DPPA promotes competitive electricity market development in VN

July 08, 2024 - 08:15
The newly-released Government's Decree 80/2024/NĐ-CP regulates the DPPA mechanism with two options being through a private power line and the national grid via EVN
EVN's Power Transmission Company 1 in Hà Nội. The issuance of Decree 80 on DPPA mechanism meets the expectations of domestic and foreign businesses. — VNA/VNS Photo

HÀ NỘI — Implementing the direct power purchase agreement (DPPA) mechanism between renewable energy generators and large customers is important to developing a competitive electricity market in Việt Nam.

On July 5, the Ministry of Industry and Trade held a conference to deploy the Government's Decree 80/2024/NĐ-CP dated July 3, 2024 regulating the DPPA mechanism with two options being through a private power line and the national grid via EVN.

In the case of trading renewable energy through a private power line, the electricity price will be set under an agreement between seller and buyer.

The electricity price for the contracts trading renewable power through the national grid will be under the regulations on electricity prices issued by the Ministry of Industry and Trade.

According to Phạm Quang Huy, deputy director of the Electricity Regulatory Authority (Ministry of Industry and Trade), building and perfecting fair and transparent mechanisms/policies creates motivation to attract private capital in producing and using renewable energy, leading to promote the development of the competitive electricity market in Việt Nam.

Võ Quang Lâm, deputy general director of Vietnam Electricity (EVN) said the issuance of this decree meets the expectations of domestic and foreign businesses.

"This is a very important step to boost the development of Việt Nam's competitive electricity market," Lâm said.

"EVN has organised a review of internal processes and this July, EVN will complete the processes to be suitable with the decree as well as related laws, so EVN's member units and the electricity trading companies will immediately implement this decree."

At the conference, many representatives of a number of international organisations such as Vietnam Business Forum (VBF), Japan International Bank (JBIC), Embassy of the United States and the Asian Clean Energy Coalition (ACEC), and large electricity customers such as Samsung, all expressed their support and appreciation for the issuance of the DPPA mechanism.

The United States Mission to Việt Nam applauded the Government for approving the Decree on the DPPA.

The US Mission to Việt Nam through the US Agency for International Development (USAID) has provided technical assistance to the Ministry of Industry and Trade (MoIT) since 2017 on the design, development and approval of the DPPA. USAID will continue to partner with MOIT on the DPPA’s implementation.

When implemented, the new policy will allow businesses in Việt Nam to purchase electricity directly from private firms producing renewable energy, enabling them to power their operations with 100 per cent renewable energy.

This helps Việt Nam attract private sector investment in renewable energy while meeting the needs of corporate leaders seeking to integrate renewable energy into their operations and achieve their corporations’ emissions reduction targets.

“The DPPA will enable businesses to reduce their carbon footprint while also enabling Việt Nam to accelerate its clean energy transition and advance its goal of net-zero emissions by 2050. The United States remains Việt Nam’s partner as you roll out this important initiative, and expand Việt Nam’s access to clean and renewable energy,” said USAID/Vietnam Mission Director Aler Grubbs.

At the same time, foreign organisations and companies also consider this decree as a mechanism not only to contribute to ensuring electricity supply but also to help the customers achieve production and green growth goals.

It contributes to attracting investment not only in the renewable energy industry but also in sectors with large electricity consumption needs.

Especially, the DPPA mechanism also contributes significantly towards developing the competitive retail electricity market in Việt Nam, and improving the effectiveness of State management and the level of competition in electricity trading activities.

Speaking at the conference, Minister Nguyễn Hồng Diên said this is an important and groundbreaking mechanism to contribute to attracting investment in renewable energy development, thereby achieving the goals of energy transition and sustainable development, and development of Việt Nam's competitive electricity market.

This is also the mechanism to be interested by many organisations and individuals, especially large electricity users and FDI firms.

Therefore, to ensure efficient implementation of the DPPA mechanism, Diên has requested the authorities of localities to effectively implement the tasks assigned in the decree. Those tasks focus on inspecting and supervising the implementation of power purchase contracts in the direct form, as well as resolving complaints and handling violations during implementing this mechanism.

EVN and its affiliated units are asked to urgently calculate the costs of using power system services in the DPPA mechanism, and build processes of trading, management and payments for customers.

Minister Diên requested the Electricity Regulatory Authority and relevant ministries and branches to amend and promulgate new circulars to carry out this mechanism, ensuring no major obstacles during the implemention of Decree No 80.

Along with that, they urgently research and propose a pilot mechanism of electricity prices and submit them to competent authorities for promulgation in August.

According to Diên, EVN, electricity buyers and sellers need to proactively review technical conditions to ensure this mechanism does not affect the safety of the national power grid and the process of implementing the Electricity Planning VIII.

Large customers are those who use electricity from 500,000 kWh per month, estimated at around 3,000 customers and making up for 30 per cent of the total electricity consumption, according to the Decree 80.

The ministry's statistics show that there are nearly 1,500 customers using over 1 million kWh per month, accounting for 26 per cent of the total electricity consumption.

There are about 7,700 customers using from 200,000 kWh per month, or 36.5 per cent of the total electricity consumption.

A survey conducted by the MoIT at the end of last year found that approximately 20 large companies were interested in purchasing electricity directly, with a total demand of nearly 1,000 MW.

Additionally, 24 renewable energy projects with a capacity of 1,773 MW looked at selling electricity through the DPPA mechanism and 17 projects with a capacity of 2,836 MW were considering becoming participants. — VNS