New decree opens direct renewable energy trade in Vietnam

The Government issued Decree 80/2024/ND-CP on the mechanism of Direct Power Purchase Agreements (DPPA) between renewable energy producers and large electricity consumers, which helped overcome the existing backlog in renewable energy.

Under Decree 80, electricity can be acquired in two ways: either by connecting to a private electricity grid or through the national grid.

In the first case, larger energy consumers sign an agreement with renewable energy entities to purchase electricity through a dedicated line in accordance with the provisions of the Energy Law (parties to the agreement, purpose of use, standards and quality of services, electricity prices, payment methods, etc.). The price of electricity will be negotiated between both parties, except for some special cases.

Renewable energy generators can negotiate and sign power purchase agreements with Electricity of Vietnam (EVN) or its authorized entity. Renewable energy units include solar power plants, wind farms, small hydropower plants, as well as biomass, geothermal, wave, tidal, ocean current and rooftop solar systems.

Large electricity consumers are organisations or individuals who purchase electricity with an average monthly consumption of 200,000 kWh or more.

In the second case, renewable energy units sell all their electricity generation on the day-ahead market in a competitive electricity market under a forward contract with large electricity consumers or authorised retail electricity sales entities in the relevant zones and clusters.

The latter will sign a power purchase agreement with EVN to buy all the electricity they need. The market price of electricity for the next day is determined by the sum of the market price of electricity and the market price of capacity, as determined by the Ministry of Industry and Trade. Large companies can negotiate the price of electricity directly, which helps to optimize energy costs.

EVN Deputy CEO Vo Quang Lam said the approval of Decree 80 is a very important step in promoting the development of a competitive electricity market. EVN has reviewed its internal procedures and will complete the mechanisms in accordance with the provisions of the decree and related regulations in July this year. On this basis, EVN and its member entities, the power trading corporations, can immediately implement the decree.

Chairman Nguyen Ngoc Hoa of HCMC Businesses Association commented that the acceleration of the DPPA mechanism helps export-oriented enterprises to access and use green certified renewable energy for their goods earlier. This in turn will give them a competitive advantage in the world.

Bincon JSC director Pham Phuoc Binh said the issuance of Decree 80 enables companies to access renewable energy more conveniently and mention the power grid when selling their goods. In addition, participating in direct power purchase helps power sourcing entities proactively find customers who need to buy electricity and regulate the grid more conveniently.

However, Director Binh noted that it is necessary to issue specific regulations on costs such as system distribution, electricity loss rate, system operation and maintenance so that enterprises can calculate investment costs. If this issue can be clarified, enterprises will quickly invest, considering that the electricity market is quite large and lucrative at present.

The Vietnam Energy Association said the Prime Minister’s approval of Decree 80 on the launch of the DPPA mechanism paves the way for a competitive wholesale and retail electricity market, not just EVN and its power distribution corporations as energy suppliers.

The mechanism also offers valuable opportunities for large-scale investments in the development of renewable energy sources, promoting green production and granting carbon dioxide emission reduction certificates to increase the competitiveness of goods exported to international markets.

However, in the current context, the Vietnam Energy Association also recommends that direct (through private grid connection) or virtual (through the national grid) power purchase agreements also put great pressure on the existing grid to balance the growing amount of renewable energy. This requires appropriate dispatch policies in line with the network capacity.

Meanwhile, to prevent speculation in the direct purchase and sale of renewable energy, energy engineer Nguyen Thanh Hoai proposed that authorities consider the optimal solution of establishing a mechanism for purchasing and selling electricity from storage systems.

This will ensure the stability of the national energy system because the battery capacity is the best flexible energy source that can compensate for the power shortage in the energy system when the wind weakens (for wind energy) or when it is cloudy, rainy, stormy and at night (for solar energy system). This will help reduce the investment in flexible energy sources from the state budget, encourage and mobilize external sources of capital for renewable energy investment.

Authors: Editorial Staff – Translation: Thanh Tam