Direct Power Purchase Agreement (DPPA) and its role in reducing greenhouse gas emissions for businesses

Promoting renewable energy is one of the directions of the Vietnamese Government in its efforts towards the Net Zero commitment. To create a foundation for this goal, the law is a basis for individuals, businesses, and households to rely on and implement. With the mechanism Direct Power Purchase Agreement (VPPA), legal issues are gradually being resolved, helping people feel secure in investing.

At COP 26, Prime Minister Pham Minh Chinh pledged that Vietnam will achieve net zero emissions by 0. Currently, European countries are applying the carbon border adjustment mechanism (CBAM), requiring imported goods to be transparent about emissions. If greenhouse gases are not reduced, Vietnamese businesses will face difficulties in exporting, especially to demanding markets such as the EU and the US. Reducing greenhouse gas emissions is often applied by innovating processes, saving energy, changing fuels, and applying clean energy. One of the measures to reduce greenhouse gas emissions is to use renewable energy such as solar power.  

During many business trips to factories and enterprises, GREEN IN staff realized that many factories and enterprises consume a lot of electricity from the national grid, the amount of electricity consumed can be up to two-thirds of the total energy source. They know that to reduce greenhouse gas emissions, it is necessary to build rooftop solar power. However, their rooftop area is not much, even if they try hard, they can only meet less than 5% of their electricity needs. Direct power purchase agreement (DPPA) from renewable energy producers will solve this problem. 

Decree 57/2025/ND-CP on the Direct Power Purchase Agreement (DPPA) has created a mechanism to promote the production and use of renewable energy in Vietnam. Until now, only Vietnam Electricity (EVN) has the right to buy electricity from power plants to the grid and only EVN has the right to sell electricity from the grid to electricity consumers. In other words, EVN is the only buyer and also the only seller of electricity. 

This DPPA mechanism allows large electricity users to sign contracts to buy electricity directly from renewable energy generators, through private transmission lines or through the national transmission system without going through EVN. Renewable energy generators are defined as power units that own power plants from solar, wind, small hydro, biomass, geothermal, ocean wave, tidal, ocean current, other forms of renewable energy and rooftop solar power systems with a capacity of 10 MW or more. Large electricity customers are large electricity customers with an average consumption of 200.000 kWh/month who want to use renewable energy. Thus, electricity producers and electricity sellers are much more diverse than before. 

According to Decision No. 988/QD-BCT dated April 10, 4 of the Ministry of Industry and Trade on the direct electricity purchase and sale mechanism, the maximum price (excluding value added tax) of the electricity generation price frame for solar power plants with and without battery storage is as follows: 

The price specified in the table above is the highest production cost. The electricity transmission price in 2024 is 83,07 VND/kWh. Including the transmission fee, the price of solar power ranges from 1.095,07 VND/kWh (solar power without storage, South) to 1.960,33 VND/kWh (solar power with storage battery, North). 

Normally, production facilities buy electricity from the grid at peak prices of 3.398 VND/kWh, normal hours are 1.833 VND/kWh, and an average of about 2.500 VND/kWh. Thus, if production enterprises buy solar power through the DPPA mechanism, they will benefit from 540 VND/kWh to 1.405 VND/kWh. According to many energy experts, electricity prices as well as transmission prices will increase in the future and thus, facilities buying electricity under the DPPA mechanism will benefit even more. 

In terms of greenhouse gas emissions, according to Official Dispatch No. 1726/BĐKH-PTCBT of the Department of Climate Change, Ministry of Natural Resources and Environment (former), the emission factor of the power grid in 2023 is 0,6592 tCO2/MWh or 0,6592 kgCO2/kWh. In other words, if a production facility buys 1 kWh of solar power, it will reduce 0,6592 kgCO2. 

When working at a manufacturing facility in Hai Phong, we learned that the greenhouse gas emissions of this facility are about 14 thousand tons of CO2tđ in 2024, of which emissions from the grid are about 8 thousand tons, accounting for 57% of the total emissions. The facility consumes about 12 million kWh from the grid each year. The roof area that can be installed with solar power is only about 6.000 m2, only about 1.150 kWp of rooftop solar power can be installed. With such capacity, it is estimated that each year this rooftop solar power system can produce about 1,25 million kWh, accounting for about 10% of the annual electricity consumption. To install such a solar power system, the facility must make an initial investment of about 13 billion VND and will break even after about 5 years. 

If the facility can purchase about 30% of solar power through the DPPA mechanism, equivalent to 3,6 million kWh, each year the facility will reduce 2,4 thousand tons of CO2td, accounting for 30% of CO2td emissions from the electricity section and 17% of total emissions in 2024, and earn about 1,3 billion VND each year.  

The Direct Power Purchase Agreement (DPPA) is an important step forward in promoting the development and use of renewable energy in Vietnam. Currently, this mechanism still has some unclear details, for example, whether electricity from battery storage can be considered renewable energy or the regulation that renewable energy producers with a minimum capacity of 10 MW will not have the opportunity to participate.... However, DPPA is a powerful tool to support Vietnam in implementing sustainable development goals and reducing greenhouse gas emissions and helping businesses not only reduce CO10 emissions but also bring financial benefits to businesses. It is beneficial for both the state and businesses.