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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%