Ministry puts forward mechanism enabling direct renewable energy purchase

Thursday, Nov 02, 2023 17:43

A solar farm in Long An Province. DPPA, if approved, would enable the direct purchase of electricity from renewable energy producers. — VNA/VNS Photo Minh Hưng

The Ministry of Industry and Trade has proposed a mechanism under which large buyers can purchase electricity from renewable energy producers through direct power purchase agreements (DPPA).

The ministry stated that the mechanism has three key objectives.

Firstly, it aims to cater to the growing demand for clean energy from large buyers. Secondly, it seeks to incentivise investments in the sector. Lastly, it strives to create a more competitive electricity market in Việt Nam.

Under DPPA, the producers who sell electricity to buyers through the national grid are required to issue some documents beforehand, which elaborate on the calculation of electricity prices and other related fees.

They are also required to have a generation capacity of 10MW and above, which is the threshold for entrance to the electricity market. On top of that, their buyers must use the electricity for production purposes at a voltage level of 22kV and above.

Meanwhile, for the producers who engage in electricity sales through a separate grid, a different procedure would apply, which has been fully specified in relevant legal documents. The same goes for their buyers.

It is worth noting that the Vietnam Electricity Group, the bodies in charge of operating power grids, and electricity retailers also fall into the scope of the Regulations on DPPA.

The regulations also lay down three rules governing the power deals among electricity producers, buyers, and retailers.

Under the first rule, producers who are connected to the national grid are allowed to sell electricity on the spot market. The second rule states that buyers who purchase electricity from retailers will do so at predetermined prices.

The last rule applies to forward contracts between producers and buyers. It states that both parties have to settle the price difference between the spot market price and the contractual price for a specific quantity of electricity in every period.

In May 2022, the ministry conducted a survey to gauge renewable energy producers' stance on the mechanism. Among 95 wind and solar farms of 30MW and above being surveyed, 67 responded.

Twenty four respondents, with a total capacity of 1,173MW, expressed a strong desire to participate in a DPPA pilot programme; 17 respondents, totalling 2,863MW, said they were weighing the criteria for DPPA participation and evaluating the feasibility of striking a contract with large buyers.

The remaining 26 respondents did not express any interest in taking part in a DPPA pilot programme.

In another survey of 41 large electricity buyers, 24 responded with a yes to the question of whether they desire to enter into a DPPA. Their total demand is estimated at 1,125MW. — VNS

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