From 2020 to date, the Vietnamese government has continued to work on a scheme to allow bilateral power purchase agreements (PPAs). This pilot scheme has been delayed to date and is now expected to be launched in the first quarter of 2023. The official scheme will be launched in 2025.
The Ministry of Industry and Trade (MIOT) wants to implement bilateral power purchase agreements (PPAs) in the Vietnamese electricity market through a pilot scheme. The scheme will for the first time allow renewable energy plants to sell electricity directly to private offtakers under a virtual or integrated deal.
Under current rules, state-owned energy producer Electricity of Vietnam (EVN) has a monopoly on the transmission, distribution, wholesale and retail sale of electricity in the country and is the only buyer in the country's electricity market.
Moritz Sticher, a senior consultant at Berlin-based German consultancy Apricum, told PV magazine that the scheme had not yet been launched and that "the exact timing is now uncertain". It was originally planned to be operational between 2022 and 2024, but is now expected to start in the first quarter of 2023. Following the pilot scheme, the official plan will be launched in 2025.
Since 2020, the Vietnamese government has drafted several pieces of legislation and several amendments have delayed the scheme until now. In January this year, the government made changes to the scheme's tariff structure, with Sticher saying, "Offtakers will now buy electricity at the retail price, rather than at the spot market price plus the cost of the power purchase agreement." National utility Genco will still pay EVN at the wholesale price. Buyers and power plants will also need to enter into forward contracts for the difference in price over the forward trading cycle.
Under this mechanism, investors will now invest at a fixed tariff and the risk of tariff fluctuations is transferred to the offtaker," Sticher explained. For the offtaker, the change in price from wholesale to retail means an additional share of EVN of about 2%, so the return to the investor is slightly reduced (assuming the offtaker targets the same total price). And it is also slightly less attractive to offtakers due to the risk of tariff changes."
Sticher said that delays in the start of the PPA programme had hindered the development of utility-scale projects in Vietnam and that the country had "little interest in rapidly increasing solar capacity on a large scale". Continued uncertainty over renewable energy targets, power constraints and stranded projects that have benefited from previous rounds of feed-in tariff subsidies are also said to have contributed to this situation.
Data from Apricum's latest 'ASEA Solar Power' report shows that Vietnam currently has around 18.47 GW of installed solar power capacity. Apricum says that offshore and onshore wind power will compensate for the reduction in solar capacity and imports from Laos.
The country's commercial and industrial (C&I) sector is growing. In its core scenario, Apricum forecasts a total installed capacity of 10,792 MWp by the end of 2022, with most C&I projects funded by independent power producers (IPPs).