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April 10, 2025

Clear Guidance for Direct Power Purchase Agreements in Vietnam

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On March 3, 2025, the government of Vietnam issued Decree No. 57/2025/ND-CP, regulating the direct power purchase agreement (DPPA) mechanism between renewable energy generators and large electricity consumers (“Decree 57”). Decree 57 took immediate effect and replaces Decree No. 80/2024/ND-CP on the same subject. The new regulations enable investors to kickstart their investment plans for DPPAs in Vietnam. Below are the key changes and provisions of Decree 57.

Participants in On-Grid DPPAs

Decree 57 expands the eligibility criteria for participating in DPPAs via the national grid (on-grid DPPAs):

  • Sellers: In addition to wind and solar power generators, biomass energy generators with a capacity of 10 MW or more can now participate.
  • Buyers: Electric vehicle charging businesses are now eligible to participate, broadening the scope beyond just production businesses.

Large Electricity Consumers

Instead of setting definite criteria at the government decree level, Decree 57 defines large electricity consumers based on average electricity consumption as set out in wholesale electricity market regulations to be issued by the Ministry of Industry and Trade (MOIT). Although the threshold for DPPA participation remains for now at 200,000 kWh per month, Decree 57 will allow the MOIT to adjust this threshold as deemed necessary.

Decree 57 also provides specific guidance for large electricity consumers based on their consumption period. To participate in both private off-grid DPPA (selling electricity directly via a grid system separate from the national grid) and on-grid DPPA models, large electricity consumers must meet the minimum threshold for electricity consumption set by the MOIT under the Vietnam wholesale electricity market regulations (“Minimum Consumption Threshold”). Consumers with a consumption history of at least 12 months must have already met the Minimum Consumption Threshold at the time of registration or notification, while those whose consumption period is less than 12 months must commit to meeting the Minimum Consumption Threshold.

For continued participation in the DPPA model in subsequent years, one of the following conditions must be met:

  • The total period of DPPA implementation is less than 12 months; or
  • The consumer’s average electricity consumption between November 1 of the preceding year and October 31 of the current year meets or exceeds the Minimum Consumption Threshold.

Private Off-Grid DPPAs

Decree 57 introduces detailed rules related to private off-grid DPPAs, including, among others, the following:

  • Rooftop solar power generators are entitled to sell surplus electricity provided it does not exceed 20% of the total actual generated electricity.
  • While parties can agree on the selling price of electricity, Decree 57 mandates that the price cannot exceed a ceiling price within the price bracket for the corresponding type of power source. This price bracket (to be approved and published by the MOIT annually) is calculated using a statutory formula that considers average fixed prices, operation and maintenance costs, and other variable expenses.

DPPA Contracts

Decree 57 provides clearer regulations for private off-grid DPPA and on-grid DPPA contracts.

For private off-grid DPPAs, renewable energy generators and large electricity consumers will enter into a power purchase agreement that has no mandatory template, under which the generator will sell electricity to the consumer at a price they both agree upon. The electricity price may be negotiated, but it must fall below the ceiling price for the relevant power source as specified by the price bracket.

In the on-grid DPPA framework, there are three types of contracts:

  • EVN Power Purchase Agreement (EVN PPA): Under this agreement, renewable energy generators will sell their entire generation output to the national power corporation, Vietnam Electricity (EVN), in the spot market, with payments based on the spot price for immediate delivery.
  • Customer Power Purchase Agreement (Customer PPA): This contract between a customer and the power corporation covers the customer’s total electricity needs. The agreement includes charges for electricity (at wholesale spot price), service fees, adjustments, and costs for electricity purchased to cover any shortfall in generation (at retail price). EVN is required to update and report to the MOIT the applicable costs for 2025, including system service usage, clearing settlement, and distribution grid energy loss conversion factors, before the costs are published on the electricity market website. This will facilitate investors to run financial models for investments in on-grid DPPAs.
  • Forward Contract (or Contract for Differences): Renewable energy generators and customers enter into a contract specifying the committed price and consumption ratio. The contract’s revenue is determined by the difference between the committed price and the spot price.

Details of these three contracts are specified in the appendices of Decree 57.

Adding Terms to Statutory Template Contracts

Under Decree 57, renewable energy generators, large electricity consumers, and EVN have the right to supplement the statutory templates for power purchase agreements and other agreements with additional terms and content to clarify the rights and obligations of the parties, provided that such additional terms do not contradict relevant legal provisions.

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