Vietnam has announced Decree 80/2024/ND-CP regarding Direct Power Purchase Agreements, outlining important details.

Decree 80/2024/ND-CP, which the Vietnamese government issued on July 3, 2024, focuses on Direct Power Purchase Agreements (DPPA) and is a key component of Vietnam’s strategy to advance environmental sustainability and improve the competitiveness of its retail electricity market.

This decree represents a significant advancement in Vietnam's renewable energy sector and underscores the country's dedication to reducing carbon emissions and achieving net-zero emissions by 2050.

The DPPA enables the direct sale of renewable energy, such as rooftop solar, through private transmission lines and the national grid. It establishes transparent processes for direct energy transactions between energy producers and large electricity consumers. This initiative aims to meet the increasing demand for clean energy, encourage investment in renewable resources, and foster a competitive electricity retail market in Vietnam.

The Decree took immediate effect upon its issuance, and the Ministry of Industry and Trade (MoIT) is now tasked with promoting the decree, collaborating with relevant entities to disseminate information, and working with organizations and individuals to implement the DPPA mechanism.

Decree 80/2024/ND-CP consists of 5 Chapters, 30 Articles, and 5 Appendices:

• Chapter I covers general regulations in Articles 1 to 5;

• Chapter II addresses direct electricity trading through private transmission lines in Articles 6 to 8;

• Chapter III discusses direct electricity trading through the national grid in Articles 9 to 24;

• Chapter IV pertains to the implementation order and reporting regime in Articles 25 to 28;

• Chapter V includes implementation provisions in Articles 29 and 30;

• The Appendices are as follows:

• Appendix 1: Summary of the power purchase contract on the spot electricity market;

• Appendix 2: Summary of the Forward Contract;

• Appendix 3: Summary of the power purchase contract between large electricity consumers or power harnessing units in authorized industrial parks and the public power company Vietnam Electricity (EVN);

• Appendix 4: Charges for clearing differences in month M; and

• Appendix 5: Sample report on direct power purchase mechanism.

Direct Power Purchase Agreements: The functioning of the mechanism

Decree No. 80/2024/ND-CP outlines two main methods for directly purchasing energy:

1. Direct Power Purchase via a Dedicated Connection Line:

This method entails entering a power purchase agreement and transmitting electricity through a private connection line between a renewable energy generation unit and a large electricity customer. The agreement must cover aspects such as contract scope, usage, service standards and quality, rights and responsibilities of the parties, electricity pricing, payment terms, contract duration, and termination conditions.

2. Direct Power Purchase via the National Power Grid:

This method involves the buying and selling of electricity through forward contracts between renewable energy generators and large electricity users, or retail electricity suppliers in authorized areas or clusters. Renewable energy generators sell all generated electricity in the spot electricity market of the competitive wholesale electricity market. Large electricity users or authorized electricity retailers then enter into contracts to purchase the required electricity to meet their demand.

Important regulations and provisions

Rules governing the direct trading of electricity through private connection lines

The Decree requires renewable energy facilities to engage in negotiations with Vietnam Electricity (EVN) or an authorized entity to establish power purchase agreements for surplus electricity, covering capacity, output, and price. This process ensures the efficient integration of excess electricity into the national grid.

For large electricity customers purchasing from EVN or other retail suppliers, retail electricity prices are regulated by the Ministry of Industry and Trade.

The Decree also outlines specific regulations for direct electricity trading through private connection lines, including the requirement for both parties to agree on terms in accordance with relevant laws. The electricity price is determined through mutual agreement, with exceptions outlined in the Decree.

Renewable energy generators are mandated to negotiate and sign contracts for surplus electricity output with Vietnam Electricity Group or an authorized unit. Additionally, large electricity users have the authorization to engage in buying and selling electricity with the Electricity Corporation or other authorized retailers.

Electricity spot market

The Decree outlines that renewable energy generators can sell electricity directly through the national grid in the spot electricity market. The price in the spot electricity market is calculated based on the market electricity price and the market capacity price, both of which are regulated by the MoIT.

Fostering a competitive retail electricity market and advancing the use of renewable energy sources

The new Decree is a key part of Vietnam's broader plan to advance environmental sustainability and improve the competitiveness of its retail electricity market. Through enabling direct power purchases, the government aims to attract more investments in renewable energy projects, thus expediting the country's shift to cleaner energy sources.

In conclusion, Decree 80/2024/ND-CP signifies a crucial step towards a sustainable energy future for Vietnam. It not only promotes the growth of the renewable energy sector but also ensures that large electricity consumers can efficiently access clean energy, fostering a more competitive and environmentally friendly electricity market in the country.

Ways in which industries and businesses can utilize Vietnam's clean energy policy

Industries and businesses should see Vietnam's policy shift towards creating a competitive framework for purchasing renewable power as a step towards aligning with global sustainability and decarbonization trends. Companies can explore ways to incorporate this new development into their corporate strategies, including:

1. Corporate Social Responsibility (CSR): Embracing DPPAs can enhance a company's CSR profile, demonstrating a commitment to sustainable practices and carbon footprint reduction, which is increasingly important to consumers, investors, and partners.

2. Cost Management and Stability: Participating in DPPAs could provide businesses with more predictable and potentially lower energy costs compared to fluctuating fossil fuel prices. This stability can support long-term financial planning and budgeting.

3. Competitive Advantage and Market Differentiation: Embracing renewable energy early through DPPAs can offer a competitive advantage. Companies that integrate clean energy may appeal to environmentally conscious customers and stakeholders, setting themselves apart in the market.

4. Mitigation of Regulatory Risks: As global and local regulations become stricter regarding carbon emissions, businesses that proactively transition to renewable energy sources through mechanisms like DPPAs will be better positioned to comply with future regulations, avoiding potential penalties or additional costs.

Opportunities for new investments are now available

The viewing of Decree 80/2024/ND-CP should not be limited to a regulatory change, but rather seen as an entry point to a wide range of new opportunities. Industries and businesses can strategically position themselves to capitalize on Vietnam’s evolving energy landscape. Here are some areas where new investment opportunities may arise:

1. Renewable energy infrastructure: There will be a high demand for investment in the development and installation of renewable energy systems such as rooftop solar, wind farms, and other sustainable energy projects.

2. Energy storage solutions: As renewable energy generation increases, there will be a growing need for efficient energy storage systems. Companies developing advanced battery technologies and other storage solutions could find significant investment opportunities.

3. Private transmission lines: Investing in the construction and maintenance of private transmission lines to facilitate direct power purchases offers another avenue for businesses. This includes both the technical infrastructure and the service contracts associated with them.

4. Energy management services: As businesses adopt DPPAs, there will be a need for sophisticated energy management services to optimize usage, monitor performance, and ensure compliance with contractual agreements. Firms offering these services will find new markets emerging.

5. Financial and legal advisory services: The new Decree will create demand for financial and legal expertise to navigate the complexities of DPPA agreements. Firms that can offer specialized advisory services in this area will find numerous opportunities.

6. Green Tech innovation: Investment in innovative technologies that enhance the efficiency and integration of renewable energy, such as smart grids, IoT-based energy management systems, and AI-driven energy analytics, will be highly attractive.

7. Corporate renewable energy procurement: Large corporations will likely seek to procure renewable energy for their operations, presenting opportunities for businesses in this space.