There have been numerous discussions about the new direct power purchase mechanisms (DPPA) introduced under Decree 80/2024 our own briefing note. In this post, we focus on issues which are unclear under Decree 80/2024 and require more clarification. Terms defined in our briefing note will have the same meaning when used herein.  These issues are:

• Decree 80/2024 introduces the concept of “Authorised Electricity Retailer in Zones” (Đơn vị bán lẻ điện tại các mô hình khu, cụm được ủy quyền). However, it is not clear who will verify and determine whether an electricity retailer will qualify as an Authorised Electricity Retailer in Zones. Decree 80/2024 does not make clear if the parties to the DPPA mechanism can verify the qualification of an Authorised Electricity Retailer in Zones or will require a third party (even the authority) to do so.

• To purchase power via a DPPA mechanism, a customer is required to consume an average 200,000 kWh per month. If a Consumer consumes less than 200,000 kWh per month then the DPPA relating to such Consumer may have to be terminated. However, it is not clear if the 200,000 kWh threshold includes the amount of power purchased from (1) both EVN and the RE Generator or (2) EVN only. In other words, it is not clear Decree 80/2024 requires a Consumer to purchase at least 200,000 kWh from EVN. This interpretation seems not logical but not impossible.

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Decree 80/2024 outlining mechanisms for direct power purchase agreement (DPPA) between renewable energy generators and large electricity consumers (Decree 80/2024) was issued by Vietnamese Government and became effective 3 July 2024. This Decree is considered as a significant policy that aims to promote the development of renewable energy in Vietnam and enhance the competitiveness of Vietnam’s retail electricity market.

This briefing note discusses the significant highlights of DPPA mechanism to be applicable to renewable power developers, including rooftop solar power developers in Vietnam as introduced by Decree 80/2024. This post is written by Nguyen Thi Kim Anh and Ha Thanh Phuc and edited by Nguyen Quang Vu.

Under Article 27 of Decree 80/2024 on mechanism for direct sale and purchase of renewable energy with large electricity customers, the Ministry of Industry and Trade (MOIT) will be entitled to suspend or terminate a Direct Power Purchase Agreement (DPPA) if there is an “act of taking advantage of the mechanism, policy for making profit”. For termination, the consequences of such act needs to be irremediable and the MOIT will need to obtain opinion from related authorities (presumably from the Ministry of Public Security).

Any large customer or any renewable energy producer enters into a DPPA will need to comply with (or “use”) the DPPA mechanism. In addition, obviously, the parties to a DPPA enter into the DPPA for the purpose of making profit (or saving costs). But Decree 80/2024 is not clear when the use of the DPPA mechanism would be considered as “taking advantage” (lợi dụng) of the mechanism or when an entity is deemed to make so much profit that the relevant DPPA may need to be suspended or terminated.

On 27 May 2024, the Ministry of Industry and Trade (MOIT) issued Decision 1260 approving the electricity generation price (EGP) range for the year 2024 applicable to LNG combined-cycle gas turbine (CCGT) thermal power plant (nhà máy nhiệt điện tua bin khí chu trình hỗn hợp sử dụng LNG in Vietnamese).

The ceiling price of such EGP range is VND 2,590.85 per kWh (about 10.67 UScents at the exchange rate of 1 USD = 24,262 VND), exclusive of VAT. Such ceiling price was calculated based on the following factors: