PM calls for end to long-delayed DPPA fulfilment

May 18, 2023 | 16:42
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Prime Minister Pham Minh Chinh last week directed an urgent study of international and regional experiences to review Vietnam’s draft direct power purchase agreement (DPPA) pilot, which has been in limbo for years.

Since 2020, the Ministry of Industry and Trade has created a number of draft legislative instruments on the DPPA pilot scheme, which included a draft circular in May 2021, a draft report in October 2021, and a draft decision in May 2022.

PM calls for end to long-delayed DPPA fulfilment
PM calls for end to long-delayed DPPA fulfilment

Although the pilot’s expected structure and conditions were revealed by the documents, a particular launch date for the programme was never suggested.

DPPAs are deemed a crucial mechanism to attract investors not only in the energy sector but also where companies have made commitments to renewable energy, carbon reduction, and sustainability.

Such agreements would make it possible for businesses in Vietnam to buy electricity directly from private companies that develop renewable energy, as opposed to doing so through regional power utilities. The policy would also support businesses in achieving their respective renewable energy supply goals.

The current DPPA pilot has been under design and review for around six years. In 2022, private companies in Asia-Pacific signed a record 7GW of DPPAs, an 80 per cent increase from 2021, demonstrating their willingness to drive new clean energy investments.

Greg Testerman, chairman of the American Chamber of Commerce in Ho Chi Minh City and Danang, said, “DPPAs are a mechanism that has been used in many countries, and we hope it can come into force here this year. We believe that Vietnam’s approval of a pilot would also unlock billions in investment, especially from companies that have committed to renewable energy and carbon reduction,”

The MoIT has been developing the mechanism and was collecting opinions through various web portals since September last year. The ministry initially planned to pilot the mechanism in 2021-2023, with total capacity of about 1,000MW.

Under the plan, after a pilot is eventually carried out, the Electricity Regulatory Authority of Vietnam (ERAV) will evaluate the market as well as technical, financial, and legal aspects, before finalising the content to be reported to authorities for consideration and decision to widely apply the mechanism.

According to ERAV, a pilot would ensure that a competitive wholesale electricity market is completed, a more competitive retail electricity market is implemented, and direct electricity purchase and sale would become reality.

Over the years, international businesses have increased their calls for a DPPA pilot. In 2019, 26 top international companies and organisations signed a statement supporting such a model in Vietnam, and purchased more than 16 million mWh of electricity for an estimated $1.57 billion.

Strong DPPA scheme desired Strong DPPA scheme desired

The Minister of Industry and Trade is likely to sign a draft circular regulating a pilot project for electricity purchases and sales between renewable energy generators and consumers under direct power purchase agreements. However, while the ministry is gaining support from some organisations, experts advise designing the schemes in an appropriate manner.

DPPA pilot to prompt low-carbon adoption DPPA pilot to prompt low-carbon adoption

Vietnam’s much-awaited direct power purchase agreement pilot will be an effective tool for global companies to meet their sustainability commitments, but it remains to be seen how Vietnam can meet the green energy demand from global businesses.

Burdens still to be tackled to ensure efficient DPPA pilot Burdens still to be tackled to ensure efficient DPPA pilot

Foreign investors have been closely monitoring a proposed pilot on the direct power purchase agreements in Vietnam, especially those with a long-term business strategy in renewable energy. However, the country’s limited mechanisms may mean the long-term goals will be difficult to attain.

By Nguyen Thu

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