With sufficient legal basis, will it be implemented immediately?

The Ministry of Industry and Trade has just submitted its latest report to the Prime Minister on the study of developing a direct power purchase agreement (DPPA) mechanism between renewable energy power generation units and large electricity consumers.

In this report, the Ministry of Industry and Trade continues to present two cases of direct electricity trading between renewable energy generation units and large electricity consumers in the manufacturing sector.

Case one involves buying and selling electricity through private lines invested in by private companies, and case two involves buying and selling electricity through the national power grid.

In the first case, the power generation unit and the large electricity consumer are not limited by conditions such as capacity, output, connection voltage level, purpose of electricity use, etc., when buying and selling electricity.

In this case, the Ministry of Industry and Trade believes that the implementation has a full legal basis, therefore, the Ministry of Industry and Trade will guide the units in accordance with the provisions of current law.

For the second case, electricity is bought and sold through the national grid system between the power generation unit and the customer. In this case, both the power generation unit and the electricity buyer must still go through the electricity retailer (currently EVN has a monopoly).

The requirement is that the power generation unit owning the wind or solar power plant must connect to the national power grid and have an installed capacity of 10MW or more.

"The DPPA mechanism proposes implementation in two phases. During the period before the Law on Prices and related guiding documents come into effect, Model 1 will be implemented first, and then the legal framework will be finalized to transition to Model 2," the Ministry of Industry and Trade explained.

Model 2, as mentioned by the Ministry of Industry and Trade, involves large customers and power generation units signing forward contracts with a difference (a type of derivative financial contract) similar to Model 1. The power generation unit participates in the electricity market and connects to the national grid to offer electricity output to the competitive wholesale electricity market, receiving revenue from the electricity market at the spot wholesale electricity market price for the entire electricity output generated.

In its comments on this proposal, the Ministry of Finance stated that: The mechanism for differential forward contracts is not yet regulated in legal documents. To establish a basis for determining the value-added tax mechanism for this type of contract, the Ministry of Industry and Trade is requested to study and submit to the competent authority for promulgation regulations on the differential forward contract mechanism in legal documents.

Accordingly, the Ministry of Finance proposed removing the provision assigning the Ministry the responsibility of providing guidance on the value-added tax mechanism for contracts.

The Ministry of Industry and Trade has incorporated the Ministry of Finance's feedback on the necessity of adding provisions regarding differential forward contracts to legal documents to apply guidelines on value-added tax mechanisms. This content has been added by the Ministry of Industry and Trade to the proposal for amending the Electricity Law and is currently being submitted to the Ministry of Justice for review.

Meanwhile, the Ministry of Justice argues that the Electricity Law does not contain a specific provision authorizing the Government to regulate this matter in detail ( DPPA mechanism - PV ), therefore, the legal basis and authority for issuing the Government Decree need to be clarified (in accordance with the Law on Promulgation of Legal Documents). Furthermore, due to the unclear legal basis and policy content, the Ministry of Justice, after initial review, found that the proposal to draft the decree under a simplified procedure is unfounded.

Previously, in report No. 105/BC-BCT dated July 25, 2023, submitted to the Prime Minister, the Ministry of Industry and Trade proposed the issuance of a DPPA mechanism in the form of a government decree. However, based on the comments of the Ministry of Justice, to ensure a complete legal basis, the Ministry of Industry and Trade recommended that the Prime Minister consider and decide on adding provisions on this mechanism to the amended Electricity Law.

The Ministry of Industry and Trade proposes direct electricity trading, bypassing EVN . The Ministry of Industry and Trade has just reported to the Prime Minister on the study of developing a mechanism for direct electricity trading between renewable energy power generation units and large electricity consumers, including a plan that could use a dedicated transmission line not managed by EVN.

Source