Further to the recent publication of Circular 18, the Ministry of Industry of Trade ("MOIT") has issued several new pronouncements that regulate and guide development of rooftop solar power projects. First Official Letter 3288 dated 8 September 2020 and, very recently, Official Letter 7088 dated 22 September 2020.
The following important points are worth considering for developers and prospective investors alike:
- Combining multiple projects into a single PPA
Where a group of rooftop solar projects (e.g. a portfolio of 5 rooftop solar installations in separate locations) exceeds a total combined capacity of 1MW, it is not permitted for the producer to combine several distinct PPAs into a single PPA for the entire portfolio.
Rather, separate PPAs must be executed with offtakers for each individual rooftop solar power project. If not, the project will not qualify as a "rooftop solar system" and will be considered something else, presumably a solar project subject to additional licensing requirements including power masterplan approval and need to obtain relevant electricity operation license(s). Though whether a system actually mounted on a roof can be treated as a 'ground-mounted' system for procedural purposes remains a matter open to debate.
While this is logical and previously largely presumed, it does potentially expose investors to additional contractual risk and contract management issues. Ideally investors would secure guarantees from a single source for a string of rooftop PPAs.
- Genuine rooftop purpose
In order to be characterized as a valid rooftop solar project for the purposes of attracting FiT 2 under Decision 13, a rooftop solar project must only be installed on a rooftop which has a genuine construction purpose beyond that of merely existing to hold solar equipment.
In other words, rooftops which have no other function than to hold solar installations will not be characterized as a valid rooftop, and thus ineligible to receive FiT.
The Official Letter specifically references agricultural land on this point, suggesting that solar systems would need to be installed on a rooftop which has a genuine pre-existing agricultural or farming function.
This was something that was foreshadowed by previous unofficial comments from various authorities. With the FiT 2 regime due to expire at end of December 2020, it remains open whether and how private rooftop PPA arrangements can proceed on structures that don't otherwise meet FiT criteria.
- Eligibility under FiT 2
Rooftop solar projects of a voltage level of more than 35kV are not eligible to receive FiT 2 under Decision 13.
Further, rooftop solar installations on agricultural farm land with a capacity of more than 1MW or 1.25 MWp are now also ineligible to receive FiT 2.
- Official Letter 3288 on fire prevention requirements
The MOIT also recently released an 8 September 2020 Official Letter providing additional regulatory requirements in regards to fire prevention obligations for ground-mounted and rooftop solar power developments.
Specifically, projects listed in Appendix IV of Decree 79/2014/ND-CP must have a design for fire prevention approved prior to the construction phase.
Appendix IV includes residential areas, apartment buildings, industrial zones, hospitals, educational facilities, and shopping malls, amongst several other specific development sites.
Relative to the current uncertainty over application of construction permit regulations for rooftop solar project around the country, this at least seems a reasonably clear and consistent requirement.
Should you have any further queries on rooftop solar power regulations or investment opportunities in Vietnam, please do not hesitate to contact us.
For more information, please contact Giles Cooper at GTCooper@duanemorris.com or Daniel Haberfield at DHaberfield@duanemorris.com. Giles is Chairman of Duane Morris Vietnam LLC and branch director of Duane Morris' HCMC office. Daniel is an Australian qualified lawyer and associate in Duane Morris' HCMC office.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.