Phu My solar power plant in central region. (Photo: BCG)
Vietnam’s government is conducting a comprehensive review of its feed-in tariff (FIT) regulations, a move that could significantly cut revenue for some operating renewable energy projects.
This has sparked concern among industry players, who have filed a petition through business chambers to the National Assembly. They accuse state-owned enterprises of breaching contractual agreements, warning that 173 solar and wind power projects across the country face the risk of bankruptcy or even market exit.
FIT calculation errors lead to industry backlash
Last year, Vietnam’s Government Inspectorate found that certain solar projects in Ninh Thuan province had received FIT rates that did not comply with regulations. This resulted in an additional cost of VND 1.48 trillion (about USD 57.7 million) for state-owned Vietnam Electricity (EVN). Consequently, the Ministry of Industry and Trade (MOIT) was instructed to review and rectify affected projects.
Under existing regulations, solar projects must receive approval from the Prime Minister and be included in the National Power Development Plan (PDP8) to qualify for the 20-year preferential FIT rate of 9.35 cents per kWh.
However, MOIT expanded this eligibility to provincial and regional projects, leading to 173 solar and wind projects receiving incorrect FIT rates, some of which had already been approved for development. As a result, EVN now seeks to recover the excess payments made to these developers.
Following the revisions, the FIT rates for these 173 projects will be reduced to between 4.8 cents and 7.09 cents per kWh—24% to 47% lower than the originally applied rates. The affected foreign-invested projects have a total investment of approximately $4 billion, impacting over 3,600 MWp of solar power and 160 MW of wind power.
Nguyen Huu Quang, a portfolio manager at Dragon Capital, argues that EVN’s decision to adjust rates based on project completion documents lacks legal standing. Dragon Capital, which has three renewable energy projects in Vietnam, has reported zero revenue since September 2023, causing financial distress.
Vietnam's FIT review raises fears of mass closures in the renewable sector. (Photo: iStock)
Industry warns of bad debt crisis affecting banks
Vietnamese government data indicates that one-third of the affected companies are foreign investors, including Dragon Capital, Ayala Corp’s energy subsidiary ACEN, and other firms from Thailand, the Netherlands, Singapore, and China. The total investment at risk is estimated at USD 13 billion.
In early March, impacted companies submitted a petition through the Vietnam Chamber of Commerce and Industry (VCCI), urging the government to retract the order. They warned that the move could severely hinder Vietnam’s renewable energy development, especially as some projects are already struggling with rising costs and construction delays, leading to potential loan defaults.
The industry estimates that bad debts could reach VND 200 trillion (about USD 7.8 billion), putting financial institutions that provided loans at risk.
Additionally, industry players argue that Vietnam’s interest rates are already significantly higher than those in other Southeast Asian nations. The revised FIT rates further disadvantage the sector. Bangkok Glass Energy (BGE), a Thai renewable energy company, pointed out that investments were made based on the initially promised higher FIT rates, leading to high project acquisition costs. If the lower rates are enforced, companies will face substantial financial losses and, in some cases, bankruptcy.
Source: VCCI, The Investor(1), (2), Bloomberg
.jpg)
