New Decree on Direct Electricity Trading Mechanisms For Renewable Energy in Vietnam.
Overview
On July 3, 2024, the Government of Vietnam issued Decree No. 80/2024/ND-CP (“Decree 80”), establishing mechanisms for direct electricity trading between renewable energy generation units and large electricity consumers. This decree is designed to facilitate the trading of electricity through both private connection lines and the national grid, marking a significant shift from the previous reliance on the national grid managed by EVN. The new decree aims to promote investment in renewable energy and broaden the customer base for direct power purchases, thereby supporting the country’s sustainable development goals.
1. General Provisions
Decree 80 defines the scope of direct electricity trading, specifying that it applies to renewable energy generation units and large electricity consumers, both through private connection lines and the national grid. The regulated entities under this decree include renewable energy generators, large electricity consumers, and other relevant parties such as electricity system and market operation units, transmission units, power corporations, and electricity retailers.
2. Mechanisms for Direct Electricity Trading
The decree establishes two primary mechanisms for direct electricity trading:
Direct electricity trading through private connection lines. Renewable energy generation units and large electricity consumers can enter into power purchase agreements to trade electricity directly through private connection lines. These agreements must conform to the stipulations of the Law on Electricity and include details such as service standards, rights and obligations, electricity pricing, payment methods, and other agreed-upon terms. Additionally, renewable energy generation units can sell excess electricity to EVN or other authorized units under negotiated power purchase agreements.
Direct electricity trading through the national grid. This involves forward power purchase agreements between renewable energy generators and large electricity consumers or authorized electricity retailers. The agreements must cover the sale of all produced electricity to the spot electricity market and the purchase of required electricity from power corporations.
3. Requirements for Entities
Renewable energy generators must have a generation capacity of at least 10 MW. They must be connected to the national electricity system and participate in the competitive wholesale electricity market. They must also comply with regulations on investment, safety, environmental protection, and electricity trading.
Large electricity consumers must use electricity for production purposes, with connections at voltage levels of 22kV or higher. They must meet minimum electricity consumption thresholds, either an average of 200,000 kWh per month for existing consumers or registered consumption of at least 200,000 kWh per month for new consumers.
4. Procedures for Participation
For private connection lines, entities must negotiate and sign power purchase agreements. Large electricity consumers must report these agreements to the Provincial People’s Committee and relevant power corporations.
For the national grid, entities must submit applications to electricity system and market operation units, including written agreements on forward power purchase agreements and details on electricity consumption and generation.
Renewable energy generators, large electricity consumers, power corporations, and electricity retailers must provide regular reporting including report on their direct electricity trading activities and ensure compliance with the regulations set forth in the decree.
Overall
Decree 80 provides a comprehensive legal framework to support the growth of Vietnam’s renewable energy sector. By enabling direct electricity trading, it aims to enhance industrial competitiveness through improved access to green energy, contributing significantly to Vietnam’s environmental and economic sustainability goals.
Disclaimer: This Legal Update is intended to provide updates on the Laws for information purposes only, and should not be used or interpreted as our advice for business purposes. LNT & Partners shall not be liable for any use or application of the information for any business purpose. For further clarification or advice from the Legal Update, please consult our lawyers: Ms. Vu Thi Thinh at thithinh.vu@lntpartners.com.
For further information, please contact:
VU Thi Thinh, LNT & Partners
thithinh.vu@lntpartners.com
