Vietnam to explore direct power purchase agreements in renewable sector

May 21, 2023 | 08:00
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Vietnam's Prime Minister Pham Minh Chinh has revealed path for direct power purchase agreements (DPPA) to drive renewable energy investments. As the nation positions itself as a key player in the renewable energy landscape, the successful implementation of DPPA mechanisms promise to propel Vietnam towards a more energy-independent future.
Vietnam to explore direct power purchase agreements in renewable sector

Vietnam's Prime Minister Pham Minh Chinh has just unveiled plans to embark on a groundbreaking initiative that involves piloting and advancing the development of a direct power purchase agreement (DPPA) framework between renewable energy producers and consumers in Vietnam.

During a meeting held on May 19 with Fujimoto Masayoshi, CEO of Sojitz Corporation, on the sidelines of the expanded G7 Summit in Japan, discussions revolved around the potential for expanding investments in Vietnam's industrial parks and renewable energy sectors.

Masayoshi emphasised Sojitz's keen interest in exploring opportunities for broader investments in these domains.

A growing number of prominent Japanese businesses are actively considering expanding their production capacities in Vietnam or relocating their manufacturing operations to the country.

Masayoshi proposed that Vietnam should expedite the implementation of a DPPA mechanism, enabling industrial plants to actively participate it. Such a move would foster a more competitive landscape in Vietnam's energy sector.

Prime Minister Chinh echoed these sentiments, highlighting the recent issuance of Power Development Plan VIII, which underscores a strategic focus on the advancement of renewable energy sources.

This plan serves as a crucial foundation for executing projects pertaining to power generation and grid infrastructure.

Building on this framework, Vietnam is poised to embark on a pilot phase aimed at establishing a robust DDPA mechanism between renewable energy producers and electricity consumers.

This progressive initiative will be accompanied by the amendment of the Electricity Law and the phased implementation of a competitive market framework across Vietnam.

Notably, the draft proposal for piloting DDPA was previously introduced by the Ministry of Industry and Trade, presenting an initial pilot capacity of 1,000 MW.

During this earlier phase, esteemed industry players such as Samsung expressed their eagerness to participate in the mechanism.

According to the ministry's draft, buyers and sellers will engage in negotiations and reach agreements for direct power purchases from solar and wind power plants through fixed-price contracts.

The ensuing electricity trading will be conducted through a spot electricity market, functioning in strict accordance with the competitive wholesale electricity market regulations set forth by the Ministry of Industry and Trade.

Previously, Gabor Fluit, chairman of the European Chamber of Commerce in Vietnam, said, "Vietnam should also establish a DPPA to incentivise renewable energy companies, particularly allowing industrial parks plants to participate in such agreements. We propose creating stronger conditions for plants that require renewable energy to comply with EU regulations.”

This significant initiative spearheaded by Prime Minister Chinh and supported by key industry players marks a significant step towards fostering a robust renewable energy sector and achieving sustainable power generation nationwide.

Vietnam, with its abundant renewable energy potential, offers a fertile ground for the development of renewable energy projects. The country's favourable geographical location and diverse renewable resources, including solar, wind, and hydroelectric power, present a promising landscape for clean energy investments.

An increasing number of domestic and international companies are entering the Vietnamese renewable energy sector, driven by the potential for significant growth and the increasing demand for energy, such as BCG Energy.

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By Trung Duong

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