Updates on certain regulations of the direct power purchase mechanism between Renewable Energy Generators and Large Electricity Consumers under Decree No 57/2025/ND-CP
On March 3, 2025, the Government issued Decree No 57/2025/ND-CP, regulating the direct power purchase mechanism between renewable energy generators and large electricity consumers (“Decree 57”). Decree 57 will take effect on March 3, 2025, and replace Decree No 80/2024/ND-CP dated July 3, 2024. Similar to Decree 80/2024/ND-CP, Decree 57 provides for two forms of direct power purchase:
(i) Direct power purchase through a privately connected grid; and
(ii) Direct power purchase through the national grid.
In this article, the author presents several provisions of Decree 57 concerning the direct power purchase mechanism between Renewable Energy Generators and Large Electricity Consumers.
(1) Renewable Energy Generators Participating in the Direct Power Purchase Mechanism
(1.1) Renewable Energy Generators Engaging in Direct Power Purchase through a Privately Connected Grid
Decree 57 does not impose any restrictions on the types of renewable energy sources eligible to participate in the direct power purchase mechanism through a privately connected grid. Renewable Energy Generators that own renewable power plants as defined in Article 4(14) of the Electricity Law No. 61/2024/QH15 and meet the conditions set forth in Article 5(1) of Decree 57 may participate in the direct power purchase mechanism through a privately connected grid.
Decree 57 does not stipulate a minimum power generation capacity requirement for Renewable Energy Generators to engage in the direct power purchase mechanism through a privately connected grid.
Additionally, Decree 57 neither prohibits nor provides clear provisions addressing situations where:
(i) A Renewable Energy Generator sells electricity directly to multiple Large Electricity Consumers; or
(ii) A Large Electricity Consumer purchases electricity from multiple Renewable Energy Generators under the direct power purchase mechanism through a privately connected grid.
It is also important to note that Decree 57 does not require a Renewable Energy Generator to be the investor, constructor, manager, or operator of the privately connected grid. Consequently, Renewable Energy Generators may utilize a privately connected grid owned by a third party for electricity transmission, similar to the case where a Retail Electricity Entity within an industrial zone or cluster provides grid infrastructure, as stipulated in Article 6(4) of Decree 57.
(1.2) Renewable Energy Generators Engaging in Direct Power Purchase through the National Grid
Renewable Energy Generators participating in the direct power purchase mechanism through the national grid must meet the following four specific conditions:
(i) The electricity must be generated from wind, solar, or biomass sources;
(ii) The generation capacity must be at least 10 MW;
(iii) The generator must be connected to the national electricity grid; and
(iv) The generator must directly participate in the competitive wholesale electricity market.
(2) Large Electricity Consumers Participating in the Direct Power Purchase Mechanism
(2.1) Large Electricity Consumers Must Be the Direct Users of Electricity
Decree 57 continues to uphold the requirement that Large Electricity Consumers participating in the direct power purchase mechanism must be the direct users of electricity.
(2.2) Large Electricity Consumers Must Meet the Minimum Electricity Consumption Threshold Within a 12-Month Cycle
Although Decree 57 removes the specific minimum electricity consumption threshold previously stipulated in Decree 80 (200,000 kWh per month) and delegates authority to the Ministry of Industry and Trade to determine the minimum consumption requirement, it maintains the criterion for evaluating whether a Large Electricity Consumer meets the necessary consumption threshold to qualify for participation in the direct power purchase mechanism and to continue participation in year N+1.
However, in the author’s opinion, the criteria for determining the eligibility of Large Electricity Consumers to participate in the direct power purchase mechanism under Article 5.2(b) of Decree 57 may present certain issues during implementation, as outlined below:
(2.2.1) Unreasonable Start and End Time of the Evaluation Cycle
The requirement that a Large Electricity Consumer must have an average electricity consumption from November of year N-1 to the end of October of year N that is not lower than the minimum consumption threshold defined in the Competitive Wholesale Electricity Market Operation Regulations issued by the Ministry of Industry and Trade, in order to continue participation in the direct power purchase mechanism for year N+1, could be interpreted in two ways:
(i) The evaluation must consider the full 12-month period from November of year N-1 to the end of October of year N; or
(ii) Only the average consumption of the months in which electricity was used within this period needs to be considered.
Given that the regulation aims to evaluate electricity consumption over a 12-month cycle, the second interpretation is less likely. However, if applied in this way, it could create difficulties for Large Electricity Consumers who begin using electricity after November 1 of year N-1 when assessing their eligibility to continue direct power purchases in year N+1.
In the author’s opinion, when evaluating the eligibility of a Large Electricity Consumer for direct power purchases in year N+1, if the consumer has already participated in the direct power purchase mechanism for at least 12 months, only the average electricity consumption for the entire evaluation period should be considered. The requirement to assess consumption from a specific month of year N-1 to a specific month of year N should not be imposed.
(2.2.2) No Exclusion of Factors Affecting Electricity Consumption in the Evaluation Period
Article 5.2(a) of Decree 57 requires an assessment of the “total average electricity consumption over the past 12 months” to determine whether a Large Electricity Consumer qualifies for participation in the direct power purchase mechanism. Similarly, Article 5.2(b) mandates an evaluation of “average electricity consumption from November of year N-1 to the end of October of year N.” However, the decree does not specify any exclusions for factors that may affect the consumer’s electricity consumption during the evaluation period.
(2.2.3) Inability to Determine Consumption Based on Electricity Purchased from the National Utility in the Case of Direct Power Purchase via a Privately Connected Grid
The regulation requiring electricity consumption assessments to be based on the total electricity purchased from the Vietnam Electricity Group (EVN) (or an authorized or delegated entity) and local Power Companies will be unworkable in cases where a Large Electricity Consumer purchases electricity directly from a Renewable Energy Generator through a privately connected grid.
(2.2.4) Lack of a Clear Mechanism for Evaluating Eligibility to Continue Participation in Year N+1
Under Article 5.2 of Decree 57, if a Large Electricity Consumer fails to meet the minimum consumption requirement, the Ministry of Industry and Trade may, pursuant to Article 27 of Decree 57, require the consumer to temporarily suspend participation in the mechanism after consulting relevant authorities. This provision raises concerns about a lack of transparency in the evaluation process and the potential for discretionary decision-making when assessing eligibility for continued participation in year N+1.
The ambiguity of this mechanism, combined with the absence of clear provisions for excluding factors affecting electricity consumption in year N+1, creates uncertainty for Renewable Energy Generators and investors/lenders considering financing Renewable Power Plant projects or investing in privately connected grid infrastructure.
(2.3) Electricity Usage Purposes of Large Electricity Consumers
(2.3.1) Large Electricity Consumers Engaging in Direct Power Purchase via a Privately Connected Grid
Decree 57 does not impose restrictions on the purposes for which Large Electricity Consumers may use electricity (except for resale) when engaging in direct power purchase transactions via a privately connected grid. This provision enables service-based consumers, such as hotels, resorts, office complexes, or large commercial centers, to access the direct power purchase mechanism via a privately connected grid.
(2.3.2) Large Electricity Consumers Engaging in Direct Power Purchase via the National Grid
For transactions conducted via the national grid, Large Electricity Consumers may only use the purchased electricity for two purposes:
(i) Industrial production; and
(ii) Charging stations for electric vehicles.
It is worth noting that the provision allowing electricity usage for “charging stations for electric vehicles” is a new regulation introduced in Decree 57 and was not included in Decree 80.
(2.4) Connection Voltage Levels
Decree 57 does not specify voltage level requirements for direct power purchase transactions conducted via a privately connected grid.
However, in the case of Large Electricity Consumers engaging in direct power purchases through the national grid, the connection voltage must be at least 22 kV.
(3) Participation of Electricity Retailers in Industrial Zones and Clusters in the Direct Power Purchase Mechanism
The participation of Electricity Retailers in industrial zones and clusters under this mechanism is limited to acting as an authorized representative of Large Electricity Consumers and may become a Power Purchaser in only one specific scenario: purchasing surplus electricity from a Renewable Energy Generator in cases where the Renewable Energy Generator invests in and installs a rooftop solar power plant to directly sell electricity to a Large Electricity Consumer operating within the industrial zone or cluster. In such cases, the Renewable Energy Generator is permitted to use the Electricity Retailer’s grid within the industrial zone or cluster to transmit electricity to the Large Electricity Consumer.
In the author’s opinion, Decree 57’s failure to allow Electricity Retailers in industrial zones and clusters to purchase electricity directly from Renewable Energy Generators for resale to businesses engaged in production and commercial activities within these zones and clusters represents a limitation of the decree. This is particularly relevant given the increasing environmental standards imposed by international importers on products and services sourced from Vietnam. The author hopes that future regulations on direct power purchase transactions will expand eligibility to include Electricity Retailers in industrial zones and clusters, allowing them to directly purchase electricity from Renewable Energy Generators for resale to enterprises engaged in production and business activities within such zones and clusters.
(4) Electricity Pricing and the Sale of Surplus Electricity by Renewable Energy Generators, as well as the Purchase of Additional Electricity by Large Electricity Consumers
(4.1) In the Case of Direct Power Purchase via a Privately Connected Grid
(4.1.1) Electricity Pricing
Decree 57 allows the parties to freely negotiate electricity prices. However, this freedom is subject to certain limitations, specifically ensuring that the agreed price does not exceed the maximum price threshold, as follows:
(i) The electricity price stipulated in the Power Purchase Agreement (PPA) between the Renewable Energy Generator and the Large Electricity Consumer must not exceed the maximum price set under the price framework for the corresponding type of power generation.
(ii) The price of surplus electricity sold by the Renewable Energy Generator to Vietnam Electricity (EVN), its subsidiaries, or local Power Companies must not exceed the maximum price set under the price framework for the corresponding type of power generation, except in cases where the Renewable Energy Generator sells surplus electricity from a rooftop solar power plant to EVN, its subsidiaries, or local Power Companies under Article 6.3 of Decree 57. In such cases, the price of surplus electricity is determined based on the average market electricity price of the preceding year as published by the System and Market Operator and must not exceed the maximum price under the price framework for ground-mounted solar power.
(iii) The price of surplus electricity sold by the Renewable Energy Generator to the Electricity Retailer in an industrial zone or cluster, in cases where the Renewable Energy Generator has invested in and installed a rooftop solar power system, must not exceed the maximum price under the price framework for ground-mounted solar power.
(4.1.2) Electricity Supply
(i) Electricity Supplied to Large Electricity Consumers or Authorized Electricity Retailers in Industrial Zones and Clusters
A Renewable Energy Generator may not enter into agreements to allocate more than 100% of its total electricity generation capacity to Large Electricity Consumers or authorized Electricity Retailers in industrial zones and clusters.
(ii) Sale of Surplus Electricity
A Renewable Energy Generator may sell surplus electricity under the following conditions:
(ii1) For surplus electricity generated from a rooftop solar power plant installed by the Renewable Energy Generator to supply a Large Electricity Consumer located in an industrial zone or cluster: The Renewable Energy Generator may sell surplus electricity to the Electricity Retailer in the zone or cluster, with the specific quantity to be determined through mutual agreement.
(ii2) For surplus electricity generated from a rooftop solar power plant installed by the Renewable Energy Generator to supply a Large Electricity Consumer: The Renewable Energy Generator may sell no more than 20% of its actual generated electricity to EVN, its subsidiaries, or local Power Companies, with the specific quantity to be determined through mutual agreement.
(ii3) For surplus electricity in all other cases: The Renewable Energy Generator may sell its entire surplus electricity output to EVN, its subsidiaries, or local Power Companies, with the specific quantity to be determined through mutual agreement.
(iii) Purchase of Additional Electricity
In cases where the electricity supplied by the Renewable Energy Generator is insufficient to meet the Large Electricity Consumer’s demand, the Large Electricity Consumer may purchase additional electricity from EVN, its subsidiaries, local Power Companies, or authorized Electricity Retailers in industrial zones and clusters.
(4.2) In the Case of Direct Power Purchase via the National Grid
(4.2.1) Electricity Pricing
For all three types of direct power purchase transactions conducted via the national grid, the price of electricity generated from renewable sources will be determined or referenced based on the spot market electricity price as calculated and published by the System and Market Operator, in accordance with the Competitive Wholesale Electricity Market Operation Regulations issued by the Ministry of Industry and Trade.
(4.2.2) Electricity Supply
Renewable Energy Generators are entitled to sell their entire generated electricity output into the national grid, while Large Electricity Consumers are entitled to purchase the entire volume of electricity required to meet their consumption needs. However, the actual volume of electricity exchanged directly between the Renewable Energy Generator and the Large Electricity Consumer will depend on the actual generation capacity of the Renewable Energy Generator and the actual consumption capacity of the Large Electricity Consumer.
Decree 57 does not specify how to handle surplus electricity in cases where the Renewable Energy Generator produces more electricity than the Large Electricity Consumer consumes. Such situations will be governed by the regulations of the spot electricity market.
Please note that the contents of this article reflect the personal views of the author, and the author advises readers to use this article for reference purposes only.
For any contributions or discussions regarding this article, please contact:
Lawyer Phan Quang Chung
BFSC LAW LLC | Hanoi Office
Tel: (024) 7108 2688 (Ext: 102) | Email: [email protected]