Sellers and buyers can transact directly.
Since 2017, the Ministry of Industry and Trade has assigned the Electricity Regulatory Authority to organize the implementation of a research project to develop a direct electricity trading mechanism between renewable energy generators and electricity customers.
Accordingly, the direct electricity trading model through financial contracts is chosen to be applied in Vietnam. In this model, electricity customers and power generators will sign a bilateral financial contract in the form of a forward contract, with a fixed price and electricity output agreed upon by both parties.
Electricity customers purchase electricity from the power corporation at electricity prices referenced to the spot electricity market price in each cycle. In addition, customers will pay the power corporation for direct electricity purchase and sale service costs for the entire electricity consumed, including electricity transmission costs, electricity distribution costs, electricity system operation costs and electricity market transaction management costs, and ancillary service costs.
The American Chamber of Commerce in Vietnam (Amcham) assessed: The proposed Direct Power Purchase Agreement (DPPA) is an important mechanism to attract investors and private investment, not only in the energy sector but also in other sectors with the commitment of companies in the fields of renewable energy, carbon emission reduction and sustainable development.
“The DPPA has been in the works for about six years, it is a mechanism that is used in many countries and we hope it can come into effect this year,” Amcham said, expecting that the approval of the DPPA mechanism could “bring billions of dollars of investment from the private sector.”
The British Business Group in Vietnam also believes that: DPPA is an important mechanism to attract private investment in green energy projects. Approval of DPPA can open up huge sources of finance from the private sector.
EVN is an intermediary, only receiving "shipping" fees?
In 2021, the Ministry of Industry and Trade completed and proposed the development of a Circular regulating the pilot implementation of direct electricity trading between renewable energy power generation units and electricity customers.
But by May 2022, the document form had changed to the Draft Decision of the Prime Minister regulating the pilot mechanism of direct electricity purchase and sale between renewable energy power generation units and large electricity users.
According to this draft, electricity customers buy electricity from the electricity corporation at the current retail price; at the same time, directly sign a Contract for Difference (CFD) with the electricity generation unit with the price and electricity output agreed by both parties for future trading cycles.
"Thus, in principle, Vietnam Electricity Group (EVN) represents customers to buy electricity from power generation units at the spot electricity market price and resell it to customers at the retail electricity price. Customers are able to choose and access the source of clean energy that they will use for production and business, with the aim of protecting the environment and being recognized by renewable energy certificates ( Renewable Energy Certificates - RECs).
EVN is compensated for its management and transmission costs by the difference between the retail price and the spot market price," an analysis posted on the website of Power Construction Consulting Joint Stock Company 3.
Sharing with PV. VietNamNet, an expert knowledgeable about the process of building DPPA commented that the direct electricity purchase and sale mechanism is facing many problems, so it has not been issued yet. The new design of the DPPA mechanism is also not the same as the original.
According to this expert, the previous DPPA design was highly market-oriented, with customers allowed to buy directly on the electricity market. That is, customer B could buy directly from unit A, not through electricity companies. Accordingly, customer B authorized electricity unit C to buy electricity from unit A. Electricity C only acted as a “shipper” for customer B and received a fee.
"But the recent design of the Ministry of Industry and Trade is not like that, but in the direction of power generation unit A selling on the electricity market, customer B must buy electricity through power company C. That is, power company C buys from unit A and then sets a series of costs, then sets the price to sell back to customer B," he commented.
According to him, the advantage of this design is that the DPPA mechanism can be implemented immediately, without any legal framework, only having to amend the circular related to selling electricity to the electricity market.
So, what is the basis for customer B and power generation unit A to sign a netting contract, and how to know clearly that the electricity that customer B buys is clean electricity. Because customer B does not buy directly from unit A.
Therefore, the DPPA mechanism can only prove the connection by a renewable energy certificate (also known as a green certificate) to create a netting contract between customer B and power generator A.
“Customer B and power generation unit A must sign a contract to purchase green certificates from power generation unit A. This case is even more complicated because there is no regulation on the green certificate market yet,” the expert said.
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