(As updated)
Electricity of Vietnam (EVN)–being a state-owned corporation–has been an exclusive supplier of electricity, and power consumers have not been allowed to purchase electricity directly from renewable energy (RE) developers. But that has changed. The Government has issued a new regulation (Decree 57[1]) which allows RE developers to sell their electricity to large power consumers under direct power purchase agreements (DPPA). This Article discusses the DPPA mechanism, conditions and requirements for RE developers and power consumers to participate, contract templates, and the pricing mechanism under Decree 57.
Notable changes in Decree 57.
The first DPPA legal framework was set out in Decree 80[2]. It was soon clear that Decree 80 was not going to work. It was soon replaced by Decree 57 in March 2025. A number of new rules have been introduced and are incorporated in new Decree 57. Below are the notable changes:
- The concept of “large power consumers” has been changed in a broad and open manner. The requirement for monthly minimum power consumption (200kWh) and the requirement on the voltage connection level of large power consumers have all been removed.
- In the past, only wind and solar power plants were permitted to participate in the virtual DPPA mechanism. Now, biomass power plants are also permitted to sell electricity under the virtual DPPA mechanism.
- The price under the physical DPPA mechanism is now capped, and it is subject to ceiling prices notified by the Ministry of Industry and Trade (MOIT) from time to time.
- Owners of rooftop solar projects can sell the remaining volume of electricity to EVN at the average price of electricity of the previous year. However, the maximum remaining volume of electricity is limited to 20% of their actual capacity to generate power.
DPPA mechanisms.
There are two forms of the DPPA mechanism in Decree 57: the physical DPPA and the virtual DPPA. Under the physical DPPA format, RE developers can sell their electricity directly to large power consumers via private transmission lines. But what if the distance from an RE plant to the factories of large power consumers is long? It will often be impractical and costly to develop a long private transmission line. In those cases, RE developers can sell their electricity using EVN’s grid under a virtual DPPA mechanism. Under the virtual DPPA mechanism, RE developers can sell their electricity to EVN, and EVN then sells electricity to large power consumers from its pooled supply of power. This innovative and creative feature should open wide the pathway for renewable energy. The virtual DPPA mechanism, in which EVN is an intermediate party, allows EVN to charge for the transmission, distribution, and sale of electricity to power consumers. However, of course, consumers that purchase electricity from RE developers under the virtual DPPA mechanism will not receive 100%-clean energy from the selected RE developer. That is, the electricity under the virtual DPPA mechanism, is transmitted via EVN’s grid, and EVN’s grid contains electricity generated from many sources: coal, gas, RE sources, plus electricity imported from Laos and from China.
Conditions and requirements for RE developers and power consumers.
Under the physical DPPA mechanism, power plants that generate electricity from solar energy, wind, small hydropower, biomass, geothermal, ocean waves, tides, ocean currents, rooftop solar power and other forms of RE, are allowed to sell their electricity directly to large power consumers. Of course, power plants must have power generation licenses, power retailing licenses, and RE projects must be included in the national power development plan known as PDP8. Those RE projects authorized to be developed under PDP8, can be found in Decision 262 of the Prime Minister dated April 1, 2024. In theory, existing RE projects which have been fully licensed can also participate in the DPPA mechanisms. In such case, the existing PPAs which were signed with EVN must be terminated, and the RE project will not be able to carry forward the existing favourable feed-in tariff (FiT) they enjoyed under the signed PPAs.
Under the virtual DPPA mechanism, only biomass, wind and solar power plants can sell their electricity to large power consumers through EVN’s grid, and the capacity of wind and solar power plants must exceed 10 MW. Biomass, wind and solar power plants must have power generation licenses and these biomass, wind and solar power RE projects must be included in PDP8.
Contract Templates.
There is no still no contract template for the physical DPPA. RE developers and large power consumers are free to negotiate and conclude DPPAs. Decree 57 provides only key terms and conditions (subject of the contract; purpose of use; service standards and quality; rights and obligations of the parties; electricity price, payment method and term; conditions for contract termination; liability for breach of contract; term of the contract; responsibilities for investment, construction, management and operation of transmission lines; other terms and conditions). From RE developers’ perspective, a number of other provisions need to be included such as termination payment, operation and maintenance costs of the private transmission line, deemed delivery, foreign exchange risks, force majeure, guarantees, etc.
The arrangements, under the virtual DPPA mechanism, are specified in two separate agreements: (i) agreement between RE developer and EVN whereby RE developers can sell electricity to EVN at the market price (spot price), and EVN can re-sell the purchased electricity to large power consumers (or a pool of power consumers); and (ii) agreement between EVN and large power consumers (or a pool of power consumers) whereby large power consumers can buy electricity that EVN has purchased from RE developers plus electricity generated by EVN. In the past, the parties had to use PPA templates set out in Decree 80. These PPA templates have been removed from Decree 57. Now, Decree 57 provides only key terms and conditions. These key terms and conditions can be found in Appendices 1, 2, and 3 attached to Decree 57.
Pricing mechanism.
In the past, the contracting parties to a physical DPPA, were free to negotiate the price of electricity. Now, the price is capped, and it is subject to the MOIT’s ceiling prices. The price under the virtual DPPA must be the price stipulated in Decree 57 or it must be determined under formulae set out in Decree 57.
In particular, the price under the power purchase agreement between RE developers and EVN (ie, under the virtual DPPA mechanism) will be the market price (spot price) as determined each and every 30-minutes via the electricity competitive trading market. At this point, wind and solar power projects do not have a competitive advantage over conventionally powered plants in terms of price. As such, owners of solar and wind power projects may be unwilling to participate in the competitive electricity trading market.
Subject to the actual volume of electricity consumed by large power consumers, the price under the power purchase agreement between EVN and large power consumers (under the virtual DPPA mechanism) may vary. If the actual volume of electricity used by large power consumers is less than the agreed output capacity as set out in the forward contract between RE developers and large power consumers, the price will be determined under a formula set out in Decree 57. If the actual volume of electricity used by large power consumers is greater than the agreed output capacity as set out in the forward contract between RE developers and large power consumers, the price which EVN charges large power consumers will include two components: (i) the price which is determined under formulas set out in Decree 57 (for the agreed volume), and (ii) EVN’s then retail price which applies to other consumers pursuant to EVN’s pricing policies and tariff (for the volume that exceeds the agreed volume).
Under the forward contract between large power consumers and RE developers, large power consumers are responsible to pay RE developers if the full market price is less than the agreed price set out in the forward contract. Decree 57 is silent on a situation whereby the full market price exceeds the agreed price set out in the forward contract. This matter should be addressed by RE developers and large power consumers.
* * *
The DPPA framework was introduced for the first time in 2024. However, the first legal framework (Decree 80) was implemented only for 7 months. The new DPPA framework (Decree 57) was enacted only since March 3, 2025. To date, only a few DPPAs have been implemented. This new area requires a clearer and more comprehensive regulation. Several RE developers have raised their concerns on the ceiling prices in the physical DPPA mechanism, offset mechanism in the virtual DPPA mechanism, time-consuming regulatory procedures, etc. These issues are being reviewed and considered by the Government and the MOIT. A sensible policy (including mandatory and voluntary policies) will promote the development of renewable energy. For example, the government can create favourable conditions and shorten regulatory procedure for the development of DPPA mechanism, or the Government can require large-power consumers (data centres, cement/steel production, etc) to use renewable energy under DPPA arrangements or the government may provide incentives/subsidiaries for the development of renewable energy. These policies will be welcomed by the private sector.
[1] Decree 57/2025/ND-CP of the Government dated March 3, 2025 (Decree 57).
[2] Decree 80/2024/ND-CP of the Government dated July 3, 2024 (Decree 80).
