Recently, the Ministry of Industry and Trade has published the Draft Circular on the pilot implementation of the direct power purchase between renewable power project developers (RE GENCO or GENCO) and consumers (\u201cthe Draft\u201d). <\/p>\n
The pilot is to be implemented nationwide with a total capacity of selected projects of 1,000 MW at max. The nominal capacity of each project must be 30 MW. Consumers can directly negotiate, purchase electricity with GENCO under a Fixed-term Contract. The two parties shall agree upon electricity price and output in the Contract for future trading cycles. GENCO and the consumer must also calculate and carry out payment for the contract output under the Contract for the difference between the contract price and the market price (i.e. reference price).<\/p>\n
Under the Draft, renewable energy generators are defined as:
\n\u2022 organizations, individuals owing a grid-connected solar or wind power plant;
\n\u2022 installed capacity of the plant is more than 30 MW (conversion rate for solar plants: 01 MWp equals 0.8 MW);
\n\u2022 project already included in the power development plan that has been approved by competent authority;
\n\u2022 have a binding principle agreement with consumers to sell electricity; and
\n\u2022 are selected for the pilot implementation of DPPA by competent authority.<\/p>\n
Electricity consumers are:
\n\u2022 organizations, individuals purchasing electricity for industrial production at a voltage level of 22 KV or higher;
\n\u2022 have a binding principle agreement with the RE GENCO to purchase electricity; and
\n\u2022 are selected for the pilot implementation of DPPA by competent authority.<\/p>\n
Selection criteria of the pilot implementation participants:
\nFor electricity generators:
\n\u2022 have a committed COD deadline of the whole power plant of no more than 270 working days since the date of announcement on the plant being selected to participate in the pilot implementation; or
\n\u2022 have written document of financial institutions on the financing for the power plant.<\/p>\n
For consumers:
\n\u2022 have renewable energy usage commitments or is a manufacturing enterprise in the
\nsupply chain of corporations or enterprises that have renewable energy usage commitments; or
\n\u2022 have the annual contracted proportion of electricity purchased
\nfrom GENCO to the total electricity consumption in the same year provided by
\nPC in the first 3 years of the DPPA program participation of at least 80%.<\/p>\n
GENCO must submit a bid to the System and Market Operator (\u201cSMO\u201d) for the direct purchase and payment of electricity with the energy buyer. The bid must include, among others, a bid price of zero (VND\/kWh) for the range of capacity open for bidding. The capacity stated in the bid is the declared capacity of GENCO. On the operation day, GENCO may amend and submit bid for the following day or for the remaining trading cycles of the day to SMO at least 30 minutes before the beginning of trading cycle making use of the new bid content.<\/p>\n
Applicable power purchase agreement template:
\n\u2022 Between developer and EVN: the published contract templates in Decree 18\/2020\/TT-BCT for solar energy project and in Circular 02\/2019\/TT-BCT for wind energy project
\n\u2022 Between developer and consumer: to be drafted by the parties
\n\u2022 Between consumer and EVN: to be drafted by EVN, taking into consideration consumers\u2019 opinion.<\/p>\n
The direct power purchase agreement mechanism can bring about numerous benefits, namely enabling the imposition of take-or-pay obligation on off-takers in order to guarantee developer\u2019s revenue stream, fixed electricity purchase price that is not subject to change in or delay on the implementation of national legislations, flexibility in monthly exchange rate calculation and increasing consumer\u2019s environmental commitments. Developers and consumers must incorporate international standards regarding step-in right, dispute settlement, and termination to make the direct power purchase agreement bankable. A bankable DPPA put developers in advantage when seeking financial supports for the project from banks and other credit institutions. Duane Morris will keep our readers updated of any new revisions to or decision regarding the Direct Power Purchase Agreement mechanism. <\/p>\n
For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.<\/p>\n","protected":false},"excerpt":{"rendered":"
Recently, the Ministry of Industry and Trade has published the Draft Circular on the pilot implementation of the direct power purchase between renewable power project developers (RE GENCO or GENCO) and consumers (\u201cthe Draft\u201d). The pilot is to be implemented nationwide with a total capacity of selected projects of 1,000 MW at max. The nominal … <\/p>\n