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Vietnam Draft Circular Proposes New Limitations on Avoided Cost Tariff Mechanism for Hydropower

The Ministry of Industry and Trade of Vietnam (“MOIT“) recently released a draft Circular (“Draft Circular“) amending Circular No. 32 and Circular No. 06 on avoided cost tariff (“ACT“) mechanisms for small hydropower projects in Vietnam and the respective model power purchase agreement (“ACT PPA“).

In relation to cascade hydropower plants with a combined capacity of up to 60MW on the same river, under the Draft Circular, the MOIT proposes removing ACT eligibility for those plants and only allowing single plants of up to 30MW each to be eligible for the ACT mechanism.

The Draft Circular also proposes removing the option of ACT risk sharing mechanisms for parties to ACT PPAs in relation to the floor price of 90% and the ceiling price of 110% applicable for up to 12 years in order to address market risks from annual ACT adjustments, together with other amendments relating to the methods and input components of determining ACT tariff structures.

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