Vietnam has recently approved a government decree allowing Direct Power Purchase Agreements (DPPAs), enabling electricity-intensive factories to purchase electricity directly from wind and solar power producers. This move aims to assist major companies like Samsung Electronics in meeting their climate goals while alleviating strain on the country's electricity grid.
The previous regulation mandated all power consumers to rely solely on the state-run utility Vietnam Electricity (EVN) for electricity supply. The new decree permits foreign investors to engage in DPPAs, a change long sought after by investors crucial to Vietnam's growth as a significant exporter.
The introduction of DPPAs is expected to revolutionize the energy landscape in Vietnam, making it easier for companies to transition away from fossil fuels. This shift is particularly crucial as more countries impose carbon taxes, giving companies utilizing clean energy a competitive edge in certain markets.
This development marks a significant departure from the centralized electricity markets typical in Southeast Asia. The implementation of DPPAs is on the rise globally, with a notable increase in power generation under such agreements observed in countries like India, Australia, and Taiwan.
About 20 large companies in Vietnam have expressed interest in procuring clean energy directly from producers, with an estimated total demand of nearly 1 gigawatt of energy. Samsung, Vietnam's largest foreign investor, has been at the forefront of adopting this mechanism, aiming to transition all its business sites to renewable energy by 2027.
Apple Inc., another major player in Vietnam's manufacturing sector, has also welcomed the reform, emphasizing its importance in achieving a cleaner grid. The success of DPPAs in Vietnam hinges on the country's ability to upgrade its electrical grid, which requires a substantial investment of $15 billion.
The new directive offers two mechanisms for factories to purchase renewable energy directly, potentially boosting the construction of new solar and wind farms. This shift could help reverse the recent increase in fossil fuel usage in Vietnam, promoting the installation of more renewable energy capacities in the country.
