Summary of Decree 80/2024/NĐ-CP

The following summary provides key information about Decree 80 (taking effect from July 3, 2024) regulating the direct power purchase agreement (DPPA) between renewable energy generation units and large electricity consumers. It includes three sections: (1) Terminology and Explanations, (2) Main Contents of the Decree, and (3) Assessments and Solutions.

1. Terminology and Explanations:

1.1. “Decree 80” refers to Decree 80/2024/NĐ-CP regulating the direct power purchase mechanism between Renewable energy generation units and large electricity consumers, issued by the Government on July 3, 2024.

1.2. “Electricity unit”[1] refers to organizations or individuals engaged in electricity generation, transmission, distribution, system operation, market operation, wholesale, retail, consultancy and other related activities.

1.3. “Renewable energy generation unit”^[2] refers to electricity units owning power plants utilizing solar, wind, small hydropower, biomass, geothermal, wave, tidal, sea current, other renewable energy sources, and rooftop solar systems licensed for electricity operation or exempted from the license requirement for electricity operation under the regulations.

1.4. “Electricity operation license” is a document granted to organizations or individuals meeting the necessary conditions^[3] to engage in one or more electricity activities including consultancy, generation, transmission, distribution, wholesale, and retail of electricity.

1.5. “Private connection line”^[4] refers to the system of transmission lines, substations, and auxiliary equipment for exclusive electricity transmission invested, constructed, and operated by the Renewable energy generation unit to directly sell electricity to Large electricity consumers unless otherwise agreed by the parties.

1.6. “Large electricity consumer”^[5] refers to organizations or individuals purchasing electricity for use without reselling, as stipulated by the Ministry of Industry and Trade, in accordance with the development stages of the electricity system, or those having consumption levels at the point of submitting participation applications for the direct power purchase mechanism as follows:

a) For existing Large electricity consumers: monthly average consumption of 200,000 kWh or more (calculated over the most recent 12 months); or

b) For new Large electricity consumers or those with electricity use period of less than 12 months: calculated according to the registered consumption of 200,000 kWh/month or more.

1.7. “National electricity grid”^[6] refers to the system of transmission lines, substations, and auxiliary equipment for electricity transmission across the Socialist Republic of Vietnam, excluding Private connection lines.

1.8. “Spot electricity market”^[7] refers to a market serving the purchase and sale of electricity in trading cycles conducted by the Electricity System and Market Operator according to the regulations at different levels of the competitive power market.​​​​​​​

1.9. “Power Corporation”^[8] includes Northern Power Corporation, Southern Power Corporation, Central Power Corporation, Hanoi Power Corporation, Ho Chi Minh City Power Corporation.

2. Main Contents of the Decree:​​​​​​​

2.1. Scope and subjects of application: The Decree regulates the direct power purchase mechanism between Renewable energy generation units and Large electricity consumers via Private connection line and via National electricity grid.​​​​​​​

2.2. Two forms of direct power purchase:​​​​​​​

a) Direct power purchase via Private connection line:

Renewable energy generation unit and Large electricity consumer^[9] sign an electricity purchase and delivery via Private connection line agreement with directly negotiated price, unless the generation unit also performs the retail function within combined zones sourcing from both the national grid and other sources for retail within these zones^[10]. ​​​

b) Direct power purchase via National electricity grid:

Renewable energy generation units and Large electricity consumers (or authorized Electricity retail units[11] within combined zones) conduct electricity purchase activities through Forward agreement^[12].​​​​​​​

2.3.  Requirements for Renewable energy generation unit and Large electricity consumer:

a) General requirements: Must comply with legal regulations on planning, investment, electricity operation licenses, electrical safety, fire and explosion prevention in construction, land, environmental protection, operation and safety in electricity use; regulations on electricity trading and contracts, and other relevant legal provisions. 

b) Requirements for Renewable energy generation unit in purchasing and selling electricity directly via Private connection line:

• Must have an electricity operation license in electricity generation[13], unless exempted under regulations. 
• If Renewable energy generation unit does not purchase electricity from the national electricity system and has an electricity grid to conduct electricity retail activities, Renewable energy generation unit must apply for an electricity operation license in electricity retail[14] and generation according to the regulations^[15]. 

c) Requirements for Large electricity consumer in purchasing and selling electricity directly via Private connection line:

• For Large electricity consumers having power stations^[16]: Must invest in grid infrastructure and maintain a management and operational team[17].

3. Assessments and Solutions​​​​​​​

3.1. New opportunities for major investors​​​​​​​

a) For foreign investors: Foreign investors with large electricity using demands and desire to participate in Vietnam’s renewable energy market may find these regulations attractive as they could negotiate directly with electricity generation unit to ensure a stable electricity supply with reasonable price. ​​​​​​​

b) For domestic investors: Large electricity enterprises can take advantage of these opportunities to expand their business activities and engage in the field of renewable energy through joint ventures, partnerships, technology transfer and selling equipment to foreign investors to increase the opportunities to implement projects.​​​​​​​

3.2. Solutions and Opportunities for SMEs

There are some potential “opportunities” and solutions for small and medium-sized enterprises (SMEs) and factories with renewable energy demands but lacking investment and management resources. Here are some suggestions and solutions that may help these businesses participate in the renewable energy market:​​​​​​​

a) Collaboration and Partnership:

• Collaboration with large enterprises: SMEs can collaborate with large enterprises to jointly invest and share benefits from renewable energy projects. Large enterprises can provide capital, technology and management experience while SMEs provide locations and electricity using demands.
• Collaboration with energy service companies: Energy service companies (ESCOs) can invest, install and operate renewable energy systems for SMEs under public-private partnership model (PPP). SMEs will pay for electricity under long-term contracts with reasonable prices.​​​​​​​

b) Taking advantage of Government support programs:

• Financial incentive policy: The Vietnamese Government may offer financial support packages such as low-interest loans, tax reduction and subsidies for renewable energy projects. SMEs should seize these programs to ease financial burdens.
• Technical support and training programs: Government and Non-Governmental Organizations (NGOs) can organize training and consultancy programs to enhance the management and operational capacity of SMEs in renewable energy.​​​​​

c) Participating in community energy projects:

• Rooftop solar power projects: Factories and SMEs can install rooftop solar power systems. This not only provides clean electricity but also reduces monthly electricity costs.
• Energy sharing models: SMEs can participate in energy sharing models where several enterprises jointly invest and share benefits from a renewable energy projects.​​​​​​​

d) Taking advantage of innovative financial solutions:

• Long-term Power Purchase Agreement (PPA): SMEs can sign long-term PPAs with renewable energy generation units. This ensures stable electricity supply and reasonable price without large investments in infrastructure.
• Equipment lease-purchasing: SMEs can lease-purchase renewable energy equipment instead of purchasing. This reduces initial financial burdens and provides easier access to new technology.

D.P.T Law Firm is a domestic law firm with a team of highly skilled and experienced lawyers, dedicated to providing high-quality legal services. To mitigate legal risks for our clients while implementing renewable energy projects or transactions related to DPPA, we specialize in providing the following legal services:

• Legal consultancy for renewable energy projects or transactions related to DPPA;
• Assistance with licensing and project approval procedures;
• Drafting contracts and related legal documents.