Cross-Border Electricity Purchase Agreements

Detailed Explanation With Case Laws

1. Introduction

A Cross-Border Electricity Purchase Agreement (PPA) is a contract under which electricity is purchased from a generator or seller in one country by a buyer located in another country. These agreements are important for international electricity trading, renewable-energy projects, corporate energy procurement and long-term electricity supply.

A simple structure is:

Generator in Country A → Cross-border PPA → Buyer in Country B → Interconnector → Electricity market

The agreement must deal with both contract law and electricity-market regulation.

2. Meaning of Cross-Border PPA

A PPA normally specifies:

electricity quantity;

price;

delivery period;

delivery point;

payment arrangements;

transmission responsibility;

balancing and imbalance costs;

force majeure;

termination;

governing law; and

dispute resolution.

In a cross-border PPA, additional issues arise because the parties and electricity network may be subject to different national laws.

3. Importance of Cross-Border PPAs

Cross-border PPAs can support:

renewable-energy investment;

electricity imports and exports;

long-term price certainty;

corporate renewable procurement;

development of interconnectors; and

regional electricity-market integration.

Under the EU Electricity Directive 2019/944, active customers are expressly entitled to sell self-generated electricity, including through power purchase agreements. (Eur-Lex)

4. Governing Law

A major issue is determining which country's law governs the agreement.

For example:

German generator + French buyer + Belgian delivery point

The contract should clearly identify the governing law.

Under EU private international law, contractual parties can generally choose the applicable law under the Rome I Regulation. This is important because questions about payment, breach, termination and damages can otherwise become complicated.

A well-drafted PPA should therefore contain a clear governing-law clause.

5. Jurisdiction and Dispute Resolution

The parties should also decide where disputes will be resolved.

Possible arrangements include:

national courts;

international arbitration;

institutional arbitration; or

another agreed dispute-resolution mechanism.

This is especially important where the buyer's assets are in one country and the generator's assets are in another.

The agreement should clearly identify:

Governing law + dispute forum + arbitration rules, if applicable.

6. Electricity Delivery and Interconnectors

A cross-border PPA cannot be separated from the physical electricity network.

For example:

Wind farm in Country A

↓

Transmission network

↓

Interconnector

↓

Buyer in Country B

The contract must establish who is responsible for:

obtaining transmission capacity;

congestion;

balancing;

transmission charges;

losses;

scheduling; and

failure of the interconnector.

Therefore, contractual obligations must operate alongside electricity-network rules.

7. Price and Payment

The price can be:

fixed;

indexed;

market-linked;

partially fixed and partially variable; or

linked to a renewable-energy support mechanism.

The PPA should also specify:

currency;

payment dates;

interest on late payment;

credit support;

guarantees; and

consequences of non-payment.

Cross-border transactions also require consideration of taxation and foreign-exchange rules.

8. Renewable Electricity PPAs

Cross-border PPAs are increasingly used for renewable electricity.

For example:

Solar/Wind Generator

↓

Long-term PPA

↓

Foreign corporate buyer

This provides the generator with a predictable revenue stream and gives the buyer a contractual source of electricity.

However, the parties must distinguish between contractual electricity delivery and the separate legal treatment of renewable attributes, such as guarantees of origin.

9. Case Law: PreussenElektra v Schleswag

In Case C-379/98, PreussenElektra AG v Schleswag AG, the Court of Justice considered German legislation requiring electricity supply undertakings to purchase renewable electricity at minimum prices.

The Court examined the relationship between renewable-electricity purchasing obligations and EU free-movement and State-aid rules. (InfoCuria)

Relevance

The case is important because it demonstrates that electricity purchase arrangements can be affected by public regulation, even when they operate through contractual purchasing relationships.

It also shows the importance of considering EU market rules when designing electricity-purchase arrangements.

10. Case Law: Dunamenti Erőmű v Commission

In Dunamenti Erőmű v Commission, Case T-179/09, the General Court examined long-term power purchase agreements (PPAs) between a Hungarian public undertaking and electricity generators.

The case concerned whether the arrangements contained State aid that was incompatible with the common market. (InfoCuria)

Relevance

The case demonstrates that long-term PPAs involving public undertakings can raise State-aid and competition-law issues.

For cross-border PPAs, this is particularly important where one contracting party is state-owned or receives regulatory support.

11. Case Law: Commission v Slovakia

In Commission v Slovak Republic, Case C-264/09, the Court of Justice examined a long-term investment contract giving a private company preferential access to the Slovak high-voltage electricity transmission system in return for financing a transmission line.

The Court considered the relationship between the contractual arrangement and EU electricity-market rules concerning third-party access. (InfoCuria)

Relevance

This case is particularly useful for cross-border PPAs because it demonstrates that a contractual right connected with electricity infrastructure cannot necessarily override mandatory electricity-market rules.

12. Case Law: Green Power Partners

In Green Power Partners K/S and SCE Solar Don Benito APS v Kingdom of Spain, Case C-109/21, the Court of Justice considered an energy-sector investment dispute involving the Energy Charter Treaty.

The Court held that the intra-EU arbitration mechanism under Article 26 ECT could not provide a basis for the relevant dispute between an EU investor and an EU Member State.

Relevance

The case demonstrates that an electricity investment contract can involve wider EU constitutional and investment-law limitations, particularly when arbitration and cross-border investment are involved.

13. Balancing and Imbalance Risk

Electricity cannot normally be stored easily at the same scale as many ordinary commodities. Actual generation may therefore differ from contracted quantities.

A cross-border PPA should specify who bears the cost when:

Contracted electricity ≠ Actual electricity delivered

Possible responsibilities include:

generator;

buyer;

balancing responsible party; or

nominated trader.

Clear imbalance provisions reduce disputes.

14. Force Majeure

Cross-border electricity contracts may be affected by:

interconnector failure;

extreme weather;

grid emergencies;

cyber incidents;

government restrictions;

transmission outages; or

regulatory changes.

A force-majeure clause should clearly explain when non-performance is excused and what happens afterwards.

15. Regulatory Change

Energy markets are heavily regulated. Therefore, a long-term PPA may be affected by changes in:

electricity-market legislation;

carbon pricing;

renewable-energy rules;

network charges;

taxation;

transmission regulation; or

cross-border trading rules.

A change-in-law clause can determine how the parties share the consequences.

16. Competition Law

Cross-border PPAs can also raise competition concerns.

A very long-term agreement that reserves a substantial part of available electricity supply may potentially affect market competition.

The legal assessment can depend on:

market share;

duration;

exclusivity;

quantity covered;

market structure; and

alternative supply sources.

The Dunamenti Erőmű litigation illustrates why long-term electricity purchasing arrangements must be considered within the wider competition and State-aid framework. (InfoCuria)

17. Conclusion

Cross-Border Electricity Purchase Agreements provide an important contractual mechanism for international electricity trading and renewable-energy investment.

Their legal structure normally includes:

Price + Quantity + Delivery + Transmission + Balancing + Payment + Governing Law + Dispute Resolution

However, contractual freedom is not unlimited. PPAs must operate alongside electricity-market rules, network-access requirements, competition law, environmental regulation and national regulatory requirements.

The cases PreussenElektra v Schleswag, Dunamenti Erőmű v Commission, and Commission v Slovakia demonstrate different ways in which electricity-purchase and infrastructure contracts can interact with public regulation and EU internal-market law. (InfoCuria)

For cross-border transactions, careful drafting is therefore essential. A strong PPA should clearly establish the governing law, jurisdiction, delivery point, interconnector responsibilities, price mechanism, balancing obligations, force majeure, regulatory-change protection and termination rights. This provides greater legal certainty while ensuring that the agreement remains compatible with mandatory electricity-market rules.