On 22 October 2024, the Government of Vietnam issued Decree 135/2024 on mechanisms and policies incentivising the development of “self-generation and self-consumption rooftop solar power” (Self-Consumption RSP). Unfortunately, there is still a great deal of ambiguity in the provisions of Decree 135/2024 that might create unnecessary confusion in applying and administering the implementation of Decree 135/2024. Please see our discussion of a few ambiguous provisions of Decree 135/2024 below.

1) Potential risk from Decree 135/2024’s scope of application – Decree 135/2024 is said to only govern Self-Consumption RSP [systems] that are installed on the roof of construction works that were invested and constructed in strict compliance with law, including regulations on investment, construction, land, environment, safety, firefighting and fire prevention. As such, any noncompliance of the underlying building may cause the rooftop solar system to not be recognised as a Self-Consumption RSP system and therefore cannot enjoy the incentives policies under Decree 135/2024. It is unclear (i) whether mitigated noncompliance in the past (before the Self-Consumption RSP system is installed) would cause the building to be considered not “invested and constructed in strict compliance with law” and therefore prevents the installation of Self-Consumption RSP system on said building, and (i) whether noncompliance that arises after the Self-Consumption RSP system is installed and operated would affect the applicability of Decree 135/2024 to such system and what the outcome would be.

2) The seller of surplus power yield from a Self-Consumption RSP system could be different from the owner of said system – The seller of surplus power yield is defined under Decree 135/2024 as the owner of the Self-Consumption RSP (Power Owner), or the organisation or individual that “received” the rights and obligations of the Power Owner in accordance with law. By default, the owner of the Self-Consumption RSP system is also Power Owner as the generated power could be considered the benefits (hoa lợi in Vietnamese) of the Self-Consumption RSP system. However, the owner of the benefits (i.e., surplus Self-Consumption RSP yield) might be different from the owner of the property generating such benefits (i.e., the Self-Consumption RSP system), either through an agreement between the parties or as stipulated by law. This leaves an opportunity for the developers of Self-Consumption RSP systems to negotiate with relevant parties on who would be the Power Owner (and therefore has the right to sell the surplus power yield to EVN) by determining the ownership of the power generated.

3) The applicable subjects are extensive – The developers, consumers, and Power Owners can be individuals or organisations, without being limited to legal persons. As such, this might enable “collective self-consumption” where, for example, the Self-Consumption RSP system developer is a group of businesses, in which only one business is actually sponsoring the development, and the others pay said sponsor to enjoy the shared Self-Consumption RSP system. However, we have not seen this arrangement being tested in practice.

4) Conflicting provisions regarding “surplus power yield” – Decree 135/2024 uses the generic term of “surplus power yield” as the abbreviated term for the left-over Self-Consumption RSP that is not used up by the load and to be fed into the national power system. In another provision, Decree 135/2024 provides that the [developers] of Grid-connected Self-Consumption RSP may choose to feed the surplus power yield into the national power system or not. One might reasonably assume that the term “surplus power yield” used in the latter provision has a generic meaning rather than the defined meaning under the former provision. This type of drafting error could be avoided by using the appropriate abbreviated term (i.e., not using a generic term that may have a different meaning than the term defined).

5) Unclear meaning of “unrestricted capacity” – Decree 135/2024 states that organisations and individuals are allowed to develop Self-Consumption RSP with “unrestricted capacity” if the Self-Consumption RSP system is (i) not connected to the national power system, (ii) installed with equipment preventing back-feeding into the national power system (zero-export controller), or (iii) developed by household or single family house and has the capacity of less than 100 kW. However, Decree 135/2024 failed to clarify whether the “unrestricted capacity” refers to (i) the maximum capacity quota of all Self-Consumption RSP systems in a certain area within a certain period of time; or (ii) the installation capacity of a singular Self-Consumption RSP system; or (iii) both; or (iv) other things. Based on Articles 8.1(c) and 8.7 of Decree 135/2024, we find that the term “unrestricted capacity” should at least mean being exempted from the capacity quota under the relevant master plan or the implementation planning of a master plan.

6) Ambiguous wording regarding planning requirements for Off-Grid Self-Consumption RSP – There is nothing in Decree 135/2024 that requires Off-Grid Self-Consumption RSP to comply with power planning, except for Article 23.6 which states that the developers of Self-Consumption RSP are obliged to cooperate with local power department to comply with capacity scale allocated to such region in accordance with the master plan or master plan execution planning before installing Self-Consumption RSP [systems]. Thus, it is unclear whether Article 23.6 is meant to cover all types of Self-Consumption RSP or only such types of Self-Consumption RSP that are specifically required to comply with planning requirements (i.e., Grid-Connected Self-Consumption RSP). We find that the latter interpretation is more reasonable and consistent with other provisions of Decree 135/2024.

In practice, one might refer to the unofficial guidelines or statements of public officials to make a reasonable deduction of the meaning of the ambiguous wordings. However, we think that this level of ambiguity and complexity should not persist in such legislation that might affect a great deal of individuals and families (e.g., 80% of installed systems in Ho Chi Minh city from 2021 to July 2023 are household-installed), who are usually not well-versed in law and are unlikely to consult legal advisors.

This post is written by Le Thanh Nhat and edited by Nguyen Quang Vu.

Vietnam Business Law