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Transmission line is an integral part of any power project in Vietnam. For an offshore wind power project (Offshore WPP), if the Government and Vietnam Electricity (EVN) does not agree to assume the usual responsibility to develop and operate the transmission line of an Offshore WPP as in the case of onshore projects, then the project sponsor will need to assume such responsibilities and the risks associated with them. This post examines in detail the legal issues which may arise when an Offshore WPP develops, owns and operates its own transmission line under the current legal framework.

1) Some Key Legal Aspects of the Transmission Line of an Offshore WPP

Structure of a transmission line

An Offshore WPP must be a grid-connected offshore wind power project, which connects to the national power grid to supply a part or all of production power.[1] As such:

An Offshore WPP is entitled to a stable feed-in tariff (FIT) paid by EVN. That said, after the latest FIT ceases to apply from 1 November 2021,[2] the Government has not decided on the new FIT; and
An Offshore WPP may apply the existing Model Power Purchase Agreement (PPA) issued by the Ministry of Industry and Trade (MOIT).[3]

Even though there is a draft decree of the MOIT on a pilot program for direct power purchase between the power plants and its customers (instead of selling to EVN), an Offshore WPP may not participate in this pilot program due to the current legal definition requires it to be grid-connected.

Depending on the voltage level, the national power system is connected through a distribution grid (up to 110kV voltage) or a transmission grid (over 110kV voltage).[4] This system is managed and operated by a power distribution unit (đơn vị phân phối điện) or a power transmission unit (đơn vị truyền tải điện). These units are usually EVN or its subsidiaries until the recent amendment to the Electricity Law allows a private entity to develop and operate transmission line (see section 3).

In an Offshore WPP, the transmission line connects the offshore wind farms to the national power grid (Transmission Line) and consists of two following parts separated by the grid connection point (the Connection Point):

Part 1: the transmission line from the power plant to the Connection Point (the Interconnection Line); and
Part 2: the transmission line from the Connection Point to the national power grid (the Grid Connection Line).

The Connection Point is usually the power delivery point under the PPA where the power generated from the Offshore WPP is delivered to EVN acting as the project offtaker. The location of the Connection Point is agreed in a connection agreement between the Offshore WPP and power transmission unit or power distribution unit, as the case may be.[5] Since most of the existing substations and transmission lines owned and managed by EVN are situated onshore, it is likely that EVN may require the Connection Point to be onshore also. In such case, the Offshore WPP developers will need to build and maintain the submarine power cables from the power plant to the onshore Connection Point.

Compliance with the grid master plan

The development of a Transmission Line, whether as a standalone transmission line investment project (in the case of Grid Connection Line) or as a part of the Offshore WPP (in the case of Interconnection Line) must comply with the power development master plan.[6]

Regarding Offshore WPPs not yet included in the power development master plan, the Provincial People’s Committees must send a request for the inclusion of these projects in the master plan to the MOIT, which would be reviewed in accordance with the law on planning.[7] Under the Law on Planning 2017, there are a national power master plan and a provincial master plan for each province with a section on power in line with the national power master plan.[8]

The national power master plan is developed by the MOIT[9] and approved by the Prime Minister.[10] The national power master plan is developed in a 10-year period with an orientation from 30-50 years.[11] Up to now, the Prime Minister has approved the 7th national power master plan from 2011 to 2020 and is processing the 8th national power master plan from 2021 to 2030.
The provincial master plan is developed by the Provincial People’s Committees,[12] appraised by the MPI,[13] and approved by the Prime Minister.[14]

Offshore WPPs already included in power master plans approved before 1 January 2019 (which is the effective date of the Law on Planning 2017) may continue to be implemented until the termination of said projects.[15] However, it is not clear which province will have the authority to make the request in case an Offshore WPP does not fall under the area of any province. In that case, presumably, the MOIT may have to make its own decision.

Environment Impact Assessment Report (EIAR)

An Offshore WPP will also need to prepare and obtain approval for an EIAR for development of the Interconnection Line (which includes submarine power cables). This is because the Interconnection Line is a part of the Offshore WPP, and the Offshore WPP itself is always subject to EIAR requirement under the Environment Law 2020[16] for being a project using sea area allocated by the Prime Minister, the Ministry of Natural Resource and Environment (MONRE), or provincial People’s Committee (please see our discussion regarding the process of allocating sea area for Offshore WPPs for more detail).

Safety requirements for Transmission lines

Interconnection Line of Offshore WPPs mainly consist of submarine power cables, with some parts being underground or overhead power cables when connecting to the inland power grid or crossing islands. They must meet the safety requirements, including electrical safety, construction safety, fire and explosion prevention safety, and regulations on environmental protection.[17] Along with safety requirements for power generation,[18] in case the Offshore WPP is allowed to conduct power transmission business, the safety requirements for power transmission must also be taken into consideration, such as[19]:

Setting signboards at transformer stations and cross-sections with inland waterways, underground electric cables, land roads;
The high-voltage transmission line sections running over dwelling houses and/or works where people permanently live or work must be supported with steel or concrete poles, and the electric wires must not have joints in intervals between poles, except for electric wires of the cross-section of 240 square mm or more; and
Electric cables running underground or lying in the structure of other works or running together with communications lines must be guaranteed with safety distances prescribed by regulations on electric equipment.

2) Capacity to invest, construct, operate and maintain (O&M) the Interconnection Line by the project sponsors

Article 7 of Decision 37/2011 allows an Offshore WPP to invest, construct and O&M the Interconnection Line, which is a part of the Transmission line, while the power distribution unit or power transmission unit (as the case may be) will develop the Grid Connection Line. Article 27 of each Circular 39/2015 and Circular 25/2016 further stipulate that:

the Connection Point is the demarcation of assets between the Offshore WPP and power distribution unit/power transmission unit; and
each party will be responsible for assets of its own in accordance with standards and laws unless otherwise agreed.

Since the Connection Point is usually located onshore, the submarine cables for delivery of power from offshore turbines of an Offshore WPP to the inland is likely developed and owned by Offshore WPP as a part of the Interconnection Line.

3) Capacity to invest, construct, and O&M the Grid Connection Line by an Offshore WPP

Under the new amendment to the Electricity Law,[20] from March 2022, the sponsors of an Offshore WPP are entitled to invest, construct, and O&M the Grid Connection Line. The amendment provides that:

the State holds the monopoly in operating the transmission grid, except for the transmission grid invested and constructed by the private investors;
private investors are encouraged to invest and construct the transmission grid on the basis of ensuring national defense and security and in accordance with the power master plan; and
private investors are allowed to operate the transmission grid invested and constructed by themselves.

Accordingly, private investors should at least be able to invest, construct, and O&M the Grid Connection Line of the Offshore WPPs connecting to the transmission grid. Since the Law Amending Electricity Law 2022 is silent about the distribution grid, the position that EVN is the only power distribution unit may still prevent private investors from investing, constructing, operating and managing the Grid Connection Line of the Offshore WPPs connecting to the distribution grid.

Before the amendment, there is no clear legal basis for a private investor to construct, operate and maintain Grid Connection Line. This was because:

Under Article 4.2 of the Electricity Law (before the 2022 amendment), the State holds the monopoly in transmission activities. “Transmission activities” likely include investment, construction, operation, and maintenance of the Grid Connection Line;[21] and
Under Article 3.8 of Circular 39/2015, EVN is the only power distribution unit[22] and power transmission unit.[23]

4) Capacity to use the Transmission Line to transmit electricity for other Offshore WPPs

It is likely that an Offshore WPP, after constructing the Transmission line for its own, may want to use the Transmission Line to transmit electricity generated from other nearby Offshore WPPs to the national power grid.

As discussed above, under the new amendment to the Electricity Law, an Offshore WPP should be able to transmit electricity of other Offshore WPPs using the Grid Connection Line which connects to the transmission grid (but not distribution grid). This is because:

The transmission unit is defined to be the electricity unit (đơn vị điện lực) granted with the license for electricity transmission, and responsible for the management and operation of the national transmission grid;[24] and
If an Offshore WPP is allowed to invest in, construct, and operate the Grid Connected Lines under the new amendment to the Electricity Law, then they are likely considered a transmission unit since these are the responsibilities of a transmission unit under the current law.[25]

In such case, under the new amendment to the Electricity Law, the Offshore WPP owning a Transmission Line must ensure the right of other projects to connect to the transmission grid constructed by the transmission unit. The rejection of connection must follow the regulations of the MOIT. For example, the project sponsor may reject the third parties’ connection to its Grid Connection Lines if the third parties’ equipment does not meet the technical and operational requirements; or the connection does not comply with approved power development master plan.

Under the current regulations, if an Offshore WPP transmits electricity for other Offshore WPP, EVN will usually pay the transmission fee since EVN is the power purchasing unit of the Offshore WPP.[26] It is not clear if the Offshore WPP owning the Grid Connection Lines and other Offshores WPP can agree that other Offshore WPPs will pay the transmission fees instead.

In any event, an Offshore WPP which owns a Grid Connection Line and uses such Grid Connection Line to transmit electricity for other Offshore WPPs will have to deal with additional risks arising from such transmission activity. For example, if Grid Connection Line breaks down and there is no power transmitted, (1) EVN may refuse to pay the transmission fee to the transmitting Offshore WPP and (2) other Offshore WPPs may claim for damages for the loss revenue.

This post is written by Le Thanh Nhat, Nguyen Quang Vu, and Tran Duc Long.

[1] Article 2 of Decision 37 of the Prime Minister dated 29 June 2011 on the mechanism to support the development of wind power projects in Vietnam, as amended (Decision 37/2011).

[2] Article 14 of Decision 37/2011.

[3] Circular 2 of the Ministry of Industry and Trade dated 15 January 2019 on wind power project development and power purchase agreement for projects thereof (Circular 2/2019).

[4] Circular 39 of the Ministry of Industry and Trade dated 18 November 2015 regulating power distribution system (Circular 39/2015).

Circular 25 of the Ministry of Industry and Trade dated 30 November 2016 regulating power transmission system. (Circular 25/2016).

[5] Article 28.4 of Circular 25/2016; Article 43.2(a) and Item 2(b) of Appendix 2D of Circular 39/2015.

[6] Article 11 of the Electricity Law; Article 4.16 of Circular 43 of the Ministry of Industry and Trade dated 31 December 2013 on power development master plan (Circular 43/2013); Article 22.2(b) of Circular 25/2016; Article 22.2(b) of Circular 39/2015; and Articles 6.1 and 7.1 of Decision 37/2011.

[7] Article 4 of Circular 2/2019.

[8] Article 27.2(e) of the Law on Planning 2017.

[9] Article 14.3 of the Law on Planning 2017.

[10] Article 34.2 of the Law on Planning 2017.

[11] Article 8.3 of the Electricity Law.

[12] Article 14.4 of the Law on Planning 2017.

[13] Article 29.2 of the Law on Planning 2017.

[14] Article 34.2 of the Law on Planning 2017.

[15] Article 3.2 of Circular 02/2019; and Article 59.3 of the Law on Planning 2017.

Resolution 751 of the Standing Committee of the National Assembly dated 16 August 2019 interpreting some provisions of the Law on Planning 2017.

[16] Article 30, Article 28.3(c), Article 28.4(c) of the Environment Law 2020; Item 9 of Schedule III and Item 8 of Schedule IV of Decree 08 of the Government dated 10 January 2022 guiding the Environment Law 2020 (Decree 08/2022).

[17] Article 3.1 of Decree 14 of the Government dated 26 February 2014 implementing the Electricity Law regarding electrical safety

[18] Article 54 of the Electricity Law.

[19] Article 55 of the Electricity Law.

[20] Article 6 of the Law Amending Electricity Law 2022.

[21] Articles 3.16 and 28.1 of Circular 25/2016.

[22] Article 3.8 of Circular 39/2015.

[23] National Power Transmission Corporation (EVNNPT), who is a wholly owned subsidiary of EVN, is assigned to hold the State monopoly position in the power transmission sector and to conduct investment activities to develop power transmission grid under Articles 3.4 and 3.5(a) of the company charter of EVNNPT issued under Decision 10/QD-EVN dated 16 January 2015 of the Members’ Council of EVN.

[24] Article 3.16 of the Circular 25/2016.

[25] Articles 3.16 and 28.1 of Circular 25/2016.

[26] Articles 2.3 and 9 of Circular 02 of the Ministry of Industry and Trade dated 10 February 2017 on methods and procedures for formulation, assessment and approval for electricity transmission price.

Vietnam Business Law