DPPA boots renewable energy, competitive electricity market

A direct power purchase policy will allow major electricity consumers to directly buy power from electricity producers - photo: Vu Son

Major policy

Developing a competitive electricity/energy market (including a direct power purchase agreement, or DPPA, between electricity producers and consumers) and renewable energy (to replace fossil fuels) is part of Politburo Resolution 55-NQ/TW, dated February 11, 2020, on Vietnam’s national energy development strategy to 2030, with a vision to 2045.

According to point b in article 47’s clause 1 of the 2004 Electricity Law, major electricity consumers have the right to directly purchase power from generation units through term contracts or immediately, directly purchase electricity on the market.

In line with this policy, on November 9, 2023, the National Assembly ratified Resolution 103/2023/QH15 on a socioeconomic development plan for 2024, which assigns the Government and relevant agencies to effectively implementing the following key tasks and solutions: timely and efficient implementation of the National Power Development Plan for the2021-2030 period, with a vision to 2050; facilitation of investment in and speeding up power distribution and transmission projects, especially renewable energy ones to ensure sufficient electricity supply for production and trading activities, and people’s daily life; and early adoption of a direct power purchase agreement, among others.

On December 13, 2023, the National Assembly’s Executive Committee approved Resolution 937/NQ-UBTVQH15 on the implementation of 2016-2021 energy development policies and laws, under which the Government studies and improves its decree on direct trade in power between renewable energy-based power generators and major electricity consumers.

Energy transition and competitive electricity market

Vietnam has been shifting from traditional energy with environmental pollution risks to clean, renewable energy. Thanks to its timely policies, the country has achieved significant success in attracting investment in and developing renewable energy, reaching a capacity of over 20,000MW.

According to surveys and businesses’ feedback, both renewable energy investors and major electricity consumers (using one million kWh of power upward per month) want to apply a direct power purchase agreement, and they hope that the Vietnamese Government will promptly issue such a mechanism.

The Ministry of Industry and Trade has drafted a direct power purchase decree that is undergoing public consultation, focusing on direct trade in electricity between power generators and large electricity consumers through dedicated transmission lines; and direct trade in power between power generators and large electricity consumers through the national grid.

Tran Viet Hoa, Director of the Ministry of Industry and Trade’s Electricity Regulatory Authority of Vietnam, said a direct power purchase policy will help realize the Party’s and the State’s policy on sustainable development of Vietnam’s energy sector, meet the demand for clean energy, develop a competitive retail electricity market in the country, and improve state management of direct trade in electricity between power generators and consumers.