THE NEW DRAFT RESOLUTION ON PILOTING DPPA MECHANISM

The Government has just issued the Draft Resolution on piloting the DPPA mechanism between renewable energy generation units and large-scale electricity customers.

1. The Government has approved the pilot implementation of the Direct Power Purchase Agreement (DPPA) mechanism between renewable energy generation units and large-scale electricity consumers through the national power system. The Contract for Difference (CfD) form of electricity purchase is applied when using the national power grid as a financial derivative service. The MOIT and the MOF are tasked with providing guidance and directing relevant agencies in the pilot implementation of the mechanism.

2. Appendix I provides detailed regulations for the direct power purchase model between renewable energy generation units and large-scale electricity consumers. Notable contents of this Appendix include:

- Large-scale electricity consumers are those who purchase electricity for industrial production with a consumption of 500,000 kWh/month or more.

- The reference price of the CfD Contract is based on the spot market price of electricity determined by the electricity system balancing unit and market operator. In cases where the spot market price is higher than the upper limit of the electricity selling price framework issued by the authorized agency, the reference price shall be the upper limit of the electricity selling price framework. If the CfD Contract price is lower than the spot market price, the power generation unit pays the consumer the price difference according to the CfD Contract.

- Power generation units sign contracts with EVN (Electricity of Vietnam) to participate in the competitive electricity wholesale market and sell electricity to the spot electricity market.

- Power generation units are responsible for disclosing the power capacity of the power plant to the electricity system operator and the electricity market.

- Regarding electricity purchase and payment between consumers and retail electricity sellers, the retail electricity price is regulated in Decision No. 24/2017/QD-TTg, Decision No. 28/2014/QD-TTg, and relevant guiding documents in line with the development roadmap of the competitive electricity market.

3. Appendix II of the Draft Resolution stipulates the template for the electricity purchase contract in the spot electricity market. Power generation units, when signing contracts with EVN, can refer to this template.

4. Appendix III lists the main contents of the CfD Contract in detail. It clarifies provisions related to the contract's subject, output, payment method and price, contract term, rights and obligations of the parties involved, and more.

View the detailed document there: https://drive.google.com/file/d/17ZztjRFbTqcgvKOL6RuYcUAn3W9kJsSS/view?usp=sharing

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Hoang Pham (James) / Managing Partner at: hoang.pham@vselawyers.com

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