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.