DPPA Mechanism: A Turning Point for Vietnam's Power Market

Direct Power Purchase Agreement (DPPA): A Turning Point for the Competitive Power Market

The DPPA mechanism under Resolution 253/2025/QH15 expands the subjects and the right to self-negotiate prices, meeting the demand for green energy and enhancing transparency in the electricity market.

Abolishing Monopoly, Promoting Competitive Retail Electricity Market In the context of rapidly increasing electricity demand of the economy alongside the goal of transitioning to a green and sustainable growth model, the Direct Power Purchase Agreement (DPPA) mechanism is considered one of the most important reforms of Vietnam’s electricity market in the coming period. The National Assembly’s passing of Resolution 253/2025/QH15 has created the initial legal corridor for this mechanism to come into practice, meeting the expectations of the business community and energy investors.

The DPPA mechanism in Resolution 253 has expanded the scope and rights of buyers and sellers to freely negotiate prices. Photo: Nam Nguyen

According to regulations, DPPA allows electricity customers with commitments or goals to use clean energy—typically industrial and commercial enterprises—to purchase a quantity of electricity directly from renewable energy generation units through long-term bilateral contracts, with electricity prices and contract terms self-negotiated by the two parties. This approach marks a fundamental change compared to the traditional electricity distribution model, which depends almost entirely on a single supply channel.

Expanding Participants: One of the outstanding breakthroughs of Resolution 253/2025/QH15 is the significant expansion of the scope of subjects allowed to participate in the direct power purchase mechanism. Not only large electricity consumers, but also electricity retail units in the following areas can directly participate in buying and selling electricity with partners other than Vietnam Electricity (EVN):

Industrial parks.
Economic zones.
Export processing zones.
Industrial clusters.
High-tech parks.
Concentrated digital technology parks.
High-tech agricultural zones.
Urban areas.
Free trade zones.

Through this new point, the spirit of strong reform is clearly visible, shifting from a centralized, monopolistic power management model to a controlled competitive power market model, consistent with international practices and requirements for deep integration. For the business community, this is seen as an important unlocking step, creating conditions to access diverse power supply sources and be more proactive in energy strategies, especially for enterprises with high requirements for using green and clean electricity.

Market Signals and Support Mechanisms Not stopping at the right to choose suppliers, DPPA also contributes to promoting the formation of a competitive retail electricity market. When electricity prices are established based on agreements between buyers and sellers, instead of depending on a fixed price frame, market signals will become clearer. This creates motivation for investors to develop renewable power sources in an efficient direction, suitable to the actual needs of the market.

Resolution 253/2025/QH15 also designs support mechanisms for smooth market operation. Typically:

The National Power System and Market Operation Company (NSMO) is exempted from the 3-year operation time condition when reviewing for re-lending or granting Government guarantees, thereby accelerating infrastructure investment serving power market operation.
For power investment projects, the winning bid price will be the Power Purchase Agreement (PPA) price, contributing to the transparency of cash flows and clarifying the responsibility of the power purchaser in concluding contracts.

Roadmap: According to the roadmap, from March 1, 2026, the Government will issue documents guiding the implementation of the Resolution according to shortened sequences and procedures. The implementation process is strictly supervised by the National Assembly, the Fatherland Front, and People’s Councils at all levels, to prevent the risk of policy profiteering or corruption. With an implementation period until the end of 2030, the DPPA mechanism is expected to create a more dynamic electricity market, where clean energy increasingly dominates and the rights of electricity users are placed at the center.

Power Growth Pressure and Requirement for Legal Transparency In the context that the GDP growth target for the 2026–2030 period is set at a high level, the economy’s electricity demand is forecast to increase sharply, creating great pressure on the entire power system. According to analyses, if the impact of the digital economy and Artificial Intelligence (AI) is added, electricity demand could increase significantly higher than usual levels.

The economy’s electricity demand is projected to increase sharply, putting significant pressure on the entire power system. (Illustrative image)

Mr. Nguyen Quang Huan, Member of the National Assembly’s Committee on Science, Technology and Environment, emphasized:

“This pressure placed on the power system is enormous, from generation and transmission to distribution. In that context, if the market lacks transparency and healthy competition, it will be difficult to attract social investment capital, difficult to create motivation to improve efficiency, and even harder to ensure energy security in the long term.”

A major barrier currently is the overlap in the legal system related to energy. The lack of consistency between regulations on electricity, planning, investment, bidding, land, and environment has created legal gaps and complex procedures, causing difficulties for both management agencies and enterprises. Besides, Vietnam still lacks a complete legal corridor for the competitive wholesale electricity market, DPPA mechanism, or carbon credit market.

From practical implementation, experts believe that fully institutionalizing the Party’s resolutions on energy development is a prerequisite for forming a unified, transparent legal framework capable of long-term forecasting. At the same time, it is necessary to review and perfect the management institution system to ensure smoothness in market operation.

Expert Perspectives: From the perspective of power market management, Mr. Ho Dinh Tham, Resident Advisor at the Electricity Regulatory Authority (MOIT), believed:

“The electricity market must become the central component, leading the entire power supply chain, from investment planning to operation and retail power supply. Benefits from the competitive electricity market need to be transferred directly to electricity users and enterprises in the supply chain. The early formation of a multi-buyer, multi-seller electricity market model, gradually perfecting the mechanism for establishing electricity prices according to supply-demand relations, is an urgent requirement.”

At a longer-term vision, Dr. Nguyen Quoc Thap, Chairman of the Vietnam Oil and Gas Association, assessed:

“The breakthrough of Resolution 253/2025/QH15 lies in the National Assembly directly designing market operation tools, such as bidding and price discipline, thereby demonstrating strong policy commitment to implementation efficiency. Localities need to shift their role from ‘licensing’ to ‘accompanying development’, while energy enterprises need to see this as an invitation to participate in creating a modern, sustainable energy market.”

Only with a sufficiently strong legal fulcrum and the substantive companionship of the State, enterprises, and the market can the goals of energy security, Net Zero, and sustainable development become reality, gradually realizing the national energy development strategic vision.

Upcoming Event: It is expected that on January 29, the Industry and Trade Newspaper will organize the “Forum on Realizing Mechanisms and Policies for National Energy Development in the 2026 – 2030 Period”, contributing to concretizing the National Assembly’s Resolution on mechanisms and policies for national energy development in the 2026 – 2030 period.

The forum will feature the participation of representatives from management agencies, experts, and enterprises, focusing on discussing solutions to remove institutional bottlenecks, mobilize resources, and promote key areas to bring the Resolution to life.