A mechanism that enables large buyers to purchase electricity from renewable energy producers through direct power purchase agreements (DPPA) will help resolve the supply and demand of renewable energy, the Vietnam Chamber of Commerce and Industry (VCCI) has said.

The DPPA mechanism will also be a solution for many renewable energy projects that have failed to enjoy the Feed-in Tariff (FIT) price mechanism (preferential electricity purchasing price fixed for 20 years), VCCI said.

In the DPPA draft decree, developed by the Ministry of Industry and Trade (MoIT), buyers must be organisations or individuals using electricity for production purposes at a voltage level of 22 kV or higher, with an average monthly consumption of 500,000 kWh. Suppliers must be grid-connected renewable energy plants (wind or solar) with a capacity of over 10 MW. Direct transactions for households are not permitted.

The MoIT has developed a direct power purchase model based on two options: through a private power line and the national grid via EVN.

When an organisation or individual directly purchases electricity from a renewable energy plant through a private line, there are no restrictions on capacity, output or connection voltage level. The contract terms and electricity prices are negotiated directly between the two parties. The only requirement is that the power sources must be part of the national and provincial power development plans and have a power licence.

In the case of DPPA sales through the national grid, buyers and sellers negotiate and agree on fixed-price contracts. The transaction will be conducted on the spot market according to the MoIT’s regulations on the competitive wholesale electricity market.

VCCI said it believed that direct electricity trading through private lines would fail to significantly influence the national electricity system. Therefore, the draft decree should allow all electricity buyers to participate instead of only large ones.

The draft decree's requirement under which the power sources must be part of the national and provincial power development plans is also unnecessary, the chamber said.

The DPPA mechanism has been requested on several occasions by foreign-invested companies in Vietnam, as they believe this policy will have a positive impact on competition in the energy sector.

A survey conducted by the MoIT at the end of last year found that approximately 20 large companies were interested in purchasing electricity directly, with a total demand of nearly 1,000 MW.

Additionally, 24 renewable energy projects with a capacity of 1,773 MW sought to sell electricity through the DPPA mechanism, and 17 projects with a capacity of 2,836 MW were considering participation./.