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The Ministry of Industry and Trade has just issued Circular No. 20/2026/TT-BCT amending and supplementing a number of articles of Circular No. 10/2025/TT-BCT dated February 1, 2025 stipulating the method of determining and principles of applying avoidable cost tariffs for small renewable energy power plants; Main content of power purchase agreement (PPA). Download New regulations on application of avoidable cost tariffs for small renewable energy power plants. The amendment is made on the basis of Electricity Law No. 61/2024/QH15 amended and supplemented by Law No. 94/2025/QH15 and related regulations on organization and operation of the electricity market. According to the Ministry of Industry and Trade, the goal is to complete a transparent electricity price mechanism, consistent with system operation practices and promote the development of small-scale renewable energy. One of the notable contents is the amendment and supplementation of the concept of rainy and dry seasons for each region, serving as an important basis for calculating electricity prices. Specifically, the rainy season in the North is determined from July 1 to October 31; Central region from August 15 to December 15; the South from August 1 to December 1. In contrast, the dry season is calculated correspondingly for the remaining periods of the year in each region. In addition, the Circular also clarifies how to determine the North, Central, and South according to the power system dispatch boundaries, instead of simply according to administrative boundaries. This helps unify operations and calculate electricity prices, especially in the context of increasingly closely linked electricity systems. The concept of small renewable energy plant is also standardized according to the capacity scale prescribed by the Ministry of Industry and Trade, creating a clearer legal basis for investors. According to Electricity Law No. 61/2024/QH15: Avoided cost tariffs are prices calculated based on the avoided costs of the national electricity system when 01 kWh of a small renewable energy power plant is transmitted to the national grid. Notably, the agency responsible for researching and proposing avoidable cost tariffs is clearly identified as the Electricity Department (under the Ministry of Industry and Trade), instead of the previous common name. Amending regulations on the term of power purchase contracts between sellers and buyers. According to the Circular, the PPA takes effect from the date of signing and terminates after a maximum of 20 years from the date of commercial operation. This regulation creates a long-term stable legal framework for investors, and is consistent with the economic life cycle of small renewable energy projects. Regarding transitional provisions, the Circular allows factories that have previously signed contracts to continue to apply the price schedule according to the determined area, even in the event of a change in administrative boundaries. This is an important point to ensure the stability of the signed contract. For projects with changed capacity scale criteria, investors have the right to choose: continue to apply the avoided cost tariff or participate in the electricity market. However, when choosing to participate in the electricity market, the Electricity Seller cannot choose again to apply the avoidable cost tariff. In addition, in case of force majeure such as natural disasters or incidents that cause the plant to stop operating, the two parties can agree to extend the contract, but the total power generation time must not exceed 20 years. Detailed calculation method of avoidable cost tariff The appendix issued with the Circular provides a detailed calculation method of avoidable cost tariff, including three Main components: electricity price, transmission loss and capacity price. For electricity prices, the price is determined based on the average fuel cost of thermal power plants with the highest variable costs mobilized in the system. These prices are adjusted for fuel fluctuations and averaged over the year. Notably, the price of residual electricity is set at 50% of the price during off-peak hours of the rainy season - a mechanism to encourage optimal system operation. Regarding transmission losses, the Circular provides a separate calculation formula for each region, with a reward - penalty mechanism depending on the connection location and power flow direction on the 500kV line. This reflects actual costs and encourages reasonable power allocation by region. For the avoided capacity price, the calculation base is the alternative combined cycle thermal power plant (CCGT). Input parameters include investment rate, operating costs, debt-equity ratio, interest rate and discount factor (W avoidable cost tariffC, maximum 10%). After calculating the annual investment costs and adjusting for transmission losses, the price of avoided generation capacity is determined by the formula divided by the number of peak hours in the dry season. The promulgation of Circular 20/2026/TT-BCT is expected to remove some obstacles in the electricity price mechanism for small renewable energy projects, especially small hydropower and distributed sources. The Circular takes effect from June 2, 2026./. See morePhu My Thermal Power: 348 billion kWh and a shield to stabilize the national electricity system See moreThe heat is coming Early on, factories strained to keep up the power supply. 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