Unlocking the Potential: The DPPA’s Impact on Renewable Energy Trade

On July 3, 2024, the government issued Decree No. 80/2024/ND-CP, introducing a direct power purchase agreement (DPPA) mechanism for renewable energy generators to sell electricity directly to large power consumers.

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The Decree stipulates that direct electricity trading involves the physical trading and delivery of electricity, conducted through two forms: Direct Electricity Trading via Dedicated Connection Lines and Direct Electricity Trading via the National Power Grid.

The former involves signing power purchase agreements and physically delivering electricity via dedicated connection lines between renewable energy generators and large power consumers. The latter, Direct Electricity Trading via the National Power Grid, involves term contracts between renewable energy generators and large power consumers (or authorized retail electricity units in zone/cluster models).

Electricity trading activities include:

– Renewable energy generators sell all their produced electricity into the immediate power market of the wholesale competitive electricity market.

– Large power consumers or authorized retail electricity units in zone/cluster models sign power purchase agreements with the Power Corporation (or authorized/decentralized units) to buy all the electricity they need.

– Renewable energy generators and large power consumers or authorized retail electricity units in zone/cluster models trade electricity through term contracts.

Principles of Direct Electricity Trading via Dedicated Connection Lines

The Decree stipulates that renewable energy generators and large power consumers conducting direct electricity trading through dedicated connection lines must follow these principles:

– The power purchase agreement between the renewable energy generator and the large power consumer, in the case of direct electricity trading through a dedicated connection line, shall be mutually agreed upon and conform to the provisions of Article 22 of the Electricity Law and other relevant legal documents. The contract should include contract subjects; purpose of use; service standards and quality; rights and obligations of the parties; electricity prices, payment methods, and terms; conditions for termination of the contract; responsibilities for investing, constructing, managing, and operating the dedicated connection line; and other contents as agreed upon by both parties.

– The electricity price is determined by mutual agreement, except in cases specified in Clause 4, Article 6 of this Decree.

Renewable energy generators negotiate, agree, and sign contracts with the Vietnam Electricity Group (or authorized units) on capacity, output, and prices for surplus electricity, in accordance with regulations.

In addition to the above direct electricity trading activities through dedicated connection lines, large power consumers can buy and sell electricity with the Power Corporation (or non-Power Corporation retail electricity units) as per regulations.

In cases where the power unit simultaneously performs the functions of power generation and retail electricity sales in zone/cluster models, purchasing electricity from the national power system along with other local sources to sell to power consumers within these models, the retail electricity price for consumers shall comply with the Regulations on Implementing Electricity Selling Prices issued by the Ministry of Industry and Trade.

Immediate Power Market Price

The Decree also clearly stipulates the sale of electricity by renewable energy generators through the immediate power market and the purchase of electricity from the Power Corporation.

As per the regulations, the immediate power market price is the total-cost electricity market price formed according to each trading cycle of the immediate power market. It is determined by the sum of the market electricity price and the market capacity price. The market electricity price and the market capacity price are determined according to the Regulations on the Operation of the Wholesale Competitive Electricity Market issued by the Ministry of Industry and Trade.

Hai Au

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