Knowledge Highlights 26 December 2024
Vietnam issues new decree on self-produced and self-consumed rooftop solar power
On 22 October 2024, the Vietnam Government issued Decree 135/2024/ND-CP to encourage the development of self-produced and self-consumed (“SPSC”) rooftop solar power (“Decree 135”). Decree 135 came into effect on issuance.
This Article highlights some of the key provisions of Decree 135.
Self-produced and self-consumed electricity
Decree 135 applies to organisations and individuals that manage and participate in rooftop solar power development in Vietnam in the form of “self-production, self-consumption” on the rooftop of various construction works (including residential houses, public offices, industrial zones and clusters, export processing zones, high-tech parks, economic zones, production facilities and business establishments).
Decree 135 defines the term “self-produced and self-consumed electricity” as “electricity produced and consumed by the same legal entity or individual to bring benefits mainly to that organization or individual”. Put simply, in a “self-produced and self-consumed electricity” arrangement, the electricity generator and electricity consumer are the same legal entity. Where electricity is directly traded between organisations (that is, the generator and consumer are different private entities), Decree 135 expressly provides that such trading will be carried out in accordance with the Direct Power Purchase Agreement (“DPPA”) regulations. For more on the DPPA regulations, please see our article “Vietnam sets out framework for direct power purchase agreements”.
Categories under Decree 135
Decree 135 generally applies different regulatory and licensing regimes for SPSC rooftops systems based on the following three categories.
Category 1: Grid connected / non-grid connected
Decree 135 draws a distinction between grid connected rooftop solar power and non-grid connected rooftop solar power. Grid connection is determined based on whether the on-site load (that receives electricity from the rooftop solar power system) is connected to the national grid or has a physical connection to the national grid.
Where the on-site load is connected to a non-Vietnam Electricity (“EVN”) power grid but such non-EVN power grid is itself connected to the national grid, the on-site load will be regarded as having a physical connection to the national grid (and, accordingly, be regarded as grid connected) for the purposes of Decree 135.
Note also that where a rooftop solar system is grid-connected but has in place zero-export equipment to prevent any power backflow into the national grid, such system will still be regarded as being grid connected under Decree 135.
Category 2: Installed capacity
In relation to grid connected SPSC rooftop solar power systems, Decree 135 draws a further distinction between systems that have an installed capacity of (a) less than 100kW, (b) 100kW or more but less than 1000kW, and (c) 1000kW or more.
Category 3: Market segment
Decree 135 also provides for certain restrictions and exemptions where the rooftop solar power systems that are installed on the rooftops of residential buildings (that is, family and individual households) and public buildings (that is, public houses and construction works identified as public assets).
In particular, grid connected SPSC rooftop systems with an installed capacity of less than 100kW and which are installed on residential buildings are treated more favourably (for example, in relation to exemption from licensing requirements and capacity limitations) compared to other grid connected systems. SPSC rooftop systems which are installed on public buildings are prohibited from selling electricity to the grid.
Sale of excess electricity to the grid
Decree 135 provides that developers of grid connected SPSC systems are entitled to sell excess electricity generated to the national grid in the following instances:
- Where the installed capacity is less than 100kW and the SPSC system is installed on the rooftops of residential buildings;
- Where the installed capacity is 100kW or more but less than 1000kW and the SPSC system has adhered to the provincial capacity allocation set out under the Power Development Plan 8 (“PDP 8”) and its implementation plan; and
- Where the installed capacity is more than 1000kW and the SPSC system has adhered to the provincial capacity allocation set out under PDP 8 and its implementation plan (or has carried out certain power planning procedures) and has obtained a power operation licence. While power planning procedures are not prescribed under Decree 135, it is our view that such term refers to procedures to have the SPSC system approved under the PDP 8.
For more on the PDP 8 and its implementation plan, please see our articles “Renewable energy in Vietnam given significant boost with approval of National Power Development Plan VIII” and “Vietnam issues implementation plan for National Power Development Plan VIII”.
Note that the maximum amount of excess electricity that may be sold to the grid may not exceed 20% of the actual installed capacity of the relevant system. Excess electricity sold to the grid will be purchased by EVN (or its relevant subsidiaries) at the average market price of the preceding year (such price to be announced by EVN, presumably on a yearly basis). Decree 135 sets out the prescribed form of the power purchase agreement (“PPA”) to be entered into between EVN (or its relevant subsidiary) and the developer. Finally, the initial term of the PPA is five years from the date that the SPSC system is put into operation.
As mentioned above, systems installed on the rooftops of public buildings are prohibited from selling electricity to the grid.
Provincial capacity allocation limits
Under PDP 8 and its implementation plan, each province is allocated a development capacity for SPSC rooftop systems (“Provincial Capacity Allocation Limits”). Decree 135 contemplates that the Department of Trade and Industry (“DOIT”) will be responsible for (a) allocating, via the issuance of Development Registration Certificates, the capacity within the Provincial Capacity Allocation Limits to the various SPSC rooftop systems in the relevant province and (b) publicising both the total and the remaining unutilised development capacity for such province.
Decree 135 provides that SPSC systems are free of any capacity limitations (and are not subject to the Provincial Capacity Allocation Limits mentioned above) where such systems are: (a) not grid connected, (b) grid connected but have zero export equipment in place, or (c) are grid connected, have an installed capacity less than 100kW, and are installed on rooftops of residential buildings.
Licensing requirements
Notification requirements
Decree 135 requires developers of SPSC rooftop solar systems that are (a) non-grid connected, (b) grid connected and with an installed capacity of under 100kW, and (c) grid connected and with an installed capacity of 100kW or more but less than 1000kW, to make certain notifications to the DOIT, firefighting and prevention authorities, and the EVN unit. Where the projects fall within the scope of items (b) and (c) above, the notifications must be made based on the prescribed form set out in Decree 135.
Development Registration Certificates
Decree 135 further contemplates that developers of grid connected SPSC rooftop systems will be required to obtain Development Registration Certificates. While the Development Registration Certificate requirement clearly applies to grid connected systems that are 1000kW and above that supply excess electricity to the national grid, based on the current wording in Decree 135, it is not entirely clear whether the Development Registration Certificate requirement applies to cases where (a) the system has an installed capacity of less than 1000kW and (b) where the system would not sell excess electricity to the national grid. Further clarification on the precise scope of the systems that are subject to the Development Registration Certificates will be required.
Electricity operation licences
Decree 135 provides that developers of SPSC rooftop systems that are (a) non-grid connected, (b) grid connected but have zero export equipment in place, or (c) grid connected and with an installed capacity of less than 100kW and are installed on the rooftops of residential buildings, are exempt from the requirements to procure an electricity operation licence.
Decree 135 further provides that developers of SPSC rooftop systems that (a) have an installed capacity of 1,000kW or more and (b) intend to sell excess electricity to the grid are required to obtain an electricity operation licence.
Decree 135 is silent on whether an electricity operation licence would be required for grid connected SPSC rooftop systems with an installed capacity of under 1,000kW. Based on Articles 3.1 and 3.2 of Circular 21/2020/TT-BCT, systems that (a) do not sell excess electricity to any entity (in this case, the national grid) and (b) sell electricity to other entities but do not exceed 1MW are exempted from the electricity licence requirements. It is our view therefore that an electricity operation licence is only required for SPSC rooftop systems with an installed capacity of 1,000kW or more as mentioned above.
Uncertainty with respect to sub 100kW non-residential SPSC rooftop projects
One of the matters that remains unclear in the current provisions of Decree 135 is whether developers of SPSC rooftops systems that (a) are grid connected, (b) have an installed capacity of less than 100kW, and (c) are installed on a rooftop that is not a residential or public building (e.g. on a small commercial or industrial building) would be entitled to sell electricity back to the grid. If so, it is also not clear whether such projects will be subject to the Provincial Capacity Allocation Limits or the licencing requirements that would apply to such projects. Further clarification from the authorities would be required in this regard.
A summary of licensing requirements for SPSC rooftop system is provided in the table below.
|
Category |
Capacity |
Compliance with Provincial Capacity Allocation Limits |
Notification |
Development Registration Certificates |
Electricity Operation Licence |
|
Grid connected |
<100kW |
No (if on residential buildings) If on non-residential buildings, unclear but in our view unlikely |
Yes |
Unclear but in our view unlikely |
No |
|
100kW – 1000kW |
Unclear but likely if selling surplus electricity |
Yes |
Unclear but in our view unlikely |
No |
|
|
No if installing zero-export system |
Unclear but in our view unlikely |
||||
|
>=1000kW |
Yes if selling surplus electricity |
No |
Yes |
Yes |
|
|
No if installing zero-export system |
No if installing zero-export system |
||||
|
Non-grid connected |
<100kW |
No |
Yes |
No |
No |
|
100kW – 1000kW |
Transitional provisions
Decree 135 does not have retrospective effect. However, Decree 135 provides that rooftop solar system developers that (a) are selling electricity to power units and (b) have put into operation the systems prior to 1 January 2021 are not entitled to register to develop additional SPSC rooftop solar power at the same location of power use. In addition, organisations that had developed SPSC rooftop systems after 1 January 2021 are required to provide certain information to the relevant DOIT to record the location and scale of such projects and are prohibited from selling excess electricity (save where such systems are installed on residential or public buildings, in which case the sale of such electricity must be in compliance with the terms of Decree 135).
Concluding thoughts
Decree 135 marks a shift in the development policy in rooftop solar energy. It appears that the traditional rooftop PPA model may no longer be feasible (unless the arrangements meet the qualifications under the DPPA regime). Whether models such as the equipment leasing model or the deferred payment sales model would qualify as “self-produced and self-consumed” rooftop solar power also remains to be seen.
While there is a degree of ambiguity in the licensing regime under Decree 135, Decree 135 clearly encourages the development of sub 100kW rooftop systems for residential use. In our view, an increased interest in the development of such projects would seem likely.
