Draft Circular on DPPA for Renewable Energy Project to Collect Public Opinions

The Ministry of Industry and Trade of Vietnam (MOIT) HAS recently released THE second draft circular regarding the implementation of the pilot program for direct power purchase agreement (DPPA) mechanisms between renewable energy developers/power generation companies and private power buyers/consumers (“Draft Circular“).

Under the Draft Circular, there have been some changes compared to the previous version which were issued in early 2020.   

According to this Draft Circular, renewable energy generation companies and power consumers satisfying the following requirements can register with the MOIT to participate in the pilot DPPA Program:

• For renewable energy generation companies: they must (i) own a grid-connected solar or wind energy project having an installed capacity of more than 30 MW that has been included under the approved power development master plan; (ii) commit to put the relevant power plant into commercial operation and participate in the Vietnam Wholesale Energy Market (“VWEM”) within 270 working days after being selected for pilot DPPA program; and (iii) having documents of the financial and credit institutions to provide finance for the power plant.
• For energy consumers: they must (i) purchase electricity for industrial manufacturing purposes at the voltage level of 22 kV or higher, (ii) commit to using renewable energy, and (iii) commit to annual renewable energy consumption supplied by the participating power generation company equivalent to at least 80% of that supplied by EVN in the first 3 years participating in the pilot DPPA program.

In terms of application, the Draft Circular still sets a tight timeline for submission of applications by consumers and the power generation companies. Within 45 working days from the date of the MOIT’s opening of the pilot DPPA program on its website, the power generation companies and power consumers who wish to participate will be required to prepare and submit their registration applications via the electronic information portal.

The Draft Circular provides a list and templates of application documents required to be completed and submitted to the MOIT in order to participate in the DPPA pilot program (provided under Annex 1).

Under the proposed mechanism, the power generation company will not directly sell the generated electricity to the power consumer. Instead, through the VWEM and in accordance with the relevant power purchase agreement (PPA), it will sell all generated electricity to Vietnam Electricity (EVN), which in turn will sell such electricity to the power consumer.  

The sale and purchase of electricity on the VWEM will be conducted at the spot market price in accordance with the MOIT’s regulation on the operation of VWEM (that is, current Circular No.45/2018/TT-BCT dated November 15, 2018, as amended). As for the purchase of electricity from PC, the power consumer must pay EVN additional DPPA services fees (including transmission fees, distribution fees, market operation and dispatch charges, and auxiliary services fees) which are calculated on each kWh.

In addition, the power generation company and the power consumer will enter into a DPPA in the form of  a Contract for Differences with a term decided by the parties which shall be at least 10 years but not more than 20 years. The contract mainly governs the power supply commitments of the power generation company; and the strike price which the power consumer agrees to pay the power generation company.

The launch date of the DPPA pilot program is expected to be released soon this year.