The legal basis of renewable energy contracts
Renewable energy contracts in Georgia rest on several interrelated institutions of the law on energy: the promotion of electricity generation, the supply activity, the market of bilateral contracts and the right to choose a supplier. The sale of electricity generated from renewable sources happens precisely through a combination of these institutions, so before concluding a contract it is important to know exactly the boundaries of each — at what price trading takes place, on which market, and who may change supplier.
The choice of contractual strategy for a renewable project rests on three questions. First — the sales channel: a direct bilateral contract with a consumer or trading through a supplier; each case involves different reporting obligations and a different logic of price formation. Second — support: if the project uses a support mechanism, the terms of the contract derive from the framework of that mechanism and not from free negotiations. Third — timing: the stages of opening the market change with whom and under which rules a contract may be concluded, so the term of the contract must be reconciled with the concept of the market model.
Promotion of generation and support mechanisms
Under Article 37 of the law, the promotion of electricity generation is regulated transparently and non-discriminatorily, taking into account economic expediency, the minimal costs of the final consumer and the criteria of influence on the electricity balance. Electricity generation from renewable sources and high-efficiency cogeneration may be encouraged through encouragement and support mechanisms defined by legislative acts or normative acts of the government. The contractual model of a renewable project — a support agreement or a market sale — must be built precisely according to this framework.
The supply activity and the supply contract
Article 101 of the law determines that the supply of electricity or natural gas to final consumers is carried out under the procedure established by the law and by normative acts issued on its basis. Supply, except in the cases directly defined by law, is carried out at an unregulated, market price, on the basis of a supply contract concluded between the final consumer and the supplier. Household consumers and small enterprises have the right to use the supply of electricity and gas as provided by the law. The supplier buys energy on the basis of a bilateral contract or on the organized energy market; a supplier bearing a public service obligation has the right to trade, provided it keeps separate accounting for the supply activity as a public service and its other activities.
The bilateral contracts market and the platform
Under the corresponding article of the law, the purchase and sale of electricity on the basis of bilateral contracts is carried out through direct negotiations between market participants or through the platform of bilateral contracts. Market participants are obliged to report on concluded bilateral contracts in accordance with rules approved by the commission. The platform's administrator ensures its administration, records the data of purchase and sale applications, registers participants and submits a report to the commission. The independence norm is particularly significant: the platform's administrator has no right to simultaneously carry out any other electricity activity except the operation of the market — this secures the reliability of the trading environment for renewable projects.
The right to choose a supplier
Article 166 of the law governs the choice of supplier by the final consumer. The government is authorized, for the purpose of opening the market or implementing the stages of the relevant market model concept, to define in stages the mandatory criteria and deadlines upon compliance with which the consumer chooses a supplier in a mandatory manner. A consumer registered with the distribution system operator who, upon completion of unbundling, will not have a contract with a supplier receives electricity supply under the procedure and conditions established by the commission from the universal supplier or from another enterprise performing a public service obligation, and natural gas from the corresponding public service supplier. At the same time, this does not restrict the consumer's right subsequently to choose a supplier acceptable to it.
Frequently Asked Questions
At what price does supply take place?
Except in the cases directly defined by law, supply is carried out at an unregulated, market price, on the basis of a supply contract between the consumer and the supplier.
Where does the supplier buy energy?
The supplier of electricity or natural gas buys energy on the basis of a bilateral contract or on the organized energy market; a supplier with a public service obligation may also trade if it keeps separate accounting.
What does the administrator of the bilateral contracts platform do?
It administers the platform, records purchase-sale offer data, registers participants and keeps the registry, and reports to the commission. It may not carry out any other electricity activity except the operation of the market.
Can a consumer choose a supplier?
Yes. The government defines, in stages of market opening, the mandatory criteria and deadlines upon which the consumer chooses a supplier; a consumer without a contract temporarily receives supply from the universal supplier, while the right to choose an acceptable supplier later is preserved.
How We Help on Legal.ge
Our team assists in structuring renewable energy contracts, in entering the bilateral contracts market and in reporting, in assessing supply contracts and in supplier choice procedures. Every position rests on the norms of the law on energy described above.