Peer-to-peer contracts: electricity from me to you!?

Authors: Johannes Hartlieb, Alexander Gimona

A central goal of the new Electricity Industry Act (ElWG) is the promotion of the rights of self-suppliers and consumers to actively participate in the energy market. The upcoming law introduces a paradigm shift: While the simple transfer of electricity previously required the establishment of a community, this will in the future also be possible on a purely contractual basis, e.g., between neighbors. The instrument used for this purpose is aptly called a “peer-to-peer contract.” The foundations for this lie in EU law.

Legal framework

The draft of the ElWG provides the following definition of P2P contracts:

The sale or free transfer 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.
Definition of P2P contracts

The law makes it clear that P2P contracts are contracts for shared energy use. As a result, all uncertainties associated with shared energy use – which we have already outlined – also apply to P2P contracts.

Distinction from other models

Peer-to-peer contracts must be distinguished from direct lines and from joint energy use (section 61 ElWG). While direct lines require physical line connections, and community-based models such as energy communities focus more on cooperation and shared infrastructure, peer-to-peer contracts enable contractually organized, individualized electricity trading within the grid.

Opportunities and potential

Austria-wide trading: Unlike other forms of shared energy use, P2P contracts are not subject to geographical restrictions; electricity can be traded across Austria.
No legal entity: P2P contracts can be executed without establishing an association or company.
No upper limit: P2P contracts can involve a large number of contracting parties.
Decentralization of the energy market: Consumers can purchase electricity directly from their neighbors, a regional PV system, or a wind farm.
Strengthening renewable energies: Direct trading can send price signals that promote investment in renewable generation.
Cost transparency and flexibility: Standardized contract terms and digital billing systems facilitate transactions, but of course they must first be set up.
New business models: Aggregators or platform operators can act as service providers and open up P2P trading to broad user groups, similar to numerous service providers for energy communities.

Challenges and open questions

Despite the new legal framework, the draft law remains cautious, which raises questions regarding practical implementation:

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. The contracting parties must therefore observe regulatory obligations, which can make the model as a whole unattractive.
Distinction from supplier status: It remains open at what point a large number of peer-to-peer contracts might place a provider in the realm of classic supplier activity. The law does not provide for a general exemption.
Technical infrastructure: Automated processing requires smart metering systems and digital platforms. The technical infrastructure necessary for this must in part still be created.
Regulatory embedding: Peer-to-peer contracts must comply with market rules, balancing groups, and levies (e.g., system usage fees). In this regard, the regulatory authority E-Control is called upon.

Outlook

With the ElWG, a legally defined framework for peer-to-peer contracts is being established for the first time. Whether these contracts will, in practice, bring the anticipated boost to decentralized energy supply depends largely on the specifics of the regulation and the technical implementation. What is clear is that direct electricity trading could become a key element of the energy transition – especially at the local level.

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.