Contract Management for Cross -Borders Electricity Trade

Contract Management for Cross-Borders Electricity Trade 

With governments and investors increasingly trading across borders in electricity, the legal agreement between the two parties needs to develop an innovative ways to facilitate business deals, sound contractual arrangements, and efficient dispute.

In general, referring to the trading for homogenous products or services cross the international borders between countries. In this sense, it is a part of normal legal trade that flows through standard export/import frameworks of nations. However, border trade specifically refers to the legal increase in trade in areas where crossing borders is relatively easy and where products are significantly cheaper in one place than another, often because of significant variations, availability and needs for those goods.

Electricity is one of the progressive models of international trade between countries.

Trading electricity across border has many unique characteristics. One of which is the necessity of an integrated wide-area transmission grid that facilitates one-way or two-way transfer of electricity. Having this infrastructure allows electricity to be imported and exported over the course of a year, on a daily basis, or even on the spot if multiple transmission lines are present. Many correlations can be drawn between demand for electricity and resource abundance which is a result of the diversity of primary energy sources and differences in seasonal patterns of electricity availability and requirements. As a result of this, the strengthening of cross-border electricity cooperation region is a fundamental step to ensuring sufficient and reliably available electricity between the nations and neighbouring countries to ensure a stable base load supply, energy fuel diversification, and mitigation of climate change. Currently, the arrangements for power transmission and trade are designed in a bilateral manner that mostly only involves two governments with minimal involvement of the private sectors. However, as bilateral trade increases, expanded participation by third parties can also grow and it needs a governing law for each status and different case.

The level of electricity cooperation can bring incentives to produce and price power efficiently and flexibly. However, it still require additional efforts to harmonize access rules ,develop protocols for grid management and establish fair and non-discriminatory transmission charges, all of which must be in clear clauses at the contract terms.