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:

P_c = 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).

E_bq:

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);

P_t^:

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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);

n_D:

Average debt repayment period, as specified in the Appendix issued with this Circular (years);

r_d:

Loan interest rate, determined as per Clause (a) of this section (%);

r_e:

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a) Loan interest rate r_d (%): is calculated as the weighted average of domestic and foreign loan interest rates, as follows:

Where:

D_F:

Ratio of foreign loans in total debt, as specified in the Appendix issued with this Circular (%);

D_D:

Ratio of domestic loans in total debt, as specified in the Appendix issued with this Circular (%);

r_d,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:

r_e,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:

P_t:

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;

T_max:

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 P_nlc

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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);

P_nlc:

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:

TC_FOMC:

The total fixed operation and maintenance (O&M) cost of the power plant is determined in accordance with Clause 2 of this Article (VND);

E_bq:

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 (TC_FOMC, VND) of the standard power plant is calculated using the following formula:

TC_FOMC = SĐT x P_t x k_O&M

Where:

SDT:

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P_t:

Net capacity of the standard power plant (kW).

k_O&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

D_F

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4

Domestic debt ratio

D_D

20%

III

Average debt repayment period (years)

n_D

10 years

IV

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85%

Thông tư 20/2024/TT-BCT quy định phương pháp lập khung giá phát điện của nhà máy điện chất thải rắn và nhà máy điện sinh khối do Bộ trưởng Bộ Công Thương ban hành