Click here to load reader
Upload
dr-oliver-massmann
View
76
Download
2
Embed Size (px)
Citation preview
Vietnam – Power/Energy Sector - Current Issues and Solutions for
Investment and Outlook on Major Trade Deals TPP 11 and EUVNFTA
Author: Dr. Oliver Massmann
A. OVERVIEW
Vietnam contains huge potential regarding the production of clean energy. It has best conditions
for developing solar power due to being one of the countries with the most sun hours during the
year and best conditions for creating wind power due to 3000km coastline. As a result, Vietnam
in general, is able to attract much FDI for developing clean energy projects.
Furthermore, the new Solar PPA was issued this year to solve the lack of regulation on solar power
projects. Moreover, the issuance of the Circular 16/2017/TT-BCT on the power distribution of
rooftop solar plants and the alleviation of the Operating License for power plants (lmw capacity)
are notable developments in the power/energy industry in Vietnam. Moreover, the implementation
of the Direct Power Purchase Agreement could step into pilot phase in the next time, thus, it is
estimated to create better access to clean energy and increase of investment up to USD 2 billion in
clean energy.
Another notable fact is the increase of the wind tariff in early August 2017. Now, Vietnam has
implemented a wind power project with a capacity of 160 MW. The new tariff shall attract new
and more foreign investments in the wind power industry in Vietnam.
B. ISSUES
1. Environment
The government is implementing more and more measures on protection of the environment.
Vietnam plays a proactive role on reduction of emission and CO2 but the penalties for violation
are very low. Furthermore, new regulations have to be issued to ensure more environmental
protection, especially in terms of fossil power projects known to be a great danger for environment
regarding to huge amounts of emissions and pollution. The project developers should be obliged
to develop projects using highest environmental standards.
2. Solar PPA Policy
There are issues in the solar power policy necessary to be addressed.
In general, the goals on producing clean energy in large scale and the attraction of FDI cannot be
reached sufficiently yet due to issues regarding electricity pricing and the content of the final power
purchase agreement. These issues lead to restraining investments and delayed development of the
clean energy industry in Vietnam.
Further, there are continuing concerns about lack of transparency regarding to solar power prices
and due to lack of a published Roadmap for the retail sector. This leads to uncertainty of foreign
investors regarding to stability of prices. Price transparency measures should be included in the
Energy Plan and a Roadmap for the retail sector should be published. The issuance of a pricing
framework can also lead to more investments in off-grid projects causing relieve of EVN’s
pressure on power transmission, thus, the transmission system does not have to run near
overstressing at daily peak hours. Moreover, the final template of the Solar PPA contains
concerning provisions for investors such as (i) lack of EVN’s payment obligations in cases of
transmission problems; (ii) lack of transparent possibilities for international arbitration; (iii) the
lack of PPAs’ bankability. The final PPA needs to be amended to grant more security to investors
and to attract more FDI. Moreover, the administrative regulations must be simplified for more
efficiency in solar power project development as well as for easier market access, especially with
regard on major trade agreements like TPP 11 and the EUVNFTA.
3. Power Storage
The Solar Battery is the most common way of storing energy but the technology is not well-
developed yet in Vietnam. However, the country has the possibility to become leader in the new
storage technologies in the eastern part of the world. This is another reason for the necessity of
development of the solar industry and extremely important as power storage solution on remote
islands in order with power production in those areas.
4. Project Applications
Currently, there is a very large number of applications for solar plants existing. This leads to
concerns regarding to create a ,,bubble effect” which is causing gridlocks in project developing an
delays in investment as well as uncertainty among investors.
For investors, to improve the chance on winning tendered biddings, it is important to provide
conditions like (i) ensured safety for wildlife, people, environment or households; (ii) maintained
grid connection, (iii) enough financial solvency regarding feasibility of the project; (iv) successful
projects in energy or infrastructure areas in the past.
On the other hand, the Ministry of Industry and Trade (MOIT) guarantees that all investors of
power projects will be able to connect the plants to the national grid. According to the MOIT, the
total reserved capacity of all planned projects is only 30% of the whole capacity, so that, there is
no reason for concerns regarding to finalized projects not able to start power producing because of
missing opportunity on generating turnover.
C. OUTLOOK ON MAJOR TRADE AGREEMENTS TPP 11 AND EUVNFTA
In January 2017, US President Donald Trump decided to withdraw from the US’ participation in
the TPP. In November 2017, the remaining TPP members met at the APEC meetings and
concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The
agreement shall be signed by all member states by the first quarter of 2018. After that, it has to be
ratified in each member state before taking effect.
The effects of the TPP 11 promising great benefits for the energy sector in Vietnam. The TPP 11
is targeting to eliminate tariff lines and custom duties among member states on certain goods and
commodities to 100%. This will make the Vietnamese market more attractive due to technology
advances, reduction of production costs and because of the high demand on renewable energy.
One another notable major trade agreement is the EUVNFTA between the European Union and
Vietnam. The EUVNFTA offers great opportunity to access new markets for both the EU and
Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all
tariffs of 99%, as well as obligation to provide better conditions for workers which is a key aspect
in terms of working at power plants. In addition, the EUVNFTA will boost the most economic
sectors in Vietnam. Moreover, the EUVNFTA will provide certain tax reductions to 0% for clean
technology equipment as well as equal treatment for companies. Due to easier opportunity on
making business, trade and sustainable development will be a good consequence for an even more
dynamic economy and even better investment environment in Vietnam in general and especially
in the power/energy industry.
Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal
certainty and enforceability and protection for investors. We alert investors to make use of these
standards! We can advise how to best do that! It is going to be applied under the TPP 11 and the
EUVNFTA. Under that provision, for investment related disputes, the investors have the right to
bring claims to the host country by means of international arbitration. The arbitration proceedings
shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope
of the ISDS was reduced by removing references to “investment agreements” and “investment
authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th
and 11th November 2017.
Further securities come with the Government Procurement Agreement (GPA) which is going to
be part of the TPP 11 and the EUVNFTA.
The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic
bidders with investment capital and Vietnamese bidders equally when a government buys goods
or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish
information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain
confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based
on fair and objective principles, evaluate and award bids only based on criteria set out in notices
and tender documentation, create an effective regime for complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of quality and efficient developing
processes.
***
If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann
under [email protected] . Dr. Oliver Massmann is the General Director of Duane
Morris Vietnam LLC.
Thank you very much!