Phu My is the largest-scale solar power plant in central region of Vietnam with a capacity of 330 MW (Photo: BCG)
Vietnam’s Direct Power Purchase Agreement (DPPA) was approved on July 3, opening up a new era of green energy liberalization and new investment opportunities in the country. This legislation encourages the development of renewable energy in Vietnam, helping companies acquire green power and enhancing the competitiveness of their exported goods.
Foreign investment enterprises in Vietnam, such as Samsung and PepsiCo, have expressed optimism about the sustainable development prospects brought about by the DPPA. Additionally, this move is particularly attractive to data center operators interested in entering Vietnam.
DPPA approval fosters renewable energy and data center investments
After seven years of discussion, Vietnam’s DPPA has finally been approved, receiving high praise from foreign investors. Samsung Group representative Jung Byung Jin stated, "The DPPA is a long-awaited regulation by many companies, chambers of commerce, and organizations. Samsung will partner with Vietnam to transition to renewable energy and achieve the goal of 100% renewable energy usage." The group’s official website also announced plans to purchase renewable energy through the DPPA, promoting green factory development in Vietnam.
Choi Joo Ho, general director of Samsung Vietnam Complex, mentioned, "We will strive to find renewable energy operators that can meet the scale of Samsung Vietnam factories and purchase energy through the DPPA mechanism." Samsung will continue to cooperate with the Vietnamese government to build renewable energy infrastructure.
Additionally, Roberta Barbieri, PepsiCo’s vice president of global sustainability, expressed support for the DPPA, and stated, "As a global company, welcoming the DPPA mechanism to Vietnam will enable us, and other large energy customers, to drive scalable energy solutions on a local level."
Nikkei Asia said that brands like Apple and H&M are looking forward to their Vietnamese supply chains transitioning to renewable energy. Therefore, the approval of DPPA will further drive the development of solar, wind, small hydropower, and biomass energy in Vietnam.
Notably, the new "Law on Telecommunication" taking effect early this month, allowing 100% foreign ownership of data centers, will attract international companies to invest in Vietnam. Industry experts believe that even though the high setup costs and the investment recovery period can take five to eight years, the new Law on Telecommunications and the DPPA enable companies to privately negotiate renewable energy purchases. This incentivizes data center operators to invest in Vietnam, enhancing the development of data centers in the country.
Viettel's center in Hoa Lac Tech Park. Viettel mentioned that this is the first data center in Vietnam committed to utilizing renewable energy for 30% of its electricity usage. (Photo: Viettel)
Three challenges in actual implementation of DPPA
However, the implementation of the DPPA still has several challenges to address, divided into regulatory, cost operation, and technical issues.
Pham Minh Tuan, vice president of Bamboo Capital Group (BCG), one of the leading energy companies in Vietnam, said that upstream development and investment, especially trading electricity through private grids, still involves complex and time-consuming planning procedures. Additionally, the regulation has not specified how projects that already obtained a Feed-in Tariff (FIT) can transition to the DPPA mechanism.
Furthermore, a representative from a solar and wind power investor in Binh Thuan Province Vietnam pointed out that major electricity consumers in Vietnam are mainly concentrated in the north or south, while most large renewable energy projects are scattered in the central region, resulting in high transmission and distribution costs. This means that direct electricity purchases through private grids still face difficulties.
Finally, with a large amount of renewable energy integrated into the grid, Vietnam's power system may be unable to bear the burden. The government could develop energy storage technologies in the future to regulate intermittent power generation from renewable sources, maintaining national grid stability and reducing power loss.
Source: SumSung, NikkeiAsia(1), NikkeiAsia(2), Tuoitre
