Investors will benefit through electricity law

After the new Law on Electricity was passed at the end of last year, earlier this month Vietnam issued a series of decrees to guide the legislation.

Dr. Oliver Massmann, partner and general director of Duane Morris Vietnam LLC

The first is Decree No.56/2025/ND-CP, which provides guidance on implementation of a number of articles of the Electricity Law regarding power development planning, power grid expansion, investment in power projects, and bidding for electricity projects.

Several power projects are exempt from the requirements for master plan inclusion. These include self-production and self-consumption renewable and new energy sources either grid-connected at a low voltage level, or not connected at all; grid-connected power sources equipped with zero-export systems; power sources using excess heat generated from the manufacturing lines for self-consumption, whether connected or not connected to the national grid; and more besides.

For effective assessment, the bidder evaluation score with regard to the level of power industry development will contribute 80-90 per cent of the score allocation percentage for determining the winner.

The defined ceiling tariff for this case is required to be lower or equal to the ceiling tariff specified in the bidding dossier. The bidders are required to propose a power tariff lower or equal to the ceiling tariff for the power purchaser, and the winning bidder to negotiate the power purchase agreement (PPA) tariff.

When it comes to the minimum annual contribution to the state budget, regardless of the investor’s legal obligations to the state budget, the bidder must propose an amount that is higher or equal to the amount specified in the bidding dossier.

As for PPA discussion and implementation, approval of the feasibility study report will be within 15 months (for hydropower, gas-to-power, coal-fired, and wind power projects) or six months (for biomass power and solar power projects) from the execution date of the venture’s contract.

According to the bidding outcomes and the sanctioned feasibility study report, PPA negotiation and execution must take place within three months from the day the successful bidder presents a valid application to the power buyer.

Power projects already included in the master plan with a capacity scale included in the power supply network development plan at the provincial level under Decree 56 will continue to be implemented in accordance with the decisions approved by competent authorities.

These projects shall be updated in the provincial plan or the implementation plan after this decree takes effect.

Mechanism implementation

In the meantime, Decree No.57/2025/ND-CP replaces Decree No.80/2024/ND-CP on mechanisms for direct power trading between renewable energy generators and large electricity consumers.

Similar to the previous decree, Decree 57 regulates the private wire model where renewable energy generators sell electricity to large electricity consumers through a private power wire, and the grid-connected model where the sale and purchase of electricity are implemented via the grid.

While Decree 57 replaces and inherits the mechanisms as set out previously, it introduces two amendments to enhance the enforceability of the direct PPA mechanism. Firstly, biomass energy generators are added as regulated renewable energy generators. Secondly, while only industrial consumers are defined under the previous decree, businesses providing electric vehicle charging services are defined in Decree 57 as one type of large electricity consumers.

For large electricity consumers who have been using electricity for 12 months or more, the average overall electricity usage over the past 12 months (calculated based on the total electricity acquired from a power corporation or its authorised entities) cannot be less than the minimum electricity consumption threshold for large electricity users, as outlined in the regulations governing the operation of the competitive electricity market issued by the Ministry of Industry and Trade (MoIT).

For large electricity consumers who have been using electricity for less than 12 months, the average overall electricity usage is determined by the projected electricity demand acquired from a power corporation (or its authorised entities) and must meet or exceed the minimum consumption threshold for large electricity consumers, also as outlined in rules established by the MoIT.

Surplus electricity from renewable generators with rooftop solar systems selling directly to major electricity users must not surpass 20 per cent of the total electricity produced. This surplus electricity is also determined at the average market electricity price from the prior year, as reported by the electricity system and market operator. It must not go beyond the highest cost of the ground-mounted solar energy pricing structure

As for the private wire model, the selling price of electricity must not exceed the maximum price within the price framework. Similarly, the surplus electricity output from renewable energy generation units sold to Vietnam Electricity (EVN), power corporations, or electricity companies shall have its output and selling price agreed upon by both parties, but must not exceed the maximum price level within the price framework for the corresponding type of power source.

Qualifying for incentives

Elsewhere, Decree No.58/2025/ND-CP replaces a 2024 decree on policies encouraging the development of self-production and self-consumption rooftop solar power and introduces several provisions.

There is exemption from sea area usage fees during the basic construction period but not exceeding three years from the date of commencement of construction, and a 50 per cent reduction in sea area usage fees for a period of nine years after the exemption period of the basic construction period.

Exemption from land use fees and land rent will occur during the basic construction period, but not exceeding three years from the date of commencement of construction. After the exemption period of the basic construction period, the exemption and reduction of land use fees and land rent shall be implemented in accordance with the provisions of laws on investment and land.

The minimum long-term contracted electricity output is 70 per cent within the loan principal repayment period but not exceeding 12 years unless the investor and the electricity buyer have another agreement. This mechanism shall not be applied in cases where the project fails to generate the minimum committed output due to reasons from the project side, or due to load demand or technical conditions of the power system that cannot consume all the output.

New energy projects that qualify for incentives are those produced from 100 per cent green hydrogen/ammonia, or a mix of both; those supplying electricity to the national power system; and the first project for each type of new energy.

Decree 58 also provides two models for rooftop solar power ventures, where developers can opt to either connect or not to connect their system to the grid. In the case of connection to the grid, no more than 20 per cent of the power system’s installed capacity may be sold to EVN in exchange for the surplus power produced.

Finally, when it comes to development of offshore wind power projects, applicable schemes will be those with an in-principle investment policy approval issued by competent authorities before January 1, 2031. Conditions will also be applied to foreign investors which include experience, financial capability, the participation of domestic enterprises, authority consensus, and commitment to using domestic resources.

New law marks shift for electricity market Last year the National Assembly issued the new Law on Electricity, which took effect from February 1. Pham Hoang Vu, associate and deputy head of project and infrastructure, and Pham Dac Hoang, junior associate of Indochine Counsel, outline key highlights of the law that could potentially transform Vietnam’s energy sector.