Vietnam set to run PPA pilot scheme for renewable energy


Vietnam’s Ministry of Industry and Trade (MIOT) is planning a pilot scheme to open up Vietnam’s electricity market to bilateral power purchase agreements (PPAs), which would enable renewable energy generators to directly sell electricity to private off-takers under virtual or synthetic deals.

Currently in Vietnam, the state-owned energy company Electricity Vietnam (EVN) has monopolized the transmission, distribution, wholesale and retail of electricity and is the sole buyer in the market.

The scheme, which has yet to be launched, was scheduled to run between 2022 and 2024, with expectations now pointing to the first quarter of 2023. The official program following the pilot scheme should then start in 2025.

The government has drafted several pieces of legislation since 2020 and made several amendments, dragging the program on. In January, it made changes to the scheme’s tariff structure – the off-taker would buy at the retail price instead of spot market price plus PPA charges, while the national utility, Genco, would still be paid by EVN at wholesale price. The buyer and the generator would also enter into a forward contract for difference for future trading cycles.

“This mechanism now gives investors a fixed tariff and puts the risk of tariff fluctuation on the off taker. The tariff change from wholesale to retail tariff for off-takers means around 2% more share to EVN and hence slightly reduced returns on the investor side (assuming the off-taker will aim for the same total tariff) and slightly less attractive for off-takers due to the change in electricity tariff risk,” Moritz Sticher, senior advisor at Berlin-based consulting firm Apricum, explained.

The development of utility-scale projects in Vietnam has been slow due to pending PPA program. Constant uncertainty around renewable energy targets, ongoing curtailment issues, and stranded projects from the previous feed-in-tariff rounds have also allegedly contributed to that scenario, Sticher said.

Vietnam currently has around 18.47 GW of installed solar capacity, according to data from Apricum’s new “Solar power in ASEA” report. Under the National Power Development Plan VII, solar targets for 2045 are revised down to 13.6 GW for utility-scale and 3.4 GW of rooftop solar. Offshore and onshore wind would compensate for the decrease in solar generation, as well as electricity imported from Laos, according to Apricum.

The commercial and industrial (C&I) segment is growing in the country. Most C&I projects are financed by independent power producers (IPPs).

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