Circular 20/2024/TT-BCT methods for formulating electricity generation price brackets of solid waste-to-energy and biomass power plants

CIRCULAR

Prescribing the methods for formulating the electricity generation price brackets of solid waste-to-energy power plants and biomass power plants

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Pursuant to the Law on Electricity dated December 03, 2004; the Law dated November 20, 2012, Amending and Supplementing a Number of Articles of the Law on Electricity;

Pursuant to the Government’s Decree No. 96/2022/ND-CP dated November 29, 2022, defining the functions, tasks, powers and organizational structure of the Ministry of Industry and Trade; the Government’s Decree No. 105/2024/ND-CP dated August 01, 2024, amending and supplementing a number of articles of Decree No. 96/2022/ND-CP and the Government’s Decree No. 26/2018/ND-CP dated February 28, 2018, on the Charter of organization and operation of the Vietnam Electricity;

Pursuant to the Government’s Decree No. 137/2013/ND-CP dated October 21, 2013, on detailing a number of articles of the Electricity Law and the Law Amending and Supplementing a Number of Articles of the Electricity Law;

At the proposal of the Director of the Electricity Regulatory Authority of Vietnam;

The Minister of Industry and Trade hereby promulgates the Circular prescribing the methods for formulating the electricity generation price brackets of solid waste-to-energy power plants and biomass power plants.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. Scope of regulation

This Circular prescribes the methods and process for formulating, appraising and approving the electricity generation price brackets of solid waste-to-energy power plants and biomass power plants.

2. This Circular applies to the following subjects:

a) Solid waste-to-energy power plants and biomass power plants.

This Circular applies after the annulment of regulations on electricity prices in Decision No. 24/2014/QD-TTg dated March 24, 2014, of the Prime Minister, on support mechanisms for development of biomass power projects in Vietnam, Decision No. 08/2020/QD-TTg dated March 05, 2020, of the Prime Minister, on amending and supplementing a number of articles of Decision No. 24/2014/QD-TTg, and Decision No. 31/2014/QD-TTg dated May 05, 2014, of the Prime Minister, on support mechanisms for development of solid waste-to-energy projects in Vietnam;

b) The Vietnam Electricity;

c) Other relevant organizations and individuals.

Article 2. Interpretation of terms

In this Circular, the term below is construed as follows:

Standard power plant means a solid waste-to-energy power plant or biomass power plant of which the investor is selected on the basis of implementing the National Power Development Plan, with a popular capacity scale. Such power plant represents the type of solid waste-to-energy power plant or biomass power plant and is used to calculate the electricity generation price bracket.

Chapter II

METHODS FOR DETERMINING THE ELECTRICITY GENERATION PRICE BRACKETS FOR SOLID WASTE-TO-ENERGY POWER PLANTS AND BIOMASS POWER PLANTS

Article 3. Principles for formulating the electricity generation price bracket

An electricity generation price bracket of a solid waste-to-energy power plant or a biomass power plant is a range of values from 0 (VND/kWh) to the price of a standard power plant. The price of a standard power plant shall be determined using the methods as prescribed in Article 4, Article 5, Article 6 and Article 7 of this Circular.

Article 4. Method for determining electricity generation prices of standard power plants

Electricity generation price P_c (VND/kWh) of the standard power plant shall be determined using the following formula:

P_c = FC + FOMC + VC

Where:

FC: Average fixed cost of the standard power plant, which is determined in accordance with Article 5 of this Circular (VND/kWh).

FOMC: Fixed operating and maintenance cost for the base year of the standard power plant, determined in accordance with Article 6 of this Circular (VND/kWh).

VC: Variable cost of the power plant, which is determined using the method prescribed in Article 7 of this Circular (VND/kWh).

Article 5. Method for determining the average fixed price of the standard power plant

1. Average fixed cost FC (VND/kWh) of the standard power plant is a component used for the purpose of recovering investment costs, which is determined using the following formula:

Where:

TC: Total cost invested in construction of the standard power plant (excluding value-added tax), converted annually and determined in accordance with Clause 2 of this Article (VND);

E_bq: The delivered average electricity over years of the standard power plant, which is determined in accordance with Clause 5 of this Article (kWh).

2. Total cost invested in construction of the standard power plant TC shall be converted annually using the following formula:

Where:

SDT: Investment unit cost of the standard power plant, which is determined in accordance with Clause 3 of this Article (VND/kW);

P_t: Net output power of the power plant (kW);

n: Economic life of the standard power plant, which is prescribed in the Appendix attached to this Circular (years);

i: Financial discount rate of the standard power plant, which is determined in accordance with Clause 4 of this Article (%).

3. Investment unit cost means the investment cost for 01 kW of net output power of the standard power plant determined based on the effective total investment (including only items serving electricity production) or actual data of power purchase agreement negotiations (if any), which is updated with foreign exchange rates at the time the electricity generation price bracket is calculated and refers to data from consulting organizations (if necessary).

4. The financial discount rate i (%) applying the nominal pre-tax weighted average cost of capital for the standard power plant shall be determined using the following formula:

Where:

D: Proportion of debt capital in the total investment, which is prescribed in the Appendix attached to this Circular (%);

E: Proportion of owner’s equity in the total investment, which is prescribed in the Appendix attached to this Circular (%);

n: Economic life of the standard power plant, which is prescribed in the Appendix attached to this Circular (years);

n_D: Average debt repayment period, which is prescribed in the Appendix attached to this Circular (years);

r_d: Debt capital interest rate, which is determined in accordance with Point a of this Clause (%);

r_e: Pre-tax return on equity, which is determined in accordance with Point b of this Clause (%).

a) Debt capital interest rate r_d (%) is equal to the weighted average of domestic and foreign currency debt capital interest rates, calculated using the following formula:

r_d = D_F x r_d,F + D_D x r_d,D

Where:

D_F: Proportion of foreign currency debt capital in the total debt capital, which is prescribed in the Appendix attached to this Circular (%);

D_D: Proportion of domestic currency debt capital in the total debt capital, which is prescribed in the Appendix attached to this Circular (%);

r_d,F: Foreign currency debt capital interest rate, which is equal to the compounded average of the SOFR (Secured Overnight Financing Rate) over a rolling 180-day period (180 Days - Average) of the 36 months immediately preceding the closest March, June, September or December of the year of negotiation, as announced by the Fed (Website: www.newyorkfed.org), plus the yearly average rate of lender arrangement fees of the banks, which is 3%/year;

r_d,D: The domestic currency interest rate is determined by the average of the 12-month term deposit interest rates in Vietnamese Dong, paid at the end of the term, applicable to individual customers, on the first day of the 60 months immediately preceding the closest March, June, September, or December of the year in which the price bracket is formulated, as announced by four commercial banks (Vietnam Joint Stock Commercial Bank for Foreign Trade, 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 legal successors), plus the yearly average rate of service fees from the banks, which is 3%/year.

b) Pre-tax return on equity r_e (%) shall be determined using the following formula:

Where:

r_e,pt: After-tax return on equity (%), which is 12%;

t: Average corporate income tax rate over the economic life of a solid waste-to-energy plant and a biomass power plant, which is determined in accordance with the applicable regulations of the State (%), provided that the power project benefits from corporate income tax incentives.

5. Average annual delivered electricity E_bp (kWh) of the standard power plant shall be determined using the following formula:

E_bp = P_t x T_max

Where:

P_t: The net output power of the standard power plant is determined at the point of delivery to the buyer (excluding the electricity self-consumption rate and the step-up transformer loss of the power plant), taking into consideration the power degradation rate averaged over the entire economic life of the standard power plant, based on the approved design or by referencing data and documentation from consulting organizations;

T_max: The number of hours operating with maximum output power of the standard power plant is determined based on the approved basic design of the standard power plant or by referencing data and documentation from consulting organizations.

In cases where it cannot be determined using the above formula, E_bq may be determined based on the basic design and technical design (if any) applicable at the time the price bracket is calculated.

Article 6. Method for determining the variable cost of the standard power plant

The variable cost (VC) of the standard power plant for the year, on which the price bracket is applied, is a component used for the purpose of recovering fuel costs and other variable costs of the power plant with the number of hours operating with maximum output power, which is determined by the following formula:

VC = HR x P_nlc

Where:

VC: Variable cost of the power plant (VND/kW);

HR: Net heat rate of the standard power plant, which is calculated at the load prescribed in Appendix 1 of this Circular (kg/kWh or kJ/kWh or kCal/kWh);

P_nlc: Primary fuel price of the power plant (VND/kg)

The primary fuel price is calculated after the subsidy costs from fuel collection, transportation and treatment are excluded in accordance with the law regulations on environmental protection (if any).

Article 7. Method for determining the fixed operating and maintenance cost of the standard power plant

1. Fixed operating and maintenance cost FOMC (VND/kWh) of the standard power plant is a component used for the purpose of recovering major repair costs, labor and other annual costs, which is determined using the following formula:

Where:

TC_FOMC: Total fixed operating and maintenance cost of the standard power plant, which is determined in accordance with Clause 2 of this Article (VND);

E_bq: The delivered average electricity over years of the power plant, which is determined in accordance with Clause 5, Article 5 of this Circular (kWh).

2. Total fixed operating and maintenance cost TC_FOMC (VND) of the standard power plant shall be determined using the following formula:

TC_FOMC = SDT x P_t x k_O&M

Where:

SDT: Investment unit cost of the standard power plant, which is determined in accordance with Clause 3, Article 5 of this Circular (VND/kW).

P_t: Net output power of the standard power plant (kW).

k_O&M: Proportion of fixed operating and maintenance cost in the investment unit cost of the standard power plant, which is determined by referring to data from consulting organizations or actual operational data from similar completed projects (%).

Chapter III

PROCESS FOR FORMULATING, APPRAISING AND APPROVING THE ELECTRICITY GENERATION PRICE BRACKET

Article 8. Formulation, appraisal and approval of the electricity generation price bracket

1. The Vietnam Electricity shall:

a) Propose a standard power plant to be selected for the purpose of calculating the electricity generation price brackets of solid waste-to-energy power plants, combined heat and power (CHP) plants, and biomass power plants that are not combined heat and power (CHP) plants (if any);

b) Calculate by itself, or hire consultants to select sets of parameters and calculate, the electricity generation prices of the standard power plant in accordance with Chapter II of this Circular.

c) Prepare a dossier for calculation of the electricity generation price bracket in accordance with Article 9 of this Circular and submit it to the Electricity Regulatory Authority of Vietnam for appraisal.

d) Recalculate and report it to the Electricity Regulatory Authority of Vietnam for appraisal and submission to the Ministry of Industry and Trade for promulgation in cases where the parameters for calculation of the variable price bracket necessitates recalculation of the electricity generation price bracket.

2. The Electricity Regulatory Authority of Vietnam shall check the completeness and validity of the submitted dossier. If necessary, the Electricity Regulatory Authority of Vietnam shall issue a written request to the Vietnam Electricity to amend, supplement or clarify the contents of the dossier. No later than 15 working days from the date of receipt of the request for amendment, supplementation or clarification of the contents in the dossier of the Electricity Regulatory Authority of Vietnam, the Vietnam Electricity shall send a written explanation report on the contents of the dossier as required.

3. The Electricity Regulatory Authority of Vietnam shall organize the appraisal of the electricity generation price bracket and submit it to the Minister of Industry and Trade for approval and then publicize it on the website of the Electricity Regulatory Authority of Vietnam.

Article 9. Dossier of request for approval of the electricity generation price bracket

A dossier of request for approval of the electricity generation price bracket shall comprise:

1. A written request for approval of the electricity generation price bracket.

2. The parameter table and documents for calculation of electricity generation prices of the standard solar power plant prescribed in Article 4, Article 5, Article 6, Article 7, and the Appendix attached to this Circular.

3. Documents related to the parameters for calculation of the electricity generation prices.

Chapter IV
IMPLEMENTATION PROVISIONS

Article 10. Implementation organization

1. The Electricity Regulatory Authority of Vietnam shall appraise and submit the electricity generation price bracket to the Minister of Industry and Trade for approval.

2. The Vietnam Electricity shall prepare the dossier for calculation of the electricity generation price bracket in accordance with Article 8 and Article 9 of this Circular.

Article 11. Amending Point a, Clause 2, Article 1 of Circular No. 57/2014/TT-BCT dated December 19, 2014, of the Minister of Industry and Trade, prescribing the methods and process for establishing and promulgating electricity generation price brackets as follows:

“a) Electricity producers owning power plants connected to the national power system with a total installed capacity of over 30 MW or power plants with an installed capacity of 30 MW or less, that voluntarily participate in the electricity market, except for strategic multi-purpose hydropower plants, oil-fired power plants, independent power plants invested in the form of Build - Operate - Transfer (BOT), power plants using renewable energy (wind, solar, geothermal, tidal, solid waste and biomass), and power plants with specific mechanisms prescribed by the Prime Minister, the Ministry of Industry and Trade or competent State regulatory authorities.”

Article 12. Effect

1. This Circular takes effect on November 26, 2024.

2. In cases where the documents referred to in this Circular are amended, supplemented or replaced, the amendments, supplements, or replacements shall prevail.

3. Any problems arising in the course of implementation of this Circular should be reported to the Ministry of Industry and Trade for appropriate amendment and supplementation./.

Appendix