Vietnam considers direct power purchase agreements with no restrictions on capacity, usage

A draft decree on direct power purchase agreements (DPPAs) between producers and large consumers via their own power lines has no caps on capacity, connection voltage level and intended usage.

S&P Global Commodity Insights, under market analyzer S&P Global, made the above observation in a Wednesday comment on draft rules prepared by Vietnam’s Ministry of Industry and Trade.

The government had earlier intended to test “physical” DPPAs on a pilot basis, but it is looking at a proper rollout now, the company said.

The draft decree defines large electricity consumers as those with a connection voltage level of 22 kW or higher and an average monthly consumption of at least 500,000 kWh.

The company said Samsung, Apple, Heineken, Google, and Nike were examples of manufacturing units in Vietnam with average monthly electricity consumption exceeding one million kWh.

“Utilizing renewable energy would allow these global manufacturers to lower the emissions footprint of their supply chains,” it said.

It also highlighted “virtual” DPPAs, under which energy is transmitted via the national grid operated by state utility Vietnam Electricity (EVN).

It is envisaged that EVN will sign separate agreements to purchase power from the producer, input it into the national grid and sell electricity to the consumer from its pooled supply.

Customers may not get electricity generated from the specified renewable project, but EVN would sell electricity at the agreed renewables prices and pass on the "green" attributes.

“The draft policy is the outcome of many investors, international organizations and electricity consumers in Vietnam showing interest in a DPPA mechanism to advance their sustainability goals,” S&P Global Commodity Insights noted.

The Ministry of Industry and Trade will collect feedback on the draft decree for the draft rules until April 30 for consideration and incorporation before submitting it to the government.

At a Thursday conference on the draft decree, Minister of Industry and Trade Nguyen Hong Dien clarified that DPPAs that do not involve the national grid will have no restrictions, but those that do will have to abide by requirements related to voltage, capacity and sources.

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.”

“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,” it told the Vietnam Business Forum (VBF) in March last year.

An MoIT survey at the end of last year found about 20 large enterprises with a total demand of nearly 1,000 MW wanting to buy electricity directly. Also, 24 renewable energy projects with a combined capacity of 1,773 MW wished to sell electricity through DPPAs, while 17 others with a combined capacity of 2,836 MW said they were considering the idea.