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MINISTRY OF
INDUSTRY AND TRADE
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SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom – Happiness
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No. 20/2024/TT-BCT
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Hanoi, October
10, 2024
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CIRCULAR
ON THE METHOD FOR
ESTABLISHING THE GENERATION PRICE FRAMEWORK FOR WASTE-TO-ENERGY AND BIOMASS
POWER PLANTS
Pursuant to the Law on Electricity dated
December 3, 2004, and the Law on amendments to the Law on Electricity dated
November 20, 2012;
Pursuant to Decree No. 96/2022/ND-CP dated
November 29, 2022 of the Government defining the functions, tasks, powers, and
organizational structure of the Ministry of Industry and Trade; Decree No.
105/2024/ND-CP dated August 1, 2024 on amendments to Decree No. 96/2022/ND-CP
and Decree No. 26/2018/ND-CP dated February 28, 2018 of the Government on the
Charter for the Organization and Operation of Vietnam Electricity;
Pursuant to Decree No. 137/2013/ND-CP dated
October 21, 2013 of the Government on elaboration of the Law on Electricity and
the Law on amendments to the Law on Electricity;
At the request of the Director General of
the Electricity Regulatory Authority;
The Minister of Industry and Trade
promulgates this Circular on method for establishing the generation price
framework for waste-to-energy and biomass power plants.
Chapter I
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Article 1. Scope and regulated entities
1. Scope
This Circular stipulates the method,
procedures for developing, appraising, and approving the generation price
framework for waste-to-energy and biomass power plants.
2. This Circular applies to:
a) Waste-to-energy power plants and biomass
power plants.
The provisions of this Circular apply after
the annulment of electricity pricing mechanisms outlined in Decision No.
24/2014/QD-TTg dated March 24, 2014 on support mechanisms for biomass power
projects, Decision No. 08/2020/QD-TTg dated March 5, 2020 on amendments to
Decision No. 24/2014/QD-TTg , and Decision No. 31/2014/QD-TTg dated May 5, 2014
on mechanisms supporting waste-to-energy power projects;
b) Vietnam Electricity (EVN);
c) Other organizations and individuals
involved.
Article 2. Interpretation of terms
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Standard power plant refers to a
waste-to-energy or biomass power plant whose investor has been selected based
on the implementation of the National Power Development Plan. It has a typical
capacity scale and serves as a representative model for waste-to-energy and
biomass power plants, used as the basis for calculating the generation price
framework.
Chapter II
METHOD FOR DETERMINING THE
GENERATION PRICE FRAMEWORK FOR WASTE-TO-ENERGY AND BIOMASS POWER PLANTS
Article 3. Principles for establishing the
generation price framework
The generation price framework for
waste-to-energy and biomass power plants is a price range starting from zero
(VND/kWh) to the price of the standard power plant. The price of the
standard power plant is determined based on the methods specified in Articles
4, 5, 6, and 7 of this Circular.
Article 4. Method for determining the
generation price of a standard power plant
The generation price Pc (in VND/kWh) of the
standard power plant is calculated as:
Pc
= FC + FOMC + VC
Where:
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Average fixed cost of the standard power
plant (VND/kWh) as specified in Article 5.
FOMC:
The fixed operation and maintenance cost
for the base year of the standard power plant is determined in accordance
with the provisions of Article 6 of this Circular (VND/kWh).
VC:
Variable cost of the standard power plant
(VND/kWh) as specified in Article 7.
Article 5. Method for determining the
average fixed cost of a standard power plant
1. The average fixed cost (FC, VND/kWh)
of the standard power plant covers investment recovery costs, calculated as
follows:
Where:
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The capital investment cost for
constructing the standard power plant (excluding value-added tax),
annualized, is determined in accordance with Clause 2 of this Article (VND).
Ebq:
The average annual electricity delivered
over multiple years by the standard power plant, as determined in accordance
with Clause 5 of this Article (kWh).
2. The annualized capital investment
cost (TC) of the standard power plant is calculated as follows:
Where:
SDT:
Investment rate of the power plant,
determined as per Clause 3 of this Article (VND/kW);
Pt:
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n:
Economic life of the power plant, as
specified in the Appendix issued with this Circular (years);
i:
Financial discount rate of the power
plant, determined as per Clause 4 of this Article (%).
3. The investment rate is the cost of
investment per 1 kW of net capacity for the standard power plant. It is
determined based on the total effective investment cost (including only items
serving electricity generation) or actual data from negotiated power purchase
agreements (if available). The calculation must also incorporate the updated
foreign exchange rate at the time of determining the generation price framework
and may reference data from consulting organizations if necessary.
4. The financial discount rate (i, %)
applied to the pre-tax nominal weighted average cost of capital (WACC) for the
standard power plant is calculated as follows:
Where:
D:
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E:
Equity ratio in the total investment, as
specified in the Appendix issued with this Circular (%);
n:
Economic life of the power plant, as
specified in the Appendix issued with this Circular (years);
nD:
Average debt repayment period, as
specified in the Appendix issued with this Circular (years);
rd:
Loan interest rate, determined as per
Clause (a) of this section (%);
re:
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a) Loan interest rate rd (%): is
calculated as the weighted average of domestic and foreign loan interest rates,
as follows:
Where:
DF:
Ratio of foreign loans in total debt, as
specified in the Appendix issued with this Circular (%);
DD:
Ratio of domestic loans in total debt, as
specified in the Appendix issued with this Circular (%);
rd,F:
The interest rate for foreign currency
loans is determined as the average SOFR (Secured Overnight Financing Rate)
for a 180-day term (180 Days - Average) over the most recent 36 months,
calculated from the nearest March, June, September, or December of the negotiation
year, as published by the Federal Reserve (Fed) (Website:
www.newyorkfed.org), plus an annual average loan arrangement fee charged by
the bank, set at 3% per year;
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The interest rate for domestic currency
loans is determined as the average interest rate for 12-month term deposits
in Vietnamese dong, paid at maturity, applicable to individual customers, on
the first day of the most recent 60 months from the nearest March, June,
September, or December of the price framework calculation year. This rate is
based on data from four major commercial banks (Joint Stock Commercial Bank
for Foreign Trade of Vietnam, Vietnam Joint Stock Commercial Bank for
Industry and Trade, Joint Stock Commercial Bank for Investment and
Development of Vietnam, Vietnam Bank for Agriculture and Rural Development,
or their lawful successors), plus an annual average banking service fee of 3%
per year.
b) The pre-tax return on equity (re, %) is
calculated using the formula:
Where:
re,pt:
Post-tax return on equity (%), set at
12%;
t:
The average corporate income tax rate
over the economic life of waste-to-energy and biomass power plants is
determined in accordance with current State regulations (%), ensuring that
the power project benefits from corporate income tax incentives.
5. The average annual electricity
delivered Ebq (kWh) by the standard power plant is calculated as follows:
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Where:
Pt:
The net capacity of the standard power
plant is determined at the delivery point to the buyer (excluding the
proportion of self-consumption and transformer step-up losses of the power
plant) and accounts for the average capacity degradation over the economic
life of the power plant, as specified in the approved design or based on data
and documents from consulting organizations;
Tmax:
The maximum operating hours of the
standard power plant are determined based on the approved basic design of the
power plant or by referencing data and documents from consulting
organizations.
If this formula cannot be applied, Ebq is
determined using the effective basic or technical design at the time of
calculating the generation price framework.
Article 6. Method for determining the
variable cost of a standard power plant
The variable cost (VC) of the standard
power plant for the year of the price framework application is a component used
to recover fuel costs and other variable expenses of the power plant at maximum
operating hours. It is determined using the following formula:
VC = HR x Pnlc
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VC:
Variable cost of the power plant
(VND/kWh).
HR:
Specific fuel consumption of the standard
power plant, calculated at the load specified in Appendix 1 of this Circular
(kg/kWh, kJ/kWh, or kCal/kWh);
Pnlc:
Price of the primary fuel for the power
plant (VND/kg)
The primary fuel price is calculated net of
any subsidies for collection, transportation, and processing of the fuel, as
regulated by environmental protection laws, if applicable.
Article 7. Method for determining the fixed
operation and maintenance (FOMC) cost of a standard power plant
1. The fixed operation and maintenance
cost (FOMC, VND/kWh) for a standard power plant, which covers major repairs,
labor, and other annual costs, is calculated as:
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Where:
TCFOMC:
The total fixed operation and maintenance
(O&M) cost of the power plant is determined in accordance with Clause 2
of this Article (VND);
Ebq:
Average annual electricity delivered by
the standard power plant (kWh), as defined in Clause 5, Article 5 of this
Circular.
2. The total fixed operation and
maintenance cost (TCFOMC, VND) of the standard power plant is
calculated using the following formula:
TCFOMC
= SĐT x Pt x kO&M
Where:
SDT:
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Pt:
Net capacity of the standard power plant
(kW).
kO&M:
Proportion of fixed operation and
maintenance costs relative to the investment rate, determined based on data
from consulting organizations or actual operational data from similar
completed projects (%).
Chapter III
PROCEDURES FOR DEVELOPING,
APPRAISING, AND APPROVING THE GENERATION PRICE FRAMEWORK
Article 8. Developing, appraising, and
approving the generation price framework
1. Responsibilities of Vietnam
Electricity (EVN):
a) Propose the selection of a standard
power plant to calculate the generation price framework for waste-to-energy,
cogeneration, and non-cogeneration biomass power plants (if applicable);
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c) Prepare the calculation dossier for the
generation price framework in accordance with Article 9 of this Circular and
submit it to the Electricity Regulatory Authority for appraisal.
d) If there are significant changes in the
parameters affecting the calculation, EVN must recalculate the framework and
submit a revised dossier to the Electricity Regulatory Authority for appraisal
and subsequent issuance by the Ministry of Industry and Trade.
2. The Electricity Regulatory Authority
is responsible for verifying the completeness and validity of the submitted
dossier.
If
necessary, the Electricity Regulatory Authority shall issue a written request
to Vietnam Electricity (EVN) to amend, supplement, or clarify specific contents
in the dossier. No later than 15 working days from the date of receiving the
request for amendments, supplements, or clarifications, EVN must submit a
written explanatory report addressing the requested issues in the dossier.
3. The Electricity Regulatory Authority
shall organize the appraisal of the generation price framework and submit it to
the Minister of Industry and Trade for approval and publication on the
Authority’s official website.
Article 9. Dossier for requesting approval
of the generation price framework
The dossier for requesting approval of the
generation price framework includes:
1. A submission letter requesting
appraisal and approval of the generation price framework.
2. A table of parameters and supporting
documents for calculating the generation price of standard power plants, as
specified in Articles 4, 5, 6, 7, and the Appendix of this Circular.
3. Related documents concerning the
parameters used in the generation price calculations.
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IMPLEMENTATION
Article 10. Implementation
1. The Electricity Regulatory Authority
is responsible for appraising and submitting the generation price framework to
the Minister of Industry and Trade for approval.
2. Vietnam Electricity (EVN) is
responsible for preparing the calculation dossier for the generation price
framework in accordance with Articles 8 and 9 of this Circular.
Article 11. Amendments to Clause 2(a),
Article 1 of Circular No. 57/2014/TT-BCT dated December 19, 2014 of the
Minister of Industry and Trade on the method and procedures for developing and
issuing the generation price framework:
“a) Generation units with power plants
connected to the national grid with a total installed capacity of over 30 MW,
and power plants with an installed capacity of 30 MW or less voluntarily
participating in the electricity market, excluding: strategic multi-purpose
hydropower plants, oil-fired power plants, independent power plants invested
under the Build-Operate-Transfer (BOT) model, renewable energy power plants
(wind, solar, geothermal, tidal, waste-to-energy, and biomass), and power
plants with specific mechanisms as determined by the prime minister, the
ministry of industry and trade, or other competent state agencies.”
Article 12. Implementation
1. This Circular comes into force as of
November 26, 2024.
2. If the documents referenced in this
Circular are amended, supplemented, or replaced, the updated versions shall
apply.
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PP. MINISTER
DEPUTY MINISTER
Truong Thanh Hoai
APPENDIX
PARAMETERS USED FOR
CALCULATING THE GENERATION PRICE FRAMEWORK
(Issued with Circular No. 20/2024/TT-BCT dated October 10, 2024 of the
Minister of Industry and Trade)
No.
Category
Symbol
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I
Economic life
n
20 years
II
The proportion of funding sources in the
total investment of the standard power plant (%)
1
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D
70%
2
Equity ratio
E
30%
3
Foreign debt ratio
DF
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4
Domestic debt ratio
DD
20%
III
Average debt repayment period (years)
nD
10 years
IV
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85%