VIETNAM – RENEWABLE ENERGY – DIRECT POWER PURCHASE AGREEMENTS (“DPPA”) – ELECTRICITY REGULATORY AUTHORITY’s (“ERAV”) PLAN FOR DPPAs

On 12 June 2018, at a seminar on renewable energy, ERAV discussed and disclosed further information on regulations for implementation of a pilot for Direct Power Purchase Agreement (“DPPA”) and renewable energy sector. Direct Power Purchase Agreements will allow power generation companies to sell their electricity directly to private off takers. We outline some key topics as below:

Direct PPA
Since early 2017, MOIT has assigned ERAV to cooperate with USAID and consultants to research international experience and feasible models for DPPA in Vietnam. ERAV informed that it is a time consuming process since ERAV and its consultants must have researched and collected massive information on fundamental issues, design, details and criteria for DPPAs, especially for similar cases such as Vietnam. It is also challenging for ERAV to cooperate and consult other departments of MOIT on the DPPA pilot.
Currently, ERAV’s consultants have submitted a first preliminary report on international experience regarding basic design, mechanism and operation of DPPA. It is known that ERAV and its consultants also sent questionnaire papers to several industry and sectors, companies and stakeholders aimed at seeking their opinion on consumer market, demand, participants, and other issues. ERAV expected that its consultants could prepare the final report on DPPA models within July 2018.
By the end of July 2018, if such report is available, ERAV will arrange a seminar for introduction of the same and seeking opinion from all stakeholders. At this stage, there is no final decisions on capacity, licensing process, participants, location, wheeling fee, contractual terms for the piloted DPPA. However, ERAV is considering some models as below:
• Physical DPPA: (a) onsite DPPA where the solar power plants to be constructed around the consumers, and / or (ii) offshore DPPA where solar power plants to be constructed anywhere
• Financial DPPA: this would be formed with competitive market for selling powers.
ERAV also shared that the DPPA pilot would be preferably designed for 110 KV (not 220 KV or 22-25 KV) since this system is the most popular, efficient and feasible in Vietnam. It is expected that the first law that will allow DPPAs will be in effect 4th quarter of this year 2018.

Solar and wind projects
With regards to FIT for solar and wind, such prices remain unchanged under the current FIT regulations (e.g., Decision 11). ERAV stated that the technology and infrastructure costs for solar / wind energy would be lower in the future, then the FITs must be adjusted and decreased accordingly. ERAV also informed that the MOIT is now considering a scheme for determination of FITs through tender / auction in order to avoid the change of FIT annually. However, there is no draft law on this point.
The net-metering under Decision 11 for rooftop solar project is under consideration to be removed since it is very difficult to implement it in practice. It might be replaced by a more workable solution.
It is very likely that no addition to solar / wind master plan can be made until power master plan 8 is finalized. Currently, approved wind / solar powers projects have their combined capacity significantly higher than estimates in power master plan VII (f.e. 3000 MW for approved solar power projects vs. only 850 MW in power master plan VII). The Renewable energy in Vietnam, esp. the Solar sector is developing fast. Watch it happen or be part of it!

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Please do not hesitate to contact Mr Tran Minh Thanh or Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.