With the RPS system set to be abolished and a renewable energy auction scheme on the way, private PPA prices have risen above the rates locked in under existing long-term fixed-price contracts. As a result, legal disputes over contract termination between power producers and supply-obligated utilities are coming to the fore.

Drawing on his expertise in energy and environmental regulation, Attorney Sungwoo (Goni) Kim of SOLARIS contributed a column analyzing the key legal issues in this matter and the practical responses available to market participants.

The key points of the column are as follows:

• (Limits of the change-of-circumstances doctrine) A shift in economic advantage alone, such as rising PPA prices, is unlikely to justify unilateral termination on the ground of changed circumstances under the Korean Civil Act.

• (Regulatory reform and the nature of termination payments) Amending administrative notices such as the management and operation guidelines does not automatically change the effect of a private contract. Whether a termination payment can be reduced depends on its legal character: pre-estimated damages or a contractual penalty.

• (Practical risk review) Before switching to a new private PPA, producers should weigh the expected gains against the termination payment and carefully vet the buyer's credit risk and the treatment of any remaining RECs.

  
  

SOLARIS will continue to provide in-depth legal analysis of regulatory changes and related issues in the energy market.

- Original column: [Solar Issues Through the Lens of Law ⑨] Legal Issues in the Early Termination of Long-Term Fixed-Price Contracts