Vietnam’s new direct power purchase agreement (DPPA) framework aims to accelerate corporate access to renewable energy, but the coexistence of this system with a recently introduced two-part electricity tariff creates potential double-charging risks that could dampen commercial viability.
KEY FACTS AT A GLANCE
- Vietnam’s DPPA mechanism, introduced under Decree 57/2025, enables renewable energy generators to sell directly to large consumers instead of only to state utility EVN, supporting market competition and clean energy procurement.
- From late 2025, EVN has piloted a two-part electricity tariff that bills large industrial users separately for capacity (fixed charge) and energy consumption (variable charge).
- The DPPA cost structure includes a service charge for grid use that already reflects infrastructure costs shared across the system.
- The two-part tariff’s capacity component also includes grid infrastructure costs, risking overlapping charges for the same assets when applied alongside DPPA billing.
- Without adjustment, businesses participating in DPPA could pay twice for grid costs: once within DPPA rates and again via the capacity charge, undercutting incentives for corporate renewable procurement.
- Authorities are considering regulatory revisions to align cost allocation, including separating infrastructure costs from DPPA service charges or applying capacity netting to prevent duplication.
- Pilot implementation of the two-part tariff and DPPA rollout will be phased, starting with large industrial users in 2026 and expanding to broader segments thereafter.
Strategic Reform: DPPA and Market Opening
Vietnam’s energy regulators have moved to liberalize electricity procurement through the direct power purchase agreement (DPPA) regime codified in Decree 57/2025, replacing earlier transitional rules. Traditionally, renewable power producers sold exclusively to EVN at regulated prices, constraining corporate buyers seeking stable, market-linked green energy supplies. The DPPA mechanism establishes two modalities: physically connected direct supply via private infrastructure and a synthetic model routed through the national grid under competitive wholesale market rules.
For multinational manufacturers and exporters subject to stricter environmental and carbon reporting standards abroad, predictable access to renewable electricity is increasingly a commercial necessity. DPPA contracts allow them to lock in supply terms directly with generators, relieving EVN of price risk and fostering a more competitive, transparent power market. Renewable project developers also gain clearer legal footing to negotiate terms and mobilize investment capital.
Two-Part Tariff: Policy Rational and Application
Vietnam’s shift to a two-part tariff system reflects broader energy reform objectives to mirror true supply-side costs and reduce cross-subsidization inherent in the old single-price model. Under this structure, end users are charged both a fixed component tied to registered capacity (reflecting grid readiness and infrastructure cost) and a variable component based on actual energy consumed. This design aligns retail pricing with generation and transmission economics while incentivizing demand-side efficiency.
EVN initiated pilot billing for large electricity consumers in late 2025, particularly those likely to engage in DPPA transactions. The phased rollout framework seeks to gather operational data and refine billing systems ahead of broader adoption through 2027.
Overlap in Cost Allocation: Commercial and Regulatory Implications
Where these reform trajectories intersect, a key challenge emerges: the DPPA service charge includes grid use and infrastructure cost components already embedded in wholesale pricing, while the two-part tariff’s capacity charge also allocates infrastructure costs to consumers. This creates the risk of “double charging” for the same grid assets when applied concurrently.
For a corporate buyer evaluating a DPPA, total cost competitiveness against traditional EVN supply matters. If infrastructure costs are effectively paid twice—once through DPPA grid use charges and again via capacity fees—economic incentives to switch to direct procurement weaken. This could slow corporate commitments to renewables and undermine policy goals tied to net-zero commitments.
Vietnamese authorities, including the Ministry of Industry and Trade, are reviewing draft amendments to Decree 57 to address these issues. Potential solutions discussed include isolating infrastructure cost components so that DPPA service charges exclude costs already billed via capacity fees or introducing netting arrangements where capacity charges reflect only the incremental grid reliance beyond contracted renewable output.
Looking Ahead: Balancing Reform and Commercial Confidence
Vietnam’s broader energy reform agenda—a combination of DPPA rollout and two-part tariff implementation—is designed to deepen market competition, bolster renewable deployment, and foster cost-reflective pricing. Yet successful execution hinges on regulatory coordination and clarity in cost allocation. Aligning tariff structures so that grid costs are neither under- nor over-recovered will be pivotal to attracting sustained corporate investment in renewable procurement. Ongoing pilot phases through 2026–27 will provide critical insights for fine-tuning these mechanisms, balancing reform momentum with commercial realities.