ElWG Check: peer-to-peer contracts – power from me to you

Author: Kaleb Kitzmüller

One of the goals of the ElWG is the further promotion of consumers’ rights to actively participate in the energy market. What began with the EAG legislative package is now to be continued by the ElWG in implementation of the Internal Electricity Market Directive (Directive (EU) 2019/944) – the “prosumer” is entering the energy market as a so-called “self-supplier.”

These self-suppliers will in the future have the opportunity not only to sell their self-generated electricity to suppliers, or to distribute it within communal generation plants (GEAs), renewable energy communities (EEGs), and citizen energy communities (BEGs), but also to supply end customers directly. The basis for these transactions will be so-called peer-to-peer contracts (P2P contracts).

An end customer who, at the metering point for their own consumption, generates renewable electricity and is allowed to store or sell self-generated renewable electricity, provided that these activities – in the case of commercial self-suppliers – do not constitute their main commercial or professional activity.

Definition of self-supplier according to Section 6(1)(19) of the draft ElWG

The peer-to-peer contract

The requirements for a P2P contract are:

The producer must be an end customer themselves, i.e., a natural or legal person or a registered partnership that purchases electricity for their own consumption.
The energy transferred under the P2P contract must be self-generated, meaning that the generating end customer must be a “self-supplier.”
Only electrical energy, i.e., electricity, may be transferred through the P2P contract, meaning that heat or cooling, for example, are not permitted.
The electrical energy must come from renewable sources (“renewable electricity,” i.e., generated from PV, wind, or hydropower).
Peer-to-peer contracts may only be concluded in addition to a regular supply contract (explanatory notes to section 51 of the draft ElWG).
Participants must have smart meters or other measuring devices that record quarter-hourly values.

Peer-to-peer contract’ [refers to] the sale of renewable electricity between market participants on the basis of a contract with predefined conditions for the automatic execution and billing of the transaction, which takes place either directly between the parties involved or indirectly via a third-party market participant, such as an aggregator. The rights and obligations of the parties involved as end customers, producers, suppliers, or aggregators remain unaffected by the right to peer-to-peer contracts.

Section 6(1)(102) of the draft ElWG

Just as with electricity distribution within communal generation plants (GEAs), renewable energy communities (EEGs), and citizen energy communities (BEGs), the transfer of self-generated electricity is not to be considered a “supply” within the meaning of section 6(1)(82) of the ElWG. As a result, various regulatory requirements do not apply.

Furthermore – as with GEAs, EEGs, and BEGs – electricity can also be given away via peer-to-peer contracts. However, it should be noted that grid fees still apply in full.

Section 51(1) self-suppliers are entitled, in addition to their contracts with the supplier, to conclude contracts with end customers for the sale of self-generated electricity from renewable sources (peer-to-peer contracts). These contracts must, in particular, regulate the execution and settlement of the transactions.

(2) Self-suppliers who intend to sell self-generated electricity from renewable sources to end customers via a peer-to-peer contract must inform the affected distribution system operators about the conclusion of the contract and about the following details and any changes to these details:

Technology and mode of operation of the generation plants, including the metering point number;

Consumption facility of the contracting party who purchases the electricity, specifying the metering point number;

Share of the generated energy quantity allocated to the contracting party;

Start and end of the peer-to-peer contract.

Section 51 of the draft ElWG

No proximity criterion, no grid cost advantages

P2P contracts can be concluded with individuals throughout the country; unlike EEGs, there are therefore no restrictions on concession areas or grid levels. There are also no geographical restrictions. In contrast to EEGs, however, no grid cost advantages are currently provided for P2P contracts. This is understandable, as the entire grid infrastructure can be used. However, it would certainly make sense, as with EEGs, to standardize grid cost advantages if only a limited part of the public grid is used. This would allow “local“ or “regional” P2P contracts to be promoted more strongly.

Out: suppliers & co

An explicit restriction applies to suppliers, who, according to the explanatory notes, are not allowed to conclude P2P contracts, but this is already clear from section 6(1)(82) and section 51 ElWG.

Also excluded are “commercial self-suppliers” for whom concluding P2P contracts constitutes the main commercial or professional activity. Similar to EEGs, this wording is not further defined; however, it can be assumed that electricity companies are again intended to be excluded. A definition of “commercial self-supplier” or of the “main commercial or professional activity” would, however, be desirable.

Legal obligations of the peer-to-peer seller

According to section 51(2) ElWG, the seller has information duties. They must inform the relevant distribution system operators about the conclusion of the contract and certain contents of the P2P contract (as well as any related changes):

Technology and mode of operation of the generation plants, including the metering point number;
Consumption facility of the contracting party who purchases the electricity, specifying the metering point number;
Share of the generated energy quantity allocated to the contracting party;
Start and end of the peer-to-peer contract.

The execution and settlement of transactions within the P2P contract should otherwise take place automatically by specifying the relevant conditions. To this end, the parties involved may also use a service provider or even engage a third-party market participant.

Legal obligations for suppliers and distribution system operators

Details on measurement and billing by the network operator are provided for in section 56 ElWG, as is also the case for the GEA, EEG, and BEG. Energy values must be measured in quarter-hour intervals and made available to the parties involved (and the supplier) as soon as possible.

Distribution system operators must also keep a record of all P2P contracts concluded in their network [section 95(14) ElWG)].

It is particularly noteworthy that suppliers may not discriminate against parties of P2P contracts. They may not impose discriminatory requirements, procedures, or fees. In particular, no minimum electricity supply quantities may be specified, and only those costs that have actually been incurred by the supplier due to the respective case may be passed on to end customers.

Peer-to-peer contracts and power purchase agreements

Power purchase agreements (PPAs) are still not expressly regulated by law in the ElWG. P2P contracts are essentially a type of off-site PPAs, so the implementation of PPAs as P2P contracts is at least conceivable. However, due to the limitations mentioned above, P2P contracts cannot be used by suppliers (and in some cases also by “commercial self-suppliers”) and therefore have only a limited scope of application for PPAs. In particular, the exclusion from qualifying as a “supplier” can, in other scenarios, support structuring a PPA as a P2P contract. On the other hand, the registration requirement, just to name one, may again argue against the implementation of the PPA as a P2P contract. Especially in inter-company settings (e.g., in business parks) and at the neighborhood level, PPAs designed as P2P contracts could certainly be used.

Summary and outlook

Peer-to-peer contracts are another exciting instrument for energy marketing and, alongside GEAs and energy communities, can contribute to the continuous rise of energy prosumers. Similar to the legal provisions for GEAs and energy communities, the draft leaves plenty of room for practical implementation. This allows for creative models, but also brings uncertainties. It would be desirable if the content of RED III were also incorporated into this draft.

If you have any questions about peer-to-peer contracts, power purchase agreements, energy communities, or other energy supply contracts, our energy contract expert Kaleb Kitzmüller will be happy to assist you.

Disclaimer

This article is for general information only and does not replace legal advice. Haslinger / Nagele Rechtsanwälte GmbH assumes no liability for the content and correctness of this article.