Orientation of the Decree stipulating the direct electricity trading mechanism

According to Notice No. 232/TB-VPCP, dated May 20, 2024: The policy of developing a Decree on the DPPA mechanism has been mentioned in the Resolutions of the Party, the National Assembly, and the National Assembly Standing Committee, regulated in the Electricity Law. At the same time, the Government and Prime Minister have directed the Ministry of Industry and Trade (MOIT) to develop the Decree urgently.

Recently, MOIT has made many efforts in researching and developing a new policy mechanism on the DPPA mechanism under the direction of the Government and the Prime Minister. However, implementation is still slow, and the content of the draft Decree still has many issues that need to be clarified.

The Decree Scope:

In point b, Clause 1, Article 47 of the Electricity Law stipulates: "Buy electricity directly from the electricity generating unit through a term contract, or buy electricity for immediate delivery on the electricity market." Accordingly, the Law only regulates "power generation units" generally and is not limited to renewable energy power generation units. Regarding this, the Deputy Prime Minister requested MOIT to provide an appropriate explanation in the context of Vietnam's policy commitment to bring net emissions to zero by 2050.

Therefore, this Decree will focus on developing renewable energy instead of developing fossil energy. However, research must be done to expand the scope of biomass power and waste projects.

The applicable subjects:

Reviewing and ensuring implementation under the Party's policies and Resolutions of the National Assembly and the National Assembly Standing Committee. In necessary cases to limit the applicable subjects (power plant scale of 10 MW or more), the Government requests MOIT:

- It is necessary to clarify the subjects participating in direct electricity trading, the bases and arguments.

- Researching and clarifying the appropriateness of regulation on customers with an average monthly consumption of 500,000 kWh.

- Considering with capacity limit between manufacturers and commercial services to ensure the rights, responsibilities and obligations of parties involved in direct electricity trading, ensuring grid safety.

- Having priority policies to encourage enterprises to consume green energy and renewable energy to receive green credit.

The DPPA policy:

This is a policy to encourage, attract investment and develop a competitive retail electricity market. The Government requires:

- Researching and developing policies with aperture in according to market mechanisms.

- Regulating the form of direct electricity trading.

- Regulating the responsibilities of the buyer, the seller, and state management responsibilities this policy.

In the case where the buyer and seller sign a direct contract and connect lines directly to each other, not through the national power grid system, the Government requires:

1. It is necessary to clearly state that Power Development Planning VIII has no restriction on capacities of the renewable energy power development projects (including rooftop solar power projects), power waste and biomass projects with only they agree with the planning by the Planning Law.

2. It is necessary to stipulate clear and specific mechanisms and policies (on VAT, environment, fire prevention and fighting, technical conditions to ensure safety in electricity production and use, and safety in construction), the simple procedural sequence for maximum incentives.

3. There are no hard regulations on contracts, but let the parties negotiate according to market mechanisms.

4. In cases where the buyer and seller sign a contract with each other directly but through the national power transmission line system, the Government requests to clarify the roles of the State, Electricity of Vietnam (EVN) and the National Power System Dispatch Center with some contents as follows:

- Publicly and transparently announcing the load demands of each area, region, and dispatching capacity, calculating transmission capacity, to announce the capacity of renewable energy power projects that can be absorbed in the areas. EVN must provide information on the scale of renewable energy power projects with signed power purchase contracts to report to MOIT for adjusting from base power types such as coal, gas, hydropower...

- Developing and publicly announcing the costs (ensuring the correct and sufficient calculation when use EVN transmission system services (or the third side),and use infrastructure, loss fees.

- Must be considered to ensure compliance with power development planning of the power plants and transmission and distribution grid development, for ensuring transmission to the power system is safe and does not affect the security situation, and electricity supply.

The customers accept high electricity prices to achieve carbon credits and the carbon market, so there must be specific regulations to publicize information about enterprises using clean energy to have priority and incentive policies for enterprises to consume green energy and renewable energy to receive green credits. Regarding this content, it is recommended to clearly define the responsibilities of MOIT, the Ministry of Natural Resources and Environment, and EVN on certification procedures and publicizing information about enterprises consuming clean, green electric energy to be granted certification, and green credit. On the other hand, clearly define large customers, in which it is necessary to consider the industrial park investor as a large customer and need to expand the customer base to be service providers, not just limited to manufacturers.

Some concepts of solar, wind, biomass power, or renewable power using storage batteries need to be clearly defined. If electricity from renewable energy uses storage batteries, it is considered base electricity and there needs to be an electricity price policy for this type of renewable energy electricity combined with storage batteries generated during peak hours of the system. When there is a shortage of electricity, this type of electricity is additionally calculated for early priority and needs further research on the two-component electricity price. The provisions of this Decree need to supplement the Decree regulating rooftop solar power to encourage the development this type by PDP VIII.

Finally, the Deputy Prime Minister requested MOIT to complete the draft Decree and submit it to the Government in May 2024.