Vietnam Plans to Allow PPAs on Its Renewable Energy Market

Through a pilot program that would allow renewable energy generators to sell electricity directly to private off-takers under virtual or synthetic deals for the first time, Vietnam’s Ministry of Industry and Trade (MIOT) hopes to open up Vietnam’s electricity market to bilateral power purchase agreements (PPAs).

As of right now, Power Vietnam (EVN), a state-owned energy firm, is the only buyer on the market and has a monopoly over the transmission, distribution, wholesale, and retail of electricity.

According to Moritz Sticher, senior adviser at Berlin-based consulting firm Apricum, the program has not yet been launched and “no clear date exists yet.” It was supposed to last from 2022 to 2024, but current predictions place it in the first half of 2023.

The official program that will follow the trial program should launch in 2025.

Since 2020, the government has proposed several pieces of legislation, and several modifications have prolonged the program. The tariff structure of the plan underwent revisions in January. Instead of paying the spot market price plus PPA fees, the off-taker would now purchase at the retail price, according to Sticher. EVN would continue to pay Genco, the national utility, at wholesale rates. Additionally, a forward contract for differences in future trading cycles would be made between the buyer and the generator.

The risk of tariff fluctuation is now transferred to the offtaker by this system, which provides investors with a stable tariff. According to Sticher, “The tariff change from wholesale to retail tariff for off-takers means around 2% more share to EVN and consequently slightly reduced returns on the investor side (assuming the off-taker will aim for the same total tariff). It also makes it slightly less attractive for off-takers due to the change in electricity tariff risk.”

Due to Vietnam’s “low enthusiasm for speedy large-scale solar capacity additions,” the PPA program’s impending implementation has hampered the growth of utility-scale projects in Vietnam, claims Sticher. That situation is also said to be impacted by current curtailment problems, stranded projects from earlier feed-in-tariff rounds, and continued ambiguity surrounding renewable energy targets.

The installed solar capacity in Vietnam is now around 18.47 GW, according to statistics from Apricum’s latest “Solar power in ASEA” study. Targets for solar energy up to 2045 were lowered by the National Power Development Plan VII to 13.6 GW of utility-scale and 3.4 GW of rooftop solar. According to Apricum, offshore and onshore wind would make up for the decline in solar power as well as the import of electricity from Laos.

According to Apricum’s primary scenario, the commercial and industrial (C&I) segment would experience growth in the nation and reach 10,792 MWp of total installed capacity by the end of 2022. Independent power producers finance the majority of C&I projects (IPPs).