Vietnam's Direct Power Purchase Decree Opens the Door to Corporate Buyers. EVN's Grid Still Holds the Key

On 3 July 2024 Vietnam's government issued Decree 80/2024/ND-CP, establishing a mechanism for direct power purchase agreements between renewable energy generators and large electricity consumers. It took effect immediately. The decree allows two models. In the first, a generator sells to a consumer through a private connection line, with no minimum generator size. In the second, the generator and consumer trade through the national grid: the generator sells its output into the competitive wholesale electricity market, and the consumer buys from the power corporation that serves it, while the two parties settle a financial contract between them.

The decree has been sought for years by multinational manufacturers in Vietnam, many of which have global commitments to buy renewable electricity, and by developers whose growth stalled after the end of Vietnam's feed-in tariffs. Our view is that Decree 80 is an important step and that the private-line model will be used quickly. Vietnam experienced one of the fastest solar booms anywhere between 2019 and 2020, driven by generous feed-in tariffs. Utility-scale and rooftop solar capacity rose from almost nothing to well over 16 GW in about two years.

At the same time, foreign manufacturers relocating from China, in electronics, textiles and other sectors, faced pressure from their global customers to source renewable power. Without a way to contract directly with generators, they could only buy power from EVN at regulated tariffs, with limited ability to demonstrate clean supply. A generator builds a plant near or on the consumer's site and supplies it directly through a dedicated line, without using EVN's grid. Many factories do not have enough roof or land area to meet a large share of their demand from on-site solar, and wind power rarely fits the private-line model.

The generator sells its physical output into Vietnam's competitive wholesale market, and the consumer continues to buy physical electricity from its local EVN power corporation. Decree 80 gives Vietnam a legal framework that its manufacturers and renewable developers have long requested.