Vietnam’s long-awaited green light for direct renewable energy could revive stalled market | News | Eco-Business

The key bill, which took seven years to develop, is to allow large companies to buy renewable energy directly from power producers, raising expectations for the development of green energy in the country.

Part of Vietnam’s electricity market opened to private-sector transactions last week, ending the state-owned utility’s effective monopoly as the sole distributor of electricity, a move promoted by companies as key to limitless clean energy growth and achieving decarbonization goals.

Green energy suppliers now have two new options for selling their electricity. They can either arrange to run power lines directly to industrial customers or let buyers pay for packages of electricity that they send to the national grid. Those eligible for such deals include solar, wind, hydro, biomass, tidal and geothermal energy.

The new rules on direct power purchase agreements (DPPAs) represent a “watershed moment” for Vietnam’s renewable energy sector and allow companies to help meet the country’s decarbonization goals while also meeting their own renewable energy targets, said Suji Kang, program director of the Asia Clean Energy Coalition, a group of energy producers and major companies including Apple and Samsung Electronics that have factories in Vietnam.

“Vietnam is now one of the region’s leaders in the energy transition,” said Mark Hutchinson, head of the Southeast Asia Task Force at the Global Wind Energy Council, a wind energy lobbying group.

New investments are also starting to flow in on the announcement wave. Nami Distributed Energy, a solar developer in Vietnam, announced a $10 million investment from Singapore-based Clime Capital through a mixed-funding scheme.

“We are very excited and are already receiving inquiries from our industrial customers to accelerate their deployment,” said Luu Hoang Ha, President of Nami Distributed Energy, commenting on the momentum following the publication of the DPPA.

Rooftop solar panel companies will benefit because they will be able to sell excess electricity back to the grid under contracts with national utility Vietnam Electricity (EVN), a welcome change from previous rules.

“For example, when factories are closed on Sundays, neighboring residential areas will still need power. If you can feed power into the grid at a low price to nearby residents, that’s good for everyone,” Ha said.

Vietnam’s renewable energy players have seen significant changes in their fortunes over the years. Generous government support from 2018 to 2021 led to a massive expansion in those years. Vietnam is now home to more than two-thirds of Southeast Asia’s 34 gigawatts of solar and wind capacity, according to analyst Ember.

However, extended adjustment void occurred, where developers had trouble selling electricity, even after their photovoltaics and turbines had been installed. Some companies halted projects and made layoffs.

The sector has been hit by a corruption crackdown, with officials in charge of spearheading Vietnam’s renewable energy efforts accused of violating licensing and certification rules for new projects while allowing green energy capacity to exceed official targets by more than three times.

Progress has accelerated since last year. Vietnam energy development plan for a decade, PDP8 was finalized, which blocked green power targets. The latest DPPA regulation is widely seen as the last of two major policy moves to get the country’s renewable energy development back on track.

The DPPA has been amended several times since its first draft was published in June 2019, which only allowed for green energy to be traded through the national grid, with no provision for the construction of new private power lines.

The law did not gain traction until Vietnam made a commitment in 2021 to achieve net zero emissions by 2050, and then faced grid stability issues as renewable energy capacity surged during that period, noted Nguyen Lan Phuong, a partner at law firm Baker McKenzie.

“Now the conditions for DPPA are ripe: PDP8 has set the framework for renewable energy generation and distribution, and private entities are ready to participate in the green energy market,” Nguyen said.

In the final version of the policy, more buyers were able to join the program and the monthly energy usage requirement was reduced from 500 to 200 megawatt-hours.

Parties interested in installing private power lines have a lot of room to maneuver in setting their own financial and technical terms. Those who prefer to trade through the national grid will have to adhere to more rules — such as power producers having to have at least 10 megawatts of capacity and staying in certain zones.

Concerns remain about whether Vietnam’s power grid can handle the new influx of intermittent solar and wind power. Load fluctuations in previous years have forced regulators to disconnect generators even when the sun was shining and the wind was blowing, leading to financial losses.

“Investing in grid infrastructure is essential to cope with the increased load from renewable sources and ensure the stability and efficiency of power distribution,” said Dr. Miguel Ferrer, general manager of renewable energy at Vietnamese technology company VIoT Group.

Ha of Nami Distributed Energy said he hopes the government will introduce incentives for deploying battery storage facilities, which could help smooth out spikes and dips in wind or solar power production.

The latest DPPA decree only provides for “high-level regulation,” Nguyen said, and the Vietnamese Ministry of Industry and Trade must handle the details of implementation, which will likely involve balancing managing network capacity with determining the optimal level of state control.

Vietnam’s DPPA law comes into effect when the country finished development a new 2.1 gigawatt coal-fired power plant worth US$3 billion. In addition to missing deadlines, the project has also been criticized for failing to meet the country’s goal of achieving net-zero emissions in the power sector by 2050. One-third of Vietnam’s current power generation capacity comes from coal, with another 10 percent from natural gas.

The country has a $15.5 billion deal with rich countries and financiers to cut greenhouse gas emissions from its power sector and shift to renewable energy. Vietnam has said its immediate priorities are facilitating the development of grid modernization, energy storage and offshore wind.