On 3 July 2024, the Government issued Decree No. 80/2024/ND-CP regulating the direct power purchase mechanism (“DPPA”) between renewable energy generators and large power consumer (“Decree 80”), marking the first legal instrument ever to regulate such a matter. On 3 March 2025, the Government issued Decree No. 57/2025/ND-CP to replace Decree 80 to be in line with the amended Law on Electricitry (“Decree 57”).
Some key provisions:
Similar to Decree 80, Decree 57 introduces two separate DPPA models:
- Model 1 – Private Wire Model:this model envisions the sale of power from a renewable energy generator with large power consumer through a power private wire (not connected to the national power grid). There is no requirement on application/registration for joining this Model but large power consumer shall report the execution of power purchase agreement with the renewable energy generator to local provincial People’s Committee, competent local power company, and competent system operator. Renewable energy generators include owners of energy, solar, wind, biomass, small hydro power plants as well as rooftop solar systems.
- Model 2 – Grid-connected Model: this Model envisions the sale and purchase of power under a forward contract between large power consumer and renewable energy generator. To implement this Model: (x) large power consumer shall sign a forward contract with renewable generator, (y) renewable energy generator shall sign a contract with Electricity of Vietnam (EVN) for selling power to spot market (i.e., VWEM – Vietnam Wholesale Electricity Market) and (z) large power consumer shall sign a retail power purchase contract with EVN or its subsidiary (e.g., local power company) for receiving the power from the local power company. Renewable energy generator shall own a renewable energy plant of at least 10 MW. This Model requires registration of participation with competent system operator and will subject to the approval and guidance from the competent system operator for proceeding.
Analysis in details:
- Scope of Regulations
The main subjects under Decree 57 are:
Renewable energy generator owning power plants from solar energy, wind, small hydropower, biomass, geothermal, ocean waves, tides, ocean currents, and other forms of renewable energy, together with rooftop solar power system granted with electricity operating license or rooftop solar power system being exempted from such a license.
Large power consumer being organizations or individuals using electricity for production purposes or engagement in the business of charging services for traffic vehicles who purchase electricity from power corporations, power companies, and electricity retailers connecting and providing voltage levels from 22kV or higher.
- Conditions for large electricity consumers to participate in DPPA mechanism:
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 authorized 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 authorized entities) and must meet or exceed the minimum consumption threshold for large electricity consumers as outlined in the regulations governing the competitive wholesale electricity market established by the MOIT.
- General principles
The two models for DPPA mechanism are regulated to be implemented under the following principles:
Private wire:
(i) Parties: This form must be implemented between renewable energy generation units and large power consumer where the DPPA is mutually agreed between the parties;
(ii) PPA: The PPA between the parties is mutually agreed with core contents being in line with Decree 57. The electricity sale price is negotiated by both parties and does not exceed the maximum price of the electricity generation price frame of the corresponding type of electricity source.;
(iii) Limit on surplus power from rooftop solar: Surplus electricity from renewable generators with rooftop solar systems selling directly to major electricity users must not surpass 20% 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.
(iv) Procedures: Regarding relevant procedures, upon the renewable energy generation unit’s obtainment of relevant approvals/licenses and the execution of the PPA between the parties, the large electricity user must report the PPA to the provincial People’s Committee, the competent local power company and competent system operator.
Grid-connected:
(i) Parties: The parties to this form of DPPA mechanism are renewable energy generators and large electricity user/electricity retailer through forward contracts. To implement the above forward contract: (x) large power consumer shall sign a contract with a forward contract with renewable generator, (y) renewable energy generator shall sign a contract with Electricity of Vietnam (EVN) for selling power to spot market (i.e., VWEM – Vietnam Wholesale Electricity Market) and (z) large power consumer shall sign a retail power purchase contract with EVN or its subsidiary (e.g., local power company) for receiving the power from the local power company. Renewable energy generator shall own a renewable energy plant of at least 10 MW.
(ii) PPA: Subject to the specific method of implementation of grid-connected mechanism, the contents of the PPA will contain specific contents as regulated in Decree 57. The same principle applies for the electricity sale price.
(iii) Procedures: Subject to the specific method of implementation of grid-connected mechanism, specific procedures will apply, according to Decree 57. Generally, this Model requires registration of participation with competent system operator and will subject to the approval and guidance from the competent system operator for proceeding.
- Spot electricity market price:
Regarding grid-connected form of electricity trading, Decree 57 provides detailed regulations on the selling of renewable electricity generation units through spot electricity market and the trading with EVN as follows: According to relevant regulations, the spot electricity market price is the total electricity market price formed according to each transaction cycle of the spot electricity market and is determined by the sum of the market electricity price and the market capacity price. In particular, the market electricity price and market capacity price are determined according to the Regulations on operating the competitive wholesale electricity market issued by the MOIT.
We – Duane Morris Vietnam – are following up closely with the implementation of this Decree 57 and any new progress will be updated in a timely manner.
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Please do not hesitate to contact Dr. Oliver Massmann at [email protected] if you have any questions. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
