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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.

1. DPPA PARTIES CRITERIA

Decree 80/2024 provides for the entities and the required qualifications to be eligible for the DPPA mechanism as follows:

Renewable Energy Generator (RE Generator):

Including not only wind or solar power plants but also other renewable energy power plants such as hydropower, biomass, geothermal, tides, ocean wave and currents;
Including a rooftop solar power system; and
Having an electricity generation license unless it is eligible for an electricity generation license exemption under the applicable laws.

Large Consumer

Being an electricity end-user (i.e. electricity purchase for usage but not for resale);

Having an average monthly consumption of at least 200,000 kWh; and
Including both service consumers and manufacturing consumers (a Large Consumer being a manufacturing consumer, a Large Manufacturing Consumer).

Authorised Electricity Retailer in Zones:

Having an electricity retail license for sale of electricity in industrial parks, economic zones, export processing zones, industrial clusters, high-tech parks, centralized information technology parks, high-tech agricultural parks and other similar models regulated by a competent authority (“Zones”).
Purchasing an average monthly volume of at least 200,000 kWh;
Having a connection voltage of at least 22 kV; and

Being authorised by Large Manufacturing Consumers to purchase electricity on their behalf.

(a Large Consumer and an Authorised Electricity Retailer in Zones, a Consumer)

2. DPPA MODELS

Decree 80/2024 adopts two models for DPPA, including (1) private wire model (Private DPPA) and (2) national grid connected model (or Grid Connected DPPA). Under Decree 80/2024, the regulatory frameworks governing those DPPA models are as follows:

Actual electricity flow

· Private DPPA - The electricity generated by the RE Generator will go directly to the Consumer via a private wire connecting the RE Generator with the Consumer.

· Grid Connected DPPA - The electricity generated by the RE Generator will go to the national grid and from the national grid the Customer will take electricity (not necessarily the electricity generated by the RE Generator).

Contractual arrangement

· Private DPPA - PPA between the RE Generator and Consumer, under which the RE Generator will sell, and the Customer will purchase, the power generated by the RE Generator via a private wire (Physical DPPA).

· Grid Connected DPPA - The National Grid Connected Model will require 3 PPAs to run:

(1) PPA between the RE Generator and EVN, under which the RE Generator will sell all power generated by the RE Generator to Vietnam Wholesale Electricity Market (VWEM) at a spot electricity market price (i.e. spot price) (EVN PPA);

(2) PPA between the Power Corporation and the Consumer, under which the Consumer will purchase the electricity from the Power Corporation the at a spot price plus other costs (see the pricing mechanism below) (PC PPA); and

(3) PPA with the RE Generator and the Consumer, under which is contract for differences between the pre-agreed price and the spot price (Virtual DPPA).

Model PPA

· Private DPPA – There is no model PPA under the Decree 80/2024 for the Physical DPPA. It is therefore subject to mutual negotiation between the relevant parties, provided that it must include main contents required by Article 22 of the Electricity Law.

· Grid Connected DPPA - EVN PPA and the PC PPA will follow Model PPAs provided in Decree 80/2024, respectively. These Model PPAs are fairly detailed so not much could be further negotiated. Decree 80/2024 also provides for a Model PPA for the Virtual DPPA but it only covers key terms. It is up to the RE Generator and the Customer to set out detailed terms in the Virtual DPPA.

Eligible RE Generator

· Private DPPA - RE Generator

· Grid Connected DPPA - RE Generator owning a power plant with (1) power sources from solar or wind only; (2) installed capacity of at least 10MW; and (3) participating in VWEM.

Eligible Customer

· Private DPPA - Large Consumer

· Grid Connected DPPA

(1) Large Manufacturing Consumers having a connection voltage of at least 22 kV; and

(2) Authorised Electricity Retailer in Zones. However, it is not clear the Authorised Electricity Retailer in Zones will enter into the DPPA with EVN in its own capacity or as an agent of the Large Manufacturing Consumer who authorises it to enter into the DPPA.

Pricing Principle - Private DPPA

Tariff to be mutually agreed by the RE Generator and the Customer. Except where the RE Generator is also an Authorised Electricity Retailer in Zones combining power purchase from the national grid for retail, tariff to be regulated by pricing policy as provided by the MOIT.

Pricing Principle – Grid Connected DPPA

· EVN PPA: Spot price on

· PC PPA:

(1) For consumption amount up to power amount generated by RE Generator (as adjusted to the power delivery point of the Consumer): spot price plus auxiliary costs (such as transmission, distribution, operation, management and other services) plus clearing costs(which are seemingly provided to require the Customer to share the costs of maintaining the baseload of the national grid such as BOT power plants or strategic hydro power plants);

(2) For consumption amount exceeding power amount generated by RE Generator: applicable retail electricity price (as provided by MOIT).

· Virtual DPPA:

(1) the RE Generator and the Consumer will agree on the committed amount of power to be sold by the RE Generator to the Consumer (Qc); and

(2) in relation to Qc, RE Generator and Consumer will settle the difference between the (i) exercise price to be agreed by the parties and (ii) the spot price (Price Difference);

(3) It is not clear why the Price Difference is calculated based on the Qc (being the committed amount) but not the actual amount of power that the RE Generator sells to the grid (Qm) or that the Consumer consumes (Qkh). So it would need some thoughts on how to deal with the situation (i) where Qm < Qc as it is not clear why and how the RE Generator and the Consumer will settle the Price Difference for the amount of power committed but not delivered or (ii) where Qkh > Qc as it is not clear why and how the RE Generator and the Consumer will settle the Price Difference for the amount of power not committed but delivered.

Registration Requirement

· Private DPPA – No registration is required but the notification of signing DPPA is required. Notification documents to be submitted to the relevant provincial People’s committee, Power Corporation and the National Load Dispatch Centre (NLDC).@

· Grid Connected DPPA – Registration is required. Registration dossiers must be submitted to NLDC, who will seek opinion from EVN, Power Corporation, the relevant Electricity Retailer in Zones before giving official confirmation. The authority will register the Grid Connected DPPA within 15 working days from submission of the adequate application dossier.

3. Suspension and Termination

The RE Generator and the Customer are suspended from participating in the DPPA regime in the following situations:

· the electricity market ceases to operate;

· one of the contracts under the DPPA regime is suspended or expired, affecting the interests of the involved parties;

· there is an “act of taking advantage of the mechanism, policy for making profit” (see our further analysis in this article); or

· the average electricity consumption of the Customer (on average over 12 consecutive months) is less than 200,000kWh/month.

The participation of the RE Generator or the Customer in the DPPA regime is terminated in the following situations:

· the RE Generator and the Customer so agree; or

· there is an “act of taking advantage of the mechanism, policy for making profit” and the consequences are not remediable (see our further analysis in this article).

- End of Document -

Vietnam Business Law