Manufacturing enterprises should be able to buy electricity directly from renewable energy plants with or without going through state utility Vietnam Electricity (EVN), proposed the Ministry of Industry and Trade in a draft decree regarding the direct power purchase agreement (DPPA).
The draft stipulates that buyers are organizations and individuals that use electricity at a voltage of 22 kV or higher, with an average monthly consumption of 500,000 kWh; while suppliers have renewable energy (wind and solar) plants connected to the grid, with a capacity of over 10 megawatts. Households would not be allowed to buy or sell renewable energy directly.
The DPPA model will be implemented through private transmission lines or the national grid (via EVN), according to the draft.
If organizations or individuals buy electricity directly from a renewable energy plant through a private transmission line, they will not be limited in terms of capacity, output, or voltage level. Power purchase contracts and electricity prices will be agreed upon by both parties. The only condition is that the power sources must be part of national and provincial power development plans, and have an electricity generation permit.
In cases where renewable power is sold through the national power grid, the buyer and seller will negotiate and agree to term contracts with a price. The transaction will be made through the spot market in accordance with the competitive wholesale electricity market regulations of the trade ministry (MoIT).
Foreign-invested enterprises have repeatedly suggested Vietnam pilot the DDPA mechanism because they believe it will have a positive impact on energy industry competition.
At the Vietnam Business Forum (VBF) in March last year, the American Chamber of Commerce (AmCham) said Vietnam should promptly allow DPPAs. AmCham noted that the proposed scheme is “an important mechanism to attract investors and private investments, not only in the energy sector but also in other sectors where companies have made commitments in the space of renewable energy, carbon reduction, and sustainability.”
According to AmCham, in 2022, private companies in Asia Pacific signed a record 7 gigawatts of DPPAs, an 80% increase from 2021, and this demonstrated their willingness to drive new clean energy investments.
“Approval of the DPPAs could unlock billions of dollars in investment from the private sector. More could be done to finance Vietnam’s move away from fossil fuels,” the chamber added.
In fact, a draft proposal to pilot the DDPA was put forward by the trade ministry nearly three years ago, with an initial pilot capacity of 1,000 MW. At that time, many large corporations such as Samsung expressed their willingness to join the scheme.
The ministry said that after the pilot phase, power sources could be expanded to hydropower and biomass. Non-manufacturing customers like traders could participate in this mechanism in line with their needs and the development of power and a competitive electricity market in Vietnam.
Customers in industrial parks, economic zones, and export processing zones could participate in the DDPA after terminating their contracts with existing retailers.
An MoIT survey at the end of last year showed that about 20 large enterprises wanted to buy electricity directly, with a total demand of nearly 1,000 MW. At the same time, 24 renewable energy projects with a capacity of 1,773 MW wished to sell electricity through the DPPA mechanism, while 17 others with a capacity of 2,836 MW were considering the idea.