Nearly two years after being written into law, the Direct Power Purchase Agreement (DPPA) mechanism has recorded its first renewable-energy transactions through the national grid. This article analyzes the operating mechanism, the environmental and economic benefits, and the practical barriers facing DPPA in Vietnam’s market.
What is DPPA?
Under Decree No. 57/2025/NĐ-CP (as amended and supplemented by Decree No. 243/2026/NĐ-CP), a Direct Power Purchase Agreement (DPPA) is a power trading activity conducted between a renewable-energy generation unit, a large electricity consumer, and an electricity retailer within zone/cluster models, allowing businesses to buy renewable power directly from the generating plant rather than only through EVN.
In Vietnam, the DPPA mechanism is set out in detail through the following decrees:
- Decree No. 80/2024/NĐ-CP laid the foundation for the DPPA mechanism, establishing two forms of power trading (via private line and via the national grid), the pricing mechanism, the rights and obligations of the parties, and participation conditions (a large-consumer threshold of 200,000 kWh/month).
- Decree No. 57/2025/NĐ-CP (effective March 3, 2025) replaced Decree No. 80/2024/NĐ-CP, spelling out the procedures for grid connection, metering, payment, and pricing; it also shifted the definition of “large electricity consumer” toward a flexible approach, with the Ministry of Industry and Trade setting the threshold for each period rather than fixing a hard number.
- Decree No. 243/2026/NĐ-CP amended Decree No. 57/2025/NĐ-CP and Decree No. 58/2025/NĐ-CP, expanding eligible participants to include data centers, EV charging stations, and retailers within industrial zones/clusters; it also raised the cap on selling surplus rooftop solar to the grid from 20% to 50% through 2030. The adjustment coming just over a year after Decree No. 57/2025/NĐ-CP shows the Government proactively absorbing real-world obstacles.
The Two Forms of DPPA and How They Operate
Within the framework of Decree 243/2026/NĐ-CP, there are two forms of operation:
- Form 1: Power trading via a dedicated private line. The seller and buyer invest in their own line and do not use the national grid. This route has simple procedures but is constrained by geographic distance.
- Form 2: Power trading via the national grid. The generation unit sells its entire output to the spot market, while the buyer receives power from the grid through the Power Corporation. The two parties additionally sign a Contract for Difference (CfD) to lock in an agreed price and hedge against price volatility. Here, “direct” carries a financial rather than physical meaning—the electricity is fed into the shared grid, and the two parties are connected through a contract rather than by conducting electricity straight to each other.
This mechanism is clearly illustrated by the first DPPA transaction through the national grid, established on June 1, 2026, between the TTC Đức Huệ 2 Solar Power Plant (Long An) and Samsung Electronics Vietnam Thái Nguyên Co., Ltd. (SEVT). Because of the large geographic distance between the two ends, running a dedicated line was infeasible, so operation via the national grid was required. According to the company’s announcement, SEVT will use roughly 70 GWh of solar power annually under this mechanism, helping to cut around 46,000 tons of CO₂ emissions.
Benefits of the DPPA Mechanism
- Cutting emissions and reinforcing renewable-energy commitments
The core benefit is reducing Scope 2 emissions (indirect emissions from purchased electricity). Vietnam’s grid electricity has a high emissions factor because coal-fired power still plays a dominant role in the generation mix. According to system operation data from NSMO, coal-fired power regularly accounts for about half of total system output—reaching as high as 58.1% on a peak hot-weather day in early April 2026. Using renewable power through the DPPA mechanism allows businesses to record this portion of electricity with a zero emissions factor.
- Stabilizing long-term energy costs
Beyond the green factor, DPPA delivers concrete economic value. The legal basis for fixing prices over the long term follows Decree 57/2025/NĐ-CP (as amended and supplemented by Decree 243/2026/NĐ-CP), which allows the renewable-energy generation unit and the customer to negotiate the core terms of the contract under Article 44 of the Electricity Law, including the electricity price, the payment method and term, and the contract duration.
In particular, the pricing mechanism is designed to be highly market-based, but must be understood correctly for each form:
- For the private-line form: the trading price is negotiated and agreed between the two parties. The new provisions in Decree 243/2026/NĐ-CP abolished the previous cap tied to the generation price bracket, giving the seller and buyer full authority to decide the price.
- For the national-grid form: the plant’s revenue from selling power to the spot market fluctuates continuously with NSMO’s system. However, the final settlement price is fixed thanks to the Contract for Difference (CfD). Specifically, the two parties use a financial offset arrangement: if the spot market price is higher or lower than the initially agreed price, the parties settle the difference between themselves.
Under this operating principle, businesses lock in their energy price and avoid the risk of future electricity price increases. For manufacturing plants, where electricity makes up a large share of operating costs, stabilizing input costs enables more proactive long-term pricing and investment planning.
For renewable-project investors, long-term contracts help secure a stable offtake, ease access to capital, and reduce price-policy risk. DPPA thus creates a mutually beneficial relationship between large electricity consumers and renewable-energy investors.
- Securing orders and export competitiveness
For exporters, clean electricity is shifting from an image choice into a market-access condition.
Many global corporations such as Apple, Samsung, Nike, and IKEA have committed to using 100% renewable electricity (RE100) and require their suppliers to follow suit. Accordingly, for Vietnam’s key export sectors such as textiles and garments, footwear, wood products, and electronics, increasing the share of renewable electricity at the plant is gradually becoming a condition for retaining orders. In this context, DPPA is one of the tools helping businesses meet that requirement, thereby reducing the risk of being excluded from the supply chain.
Regarding the EU’s CBAM mechanism, it should be noted that renewable electricity through DPPA only reduces indirect emissions (emissions from purchased electricity), whereas in its early phase CBAM mainly counts the direct emissions of a product—indirect emissions from electricity are so far counted only for certain product groups such as cement and fertilizer, and are not yet applied to steel, aluminum, or hydrogen. Moreover, how CBAM will recognize electricity purchased through DPPA, especially via the national grid, remains unclear. DPPA is therefore a promising solution to watch as CBAM expands the counting of indirect emissions from electricity to groups such as steel, aluminum, and hydrogen.
The Current DPPA Market
Although the legal framework is now relatively complete, the pace of actual implementation remains slow. According to the Ministry of Industry and Trade, as of the end of November 2025 only about 30 units had reported implementing the private-line model, and it was not until mid-2026 that the first transaction via the national grid appeared—a modest figure compared with the market’s actual demand. The causes include:
- Procedural barriers: The processes for appraisal, licensing, and connection agreements currently lack consistency across localities. This drags out implementation timelines and increases compliance costs for businesses.
- Generation capacity is not yet ready: This is the bottleneck on the supply side. For new projects, developing renewable sources is no longer greatly limited by capacity caps after the adjusted Power Development Plan VIII (April 2025) sharply raised the solar power target through 2030; the bottleneck now lies mainly in completing legal procedures and getting projects into implementation plans. For existing projects, most have already signed power sales contracts with EVN under the FIT or transitional-price mechanism; to sell directly via DPPA, these plants must terminate or amend their old contracts—something that still lacks specific guidance. As a result, even though demand exists, the capacity genuinely ready for DPPA remains limited.
Conclusion
The analysis shows that DPPA offers businesses many benefits. Environmentally, the mechanism helps cut Scope 2 emissions, improve ESG metrics, and reinforce RE100 commitments. Economically, DPPA helps stabilize long-term energy costs through the Contract for Difference (CfD). In market terms, the mechanism helps businesses maintain export competitiveness as clean electricity gradually becomes an access condition.
However, a complete legal framework is only a necessary condition. After nearly two years and three successive decrees, the number of DPPA transactions remains modest relative to demand, as implementation bottlenecks persist: connection procedures are inconsistent across localities, and the capacity genuinely ready for DPPA remains limited—especially since most existing projects have already signed contracts with EVN and there is still no specific transition guidance.
References
Decrees 80/2024/NĐ-CP, 57/2025/NĐ-CP, 243/2026/NĐ-CP; National Power System and Electricity Market Operation Company Limited (NSMO).