VN Express has reported.
Concerns raised include:
- Financial viability: Companies like Bangkok Glass Energy (BGE), which invested in solar projects under the original FIT rate, fear bankruptcy if the rates are lowered. BGE’s Executive Director, Trần Minh Tiến, highlighted that their investments were predicated on the initial tariff, and a reduction would result in severe financial losses.
- Debt repayment challenges: B.Grimm Power Vietnam, a Thai investor, has said that their 500 MWp projects, financed through loans from the Asian Development Bank (ADB), would struggle to repay debts if subjected to the reduced FIT rates.
- Legal and contractual issues: Investors argue that they have adhered to power purchase agreements (PPAs) with Vietnam Electricity (EVN), which recognized their commercial operation dates. They contend that retroactive application of new FIT rates lacks clear legal justification and undermines contractual commitments.
Of note, the policy shift has led some foreign investors to say they are reconsidering their presence in Vietnam’s renewable energy sector. Approximately one-third of the affected projects involve foreign investors from countries such as France, Japan, and Thailand, with total investments estimated at $4 billion.
The retroactive adjustment of FIT rates presents substantial challenges for FDI enterprises in Vietnam’s renewable energy market. Addressing these concerns is essential to maintain investor trust and ensure the continued development of the country’s renewable energy infrastructure.