On 3 July 2024, the Government issued Decree No. 80/2024/ND-CP regulating the direct power purchase mechanism ("DPPA") between renewable energy generators and large power consumer ("Decree 80"). Decree 80 became effective 3 July 2024.
Some key take-away:
Decree 80 adopts two separate DPPA models:
1. Model 1 – Private Wire Model: this model envisions the sale of power from a renewable energy generator with large power consumer through a power private wire (not connected to the national power grid). There is no requirement on application/registration for joining this Model but large power consumer shall report the execution of power purchase agreement with the renewable energy generator to local provincial People's Committee, competent local power company, and competent system operator (e.g., A0). Renewable energy generators include owners of energy, solar, wind, small hydro power plants as well as rooftop solar systems. One of a key change from the last draft is that large power consumer is now to include all are those who use electricity from 200,000 kWh per month (NB: the last draft requires large power consumer to use at least 500,000 kWh per month).
2. Model 2 – Grid-connected Model: this Model envisions the sale and purchase of power under a forward contract between large power consumer and renewable energy generator. To implement this Model: (x) large power consumer shall sign a forward contract with renewable generator, (y) renewable energy generator shall sign a contract with Electricity of Vietnam (EVN) for selling power to spot market (i.e., VWEM – Vietnam Wholesale Electricity Market) and (z) large power consumer shall sign a retail power purchase contract with EVN or its subsidiary (e.g., local power company) for receiving the power from the local power company. Renewable energy generator shall own a renewable energy plant of at least 10 MW. This Model requires registration of participation with competent system operator and will subject to the approval and guidance from the competent system operator for proceeding.
Analysis in details:
1. Scope of Regulations
The main subjects under Decree 80 are:
- Renewable energy generator owning power plants from solar energy, wind, small hydropower, biomass, geothermal, ocean waves, tides, ocean currents, and other forms of renewable energy, together with rooftop solar power system granted with electricity operating license or rooftop solar power system being exempted from such a license.
- Electricity retailers in industrial parks, economic zones, export processing zones, industrial clusters, high-tech parks, centralized information technology parks, high-tech industrial parks and other similar models regulated by a competent authority being electricity unit licensed to operate electricity in the field of electricity retail in such area or cluster with an electricity purchase output of 200,000 kWh/month or more connected to the voltage of 22 kV or more.
- Large power consumer being organizations or individuals buying electricity for their own use without reselling with the average consumption output of 200,000 kWh/month or more.
2. General principles
The two models for DPPA mechanism are regulated to be implemented under the following principles:
" Private wire:
(i) Parties: This form must be implemented between renewable energy
generation units and large power consumer where the DPPA is
mutually agreed between the parties;
(ii) PPA: The PPA between the parties is mutually agreed. The
electricity sale price is negotiated by both parties, except for
specific cases under Decree 80;
(iii) Procedures: Regarding relevant procedures, upon the renewable
energy generation unit's obtainment of relevant
approvals/licenses and the execution of the PPA between the
parties, the large electricity user must report the PPA to the
provincial People's Committee, the competent local power
company and competent system operator.
" Grid-connected:
(i) Parties: The parties to this form of DPPA mechanism are
renewable energy generators and large electricity user/electricity
retailer through forward contracts. To implement the above forward
contract: (x) large power consumer shall sign a contract with a
forward contract with renewable generator, (y) renewable energy
generator shall sign a contract with Electricity of Vietnam (EVN)
for selling power to spot market (i.e., VWEM – Vietnam
Wholesale Electricity Market) and (z) large power consumer shall
sign a retail power purchase contract with EVN or its subsidiary
(e.g., local power company) for receiving the power from the local
power company. Renewable energy generator shall own a renewable
energy plant of at least 10 MW.
(ii) PPA: Subject to the specific method of implementation of
grid-connected mechanism, the contents of the PPA will contain
specific contents as regulated in Decree 80. The same principle
applies for the electricity sale price.
(iii) Procedures: Subject to the specific method of implementation
of grid-connected mechanism, specific procedures will apply,
according to Decree 80. Generally, this Model requires registration
of participation with competent system operator and will subject to
the approval and guidance from the competent system operator for
proceeding.
3. Spot electricity market price:
Regarding grid-connected form of electricity trading, Decree 80 provides detailed regulations on the selling of renewable electricity generation units through spot electricity market and the trading with EVN as follows: According to relevant regulations, the spot electricity market price is the total electricity market price formed according to each transaction cycle of the spot electricity market and is determined by the sum of the market electricity price and the market capacity price. In particular, the market electricity price and market capacity price are determined according to the Regulations on operating the competitive wholesale electricity market issued by the MOIT.
We – Duane Morris Vietnam – are following up closely with the implementation of this Decree 80 and any new progress will be updated in a timely manner.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
