As part of Vietnam’s efforts to achieve carbon neutrality by 2050, Hanoi has approved direct power purchase agreements (DPPA) for renewable energy.

The long-awaited policy will enable businesses in the electricity-thirsty country to purchase power directly from private firms producing renewable energy – wind, rooftop solar and other sources – enabling them to power their operations with 100% renewable energy.

It will also help Vietnam attract more private-sector investment in renewables while meeting the needs of corporates seeking to integrate renewable energy into their operations and achieve their emissions reduction targets.

Speaking at the DPPA launch in Hanoi on July 5, US ambassador to Vietnam Marc Knapper said: “I extend my sincere congratulations to the Ministry of Industry and Trade for their dedication and hard work in bringing this DPPA to fruition.

“Our comprehensive strategic partnership marks a new era of collaboration between our two nations, and the DPPA is a testament to our deepening ties and shared commitment to sustainable development.”

The event marked the Vietnamese government’s approval of the DPPA decree, which enables renewable power to be sold directly through private-sector transmission lines without having to go through state-utility Vietnam Electricity as an intermediary. No capacity limits on the direct sales are mentioned in the decree.

US technical assistance

Since 2017, the US mission to Vietnam, through the US Agency for International Development (USAID), has provided technical assistance to the industry and trade ministry on the design, development, and approval of the DPPA. USAID will continue to partner with the ministry on the DPPA implementation. 

The implementation means wind, biomass, micro-hydropower, geothermal, wave, and tidal energy will be traded directly. Waste-to-energy facilities are not included in the deal. Investors can sell power to the Vietnam Electricity-operated national grid, either through the spot electricity market or the state-run power energy group.

According to the decree, solar and wind energy investors must have a capacity of at least 10 megawatts to sign a supply deal.

Meanwhile, buyers and sellers can negotiate their own terms and prices for the direct sales, and excess production can be sold to the state utility at predetermined prices. Buyers can also purchase electricity from the group or others as long as trading is direct.

In all cases, buyers must be those who use power for production and business operations, and have a minimum monthly consumption of 200,000 kilowatt-hours.

Shared priorities

“The DPPA will enable businesses to reduce their carbon footprint while also enabling Vietnam to accelerate its clean energy transition and advance its goal of net-zero emissions by 2050,” says USAID/Vietnam mission director Aler Grubbs.

“The United States remains Vietnam’s partner as you roll out this important initiative and expands Vietnam’s access to clean and renewable energy.”

The DPPA aligns with the two countries’ shared priorities under their comprehensive strategic partnership announced during US President Joe Biden’s visit to Hanoi in September 2023.

Vietnam is already a destination for multinational companies diversifying their supply chains under a “China plus one” strategy, in which they rely not only on China for their manufacturing and other outsourced business needs but other countries as well.

The Southeast Asian country requires huge amounts of electricity to fulfil this role, and relying solely on Vietnam Electricity for all its power needs no longer suffices.