The DPPA policy introduces two models for private development of renewable energy capacity:

• Wheeling model: In this approach, a private renewable developer generates electricity and sells it at wholesale market prices to EVN. EVN then transmits the power through its grid network to a private buyer who has contracted to purchase the supplied capacity.
• Fully private model: This model allows the private sector to develop, own and operate renewable energy generation facilities, selling energy directly to private sector consumers via private transmission connections. This approach essentially creates private utilities, bypassing EVN entirely.

The new policy targets large-scale consumers connected to a 22 kV supply line and using over 220 MWh per month, including individual industrial consumers and the aggregated demand within industrial parks, reports IEEFA.

A parallel decree permits the sale of up to 10% of uncontracted excess energy generated from privately developed projects to EVN at predetermined, discounted rates.

According to IEEFA, the fully private model is particularly revolutionary for Vietnam, as it grants private companies full control over renewable energy project development. This reduces the time and complexity of project implementation, allowing clean energy to be delivered faster. Companies can now design, finance, construct and operate these ventures with fewer limitations, paving the way for gigawatts of new renewables to quickly come online.  

Meanwhile, the EVN wheeling model caters to consumers in densely developed areas where creating private transmission lines may be impractical.  

This flexibility ensures that diverse consumer needs can be met, fostering a more robust renewable energy market.

The DPPA policy addresses several challenges, says IEEFA:

• Industrial energy supply: The policy mobilises the private sector to help close the gap in energy supply, supporting Vietnam’s GDP growth target of 5–6%/y. EVN has struggled to establish projects for all consumer segments across generation, transmission and distribution, and the DPPA decree provides a near-term solution.
• Attracting investment: The policy will help retain multinational manufacturers and service companies with corporate renewable energy mandates. The new Telecommunications Law, also adopted last month, permits 100% foreign ownership in data centre infrastructure, which, combined with the DPPA decree, could attract significant investment from major tech companies.
• Energy cost stability: Renewables, with their fixed upfront costs and zero fuel expenses, protect against the volatility of coal and LNG markets. The majority of Vietnamese renewable energy development is funded by local companies and banks, minimising exchange rate risk on power sold.
• Environmental commitments: Adding substantial clean energy capacity under DPPAs will help reduce Vietnam’s carbon intensity, supporting the country’s commitment to net zero made under the July 2022 National Climate Change Strategy.

The new law also holds the potential for rapid capacity addition, addressing supply deficits exacerbated by rolling blackouts and spiking demand. Vietnam’s energy sector has faced challenges in meeting future demand growth cost-effectively. The Power Development Plan VIII, delayed for about three years, struggled with various energy supply approaches. Renewable energy presents the fastest and cheapest solution to these challenges, says IEEFA.

The rapid buildout of renewables in Vietnam from 2017 to 2021, although costly due to high feed-in tariffs, demonstrated that local developers could add large amounts of capacity quickly, notes IEEFA. The new DPPA decree allows for private-to-private transmission, bypassing the constrained EVN grid and expediting project development.

Changing the energy landscape

Vietnam’s new DPPA decree could be a ‘game-changer’ for the country’s energy landscape, suggests the IEEFA analysis. By enabling private sector engagement in renewable energy development and allowing private transmission infrastructure, the government has created favourable conditions for rapid capacity addition. This will reduce greenhouse gas emissions, support environmental commitments, and provide EVN with the time needed to plan larger-scale interventions. All of this is accomplished without any state budget allocation, making it a win-win for Vietnam and its power consumers.

According to the Energy Institute’s latest Statistical Review of World Energy, Vietnam generated 118.8TWh of renewable energy in 2023, with hydro accounting for 80.9 TWh, solar 25.7 TWh and wind 11.4 TWh.