The DPPA allows direct sale of renewable energy producers to end-users

A Direct Power Purchase Agreement (DPPA) is a contract between a renewable energy producer and an end user, where the electricity generated by a wind or solar facility is physically supplied to power the corporate buyer’s operations. Under this scheme, independent renewable energy developers with an installed capacity of 30 MW or more are permitted to supply electricity directly to private consumers for industrial manufacturing purposes.

The scheme will be conducted nationwide with a limited total size of up to 1,000 MW.

DPPAs are win-win contracts for both large energy consumers and renewable energy producers. Buyers lock in predictable energy costs and gain access to clean power, while sellers secure financing for renewable projects and diversify their sales channels. DPPAs also promote competition within the energy market, ultimately driving investment in clean energy sources. Especially, it will help Foreign Direct Investment firms access clean energy for production, which contributes to their sustainability goals.

The DPPA facilitates the direct sale of rooftop solar and other renewable energy sources via private transmission lines and the national grid. It establishes clear mechanisms for direct energy purchases between Power harnessing units and Large Electricity Consumers (with a consumption output of at least 200MWh/month). This serves multiple goals including meeting the growing market demand for clean energy, stimulating investment in renewable resources, and creating a competitive electricity retail market in Vietnam.

Decree 80/2024 introduces two DPPA models which are (i) private transmission lines line/off-the-grid model (Private Line Model) and (ii) national grid-connected model (Grid Connected Model):

1. Private Line Model

Decree 80 does not impose any specific requirements on the Private Line Model. The Private Line Model allows the parties to agree on the electricity price without any specific restrictions as opposed to applying the regulated electricity retail price which was previously proposed in the draft of October 2023. There is no template power purchase agreement that the renewable energy companies (GENCO) and the large electricity consumers (Consumers).

2. Grid Connected Model

The eligible GENCOs wishing to participate in the Grid Connected Model are those with a capacity of at least 10MW and having participated in the Vietnam Wholesale Electricity Market (VWEM). The eligible Consumers wishing to participate in the Grid Connected Model are those with (1) a connection voltage of at least 22kV and (2) consumption output of at least 200MWh/month. This threshold is lower than the previous draft, which required a minimum consumption output of 500MWh/month. The eligible GENCOs and the eligible Consumers are required to register with the National Load Dispatch Centre for participation of the Grid Connected Model, noting that it will theoretically take approximately 15 working days for this registration procedure.

In particular, for a Power Purchase Agreement between GENCOs and EVN (PPA), the parties can negotiate its terms and conditions with the key provisions set out in Schedule 1 of Decree 80. The key provisions of (1) the Power Purchase Agreement (Retail Power Agreement) between the Consumer (or an electricity retailer which is authorized by the Consumer(s) in industrial parks/clusters) and the relevant Power Corporation (being a subsidiary of EVN) are set out in Schedule 2 of Decree 80 and (2) the forward contract (Forward Contract) between GENCO and the Consumer are set out in Schedule 3 of Decree 80.

Frasers Law Company, 2024. DPPA Decree.

Vietnamnet, 2024. Early issuance of direct power purchase critical to promote foreign investment.