On 13 September 2024, the Ministry of Industry and Trade held a meeting to discuss the latest draft amendment of the Law on Electricity No. 28/2004/QH11, amended in 2012 and 2022 (the “Amended LOE”), introducing significant changes to the regulation of Vietnam’s electricity sector. The Amended LOE is scheduled to be presented to the National Assembly for review during its 8^th session in October 2024.

Among others, significant attention was given to (i) Renewable Energy and New Energy (“RE & NE”) development and (ii) Direct and cross-border power sale and purchase (“PSP”). Below are our summary on notable points of these segments.

1. RE & NE development

• Principles in RE & NE development: The generation and use of RE & NE is encouraged with preferential policies on investment, land, taxes, and credit. The Government will determine specific incentives for renewable energy projects based on development goals in each period of the Power Development Plan. Remarkably, a decree outlining policies and mechanisms to promote the development of self-produced, self-consumed rooftop solar power is set to be issued in the first week of October 2024, ahead of the Amended LOE issuance. Should any conflicts arise between the decree and existing laws, revisions may be required.

• Promotion of RE & NE projects:
  
  – The development of self-produced and self-consumed electricity from renewable energy projects is encouraged, with a focus on promoting the use of energy storage systems and minimizing excess energy sent to the grid. Notably, self-produced rooftop solar and small-scale wind installations do not require land-use conversion.
  
  – Organizations and individuals are allowed to distribute excess electricity to the national grid, or sell such surplus power to purchasing units. The selling organizations and individuals, however, must reach an agreement on the surplus electricity rate and selling price with the purchasing units prior to the RE & NE project investments. The purchasing units, based on the needs and operating conditions of the electricity system, shall decide to mobilize surplus electricity output. The Government will specify the procedures, mechanisms for selling surplus electricity, and responsibilities of the involved parties.

• Offshore wind power projects:
  
  – Based on periodical development and investment goals, the Government regulates in detail certain aspects, notably minimum electricity production, sea area rental cost reductions, foreign ownership limits, and market access conditions.
  
  – Investors of offshore wind projects can transfer their shares or capital contributions under certain conditions, notably: (i) The transfer occurs after the project has been operated and has generated electricity; (ii) The competent authority must approve the transfer, considering investment policies in effect at the time; (iii) The transferred party assumes the rights and obligations of the initial investor; and (iv) The transaction follows investment law and enterprise law.

2. Direct PSP and cross-border PSP

• Direct PSP:
  
  – Direct PSP between large electricity consumers and power generation units include two models, whose contract templates have been enacted by the DPPA Decree (i.e., Decree No. 80/2024/ND-CP).
  Model 1: PSP through privately owned transmission lines with direct connections; and
  Model 2: PSP through the national grid.
   
• Cross-border PSP:
  
  – Cross-border PSP is allowed under the Draft Amendment though is subject to the competent authorities’ approval.
  
  – The Government will establish regulations on electricity pricing mechanisms, authority, procedures, and processes for international electricity trade, and will approve strategies for such PSP in line with economic and social development needs during each period. This is considered as a significant improvement compared to the previous legal framework, which lacks of clear regulations for the mentioned matters.

We will continue updating in greater detail key regulations of the Amended LOE once the final draft of the Amended LOE is available to the public.

The information provided is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

Phong Anh Hoang, Partner, Vietnam