Decree upgrade becomes electricity market catalyst

Ngu Truong, managing partner and Trang Nguyen, senior associate of law firm Vilasia

Several important changes and significant improvements have been introduced in Decree No.57/2025/ND-CP over Decree No.80/2024/ND-CP, creating new opportunities and providing a more favourable environment for the development of a competitive electricity market in Vietnam.

Key updates, such as greater flexibility in defining large electricity customers, the inclusion of biomass power, clearer participation rules for rooftop solar power in the direct power purchase agreement (DPPA) mechanism, and the introduction of a surplus electricity sales mechanism, reflect the government’s proactive approach and long-term vision in advancing the DPPA framework, encouraging renewable energy, and safeguarding the environment.

While the previous decree established the initial framework for the DPPA mechanism, Decree 57 represents a major step forward, swiftly and flexibly addressing its shortcomings. It expands the pool of participants while ensuring fairness and transparency in electricity transactions. This marks a new phase of progress, which is expected to further accelerate the development of the renewable electricity market, liberalise the clean energy sector, and contribute to building a sustainable, green energy system for the future.

Key differences

Decree 80 allowed renewable energy producers and large electricity consumers to freely negotiate electricity prices without being restricted by specific price thresholds.

In contrast, Decree 57 imposes a more rigorous rule: while parties are still free to negotiate prices, the price must not exceed the maximum limit set within the electricity generation price framework for the respective energy source.

The goal is to ensure fairness and transparency in electricity transactions, regulate electricity prices, and prevent parties from arbitrarily agreeing on inflated or excessively low prices, while safeguarding the interests of both investors and customers involved in the DPPA mechanism.

Under the previous rules, to participate in the DPPA mechanism via the national grid, customers needed to meet certain conditions, including an average consumption of 200,000 kWh/month, connection at 22kV or higher, and usage for production purposes.

However, these requirements have raised several issues in defining the participation conditions. For example, should electricity output be calculated based on each individual measurement point or aggregated from multiple points? How should businesses that use electricity both for production and for commercial or residential activities be accounted for? And should the connection voltage level be based on the connection agreement or the location of the metering system?

To address these challenges, Decree 57 has introduced significant adjustments. Specifically, it no longer applies the rigid criterion of “average consumption of 200,000kWh/month” for large customers participating in DPPA.

Instead, this criterion will be adjusted flexibly by the minister of industry and trade, in alignment with the evolving stages of the power system’s development.

While the detailed regulations will await further guidance from the Ministry of Industry and Trade (MoIT), this is a positive signal, reflecting the government’s flexibility and long-term vision for the DPPA mechanism.

Furthermore, Decree 57 no longer restricts large electricity customers to only using electricity for production purposes. Large customers using electricity for services such as electric vehicle charging are now also permitted to participate in DPPA through the national grid.

This not only broadens the range of eligible participants but also creates opportunities to boost investment in electric vehicle support services, contributing to the sustainable development of green transportation systems in Vietnam

The new regulations set flexible guidelines for identifying “large electricity users”. The concept has undergone a significant change between decrees. While the previous one applied a rigid criterion of average consumption or registered usage of 200,000kWh/month to define large customers, Decree 57 has introduced more flexibility by granting the MoIT the authority to adjust capacity and consumption levels according to the different stages of development of the power system.

This reflects the government’s proactive and flexible approach in adjusting the mechanism to align with practical realities and the evolving trends in the energy sector.

Meanwhile, although only wind and solar power were allowed to participate in the DPPA mechanism, Decree 57 has expanded the scope by including biomass power as a new energy source eligible to participate in the mechanism through the national grid.

The MoIT explained in a January report that the decision to include biomass power, rather than expanding to other renewable energy sources, was due to the significant potential of biomass energy. Many biomass power plants with capacities exceeding 10MW are already operational, with a total current capacity of around 332MW.

It is projected that by 2030, biomass power capacity will increase by an additional 300MW. Moreover, biomass power is highly stable, helps reduce environmental pollution, and promotes investment in clean, sustainable technologies.

Wider participation

The fresh rules also allow power companies to participate in the DPPA mechanism via the national grid.

In January, the MoIT explained that the decision to include power companies in the DPPA mechanism was made to address issues encountered during the implementation of Decree 80.

Specifically, Khanh Hoa Power JSC, a subsidiary of Central Power Corporation, was licensed to retail electricity in Khanh Hoa province but was not allowed to participate in the DPPA mechanism. This restriction prevented large electricity consumers in Khanh Hoa from engaging in DPPA transactions with the company.

In response to this issue, the MoIT has made adjustments to allow power companies to participate in the DPPA mechanism, thus creating a more favourable environment for large electricity consumers.

Elsewhere, the connection structure of rooftop solar power systems was not included in the definition of private connection grids, which led to ambiguity regarding their eligibility to participate in the DPPA mechanism. However, Decree 57 has clarified that the private connection grid of rooftop solar power systems is now considered a type of private connection grid eligible for participation in the DPPA mechanism.

Decree 57 introduces a new mechanism allowing rooftop solar power systems to sell surplus electricity to Vietnam Electricity or its subsidiaries, provided that the surplus does not exceed 20 per cent of the actual electricity output. The sale price will be based on the average electricity price from the previous year and cannot exceed the maximum price set for ground-mounted solar power under the electricity pricing framework; and retail electricity providers in specific zones or clusters, with the surplus electricity and purchase price negotiated between the parties, but again, not exceeding the maximum price for ground-mounted solar power as outlined in the pricing framework.

This provision, a new addition, opens up opportunities for rooftop solar owners to reduce their electricity costs and actively participate in the retail electricity market. It enhances flexibility and efficiency in the use of renewable energy.

Finally, Decree 57 shifts the calculation of compensation costs from a monthly to an annual basis. This adjustment alleviates the calculation burden for parties involved in DPPA transactions, resulting in significant resource savings and increased efficiency.

As the legal framework for DPPA evolves rapidly, businesses must stay updated, collaborate closely with relevant stakeholders, and carefully evaluate the new adjustments to mitigate legal risks. This approach will help expedite investment, streamline the signing of DPPA contracts, and optimise strategies for clean energy usage, ultimately supporting sustainable development and ensuring long-term, stable benefits.

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