Vietnam allows big companies to buy clean energy directly to meet their climate targets

HANOI, Vietnam (AP) — Vietnam will let electricity-guzzling factories buy electricity from wind and solar power producers, helping big companies like Samsung Electronics meet their climate targets and relieving pressure on the country’s overstrained grid.

The government decree allowing Direct Power Purchase Agreements, or DPPAs, was approved earlier this month. It lifts a regulation requiring all consumers of power to rely only on the state-run utility Vietnam Electricity, or EVN, and its subsidiaries, which distribute electricity at rates fixed by the government.

Foreign investors that are vital to Vietnam’s ascent as a major exporter had been clamoring for such a change.

“The DPPA will dramatically alter this status quo,” said Giles Cooper, a partner at the international law firm Allens based in Hanoi who specializes in energy policy.

Without such a change, it was “difficult, if not impossible” for companies to meet their commitments to phase out reliance on fossil fuels. With more and more countries taxing carbon pollution, companies that can show that their factories use clean energy can enjoy a “considerable competitive advantage” in some markets, said Cooper, who contributed to the draftomg of the law.

This loosening of the Communist Party-ruled state’s grip on the sale of electricity has been in the making since 2019. In most of Southeast Asia, electricity markets tend to be centralized. But DPPAs to allow companies to buy energy from power producers directly are increasing, said Kyeongho Lee, head of Asia Pacific Power Research at Wood Mackenzie.

Lee said the amount of power generation under such agreements increased from 15 gigawatts in 2021 to 26 gigawatts in 2023, growth concentrated in India, Australia and