USAID launched the project as it seeks to increase private sector investment and improve operational performance in Vietnam’s energy sector.
The project is known as the Vietnam low emission energy programme II (V-LEEP2). USAID will work with Vietnam’s ministry of industry and trade (MOIT) to increase clean energy deployment by mobilising private sector investment and providing project design support for developers and technical assistance for lenders.
USAID will help to design, finance, build and operate the resulting clean energy generation projects, with the goal of supporting up to 2GW of renewable energy between 2020 and 2025.
The scheme follows the V-LEEP I which ran from 2015 to 2020. Under V-LEEP I, USAID worked with the MOIT on Vietnam’s Power Development Master Plan VIII (PDPVIII) and the design of the Direct Power Purchase Agreement (DPPA) pilot programme, which will allow businesses in Vietnam to purchase electricity directly from private firms producing renewable energy. Working with the private sector, V-LEEP I encouraged investment of more than $311 million to build 300 megawatts of wind and solar projects.
Renewables expert John Yeap of Pinsent Masons said: “With the progress of the DPPA programme, Vietnam is moving ahead of some of its neighbours in enabling commercial electricity users with corporate emissions reduction targets to achieve their net zero ambitions. Much will depend on the financebility of the projects, with generators taking offtaker credit risk. Issues around operational risks such as the risk of curtailment or grid issues will also have to be addressed.”
“Nevertheless, the move towards direct bilateral negotiations for offtake arrangements in single buyer markets seems likely to continue as these markets continue to explore ways to enable offtakers direct access to electricity from renewable energy sources,” he said.
In May, MOIT has submitted the final draft of PDPVIII to Vietnam’s prime minister Pham Minh Chinh for approval. The latest revision proposes increasing electricity capacity to 146 gigawatts (GW) by 2030 and includes the use of diversified sources of power from renewable energy to other fuel sources such as hydrogen and ammonia.
Meanwhile, the ministry released a draft policy on the DPPA scheme which includes the launch of a competitive wholesale electricity market with 1GW capacity. The trial run targets solar and wind power plants which are operationally ready but which missed their scheduled commercial operation dates to apply for the FIT regime. The power plants should have at least 30MW capacity and connect to the grid. Power plants which have not yet started operations but which are included in the power development plans may also join the pilot programme. These projects will require identified investors, approved by state agencies.
During the pilot operation phase, selected power producers will directly negotiate and sign bilateral contracts with power consumers including contractual output, contract price, and reference price.