Earlier this year, the Los Angeles Department of Water and Power signed a record-breaking deal for the cheapest solar plus energy storage project. With reduced pricing and rising sustainability standards, public agencies and commercial enterprises are turning to solar & energy storage systems to reduce their energy costs and achieve their sustainability goals. However, while these projects have the potential to provide incredible benefits, there are risks in these projects that must be properly addressed. One prime example is project contract risk. Over the years, we have seen several examples of poorly written contracts, that expose project owners to the substantial risks of costly, time- consuming, and frustrating project challenges.
Here are a few examples of high-risk terms that we have seen recently in contract reviews:
Example 1: “Size of project: 250 kW” – Is this project size kW-DC (i.e., sum of total solar photovoltaic panel ratings), or kW-AC (i.e., sum of all inverter ratings), or kW-CEC-AC (i.e., solar project sizing calculation based on the California Energy Commission standard)? There is typically a 15-25% difference between these calculations for the size of a solar project. Without further clarification, the project owner could be left with a substantially different sized system than was expected.
Example 2: “Solar contractor shall have sole control over the engineering, design and construction means, methods, techniques, sequences, and procedures, and for coordination of all portions of the work” – This term leaves the door open for substandard design and construction. Project owners should retain control and active influence over the design and construction of the system.
Example 3: “Project owner shall be responsible for hiring any third party entrusted with the supervision, oversight or quality control of solar contractor, including but not limited to any special inspection or testing required by the AHJ.” – Specialized inspections and tests are common for solar projects (e.g., UL Listing of modified equipment, civil engineering reports, geotechnical engineering reports) and can be expensive. The solar contractor, not the project owner, should be responsible for evaluating the need and carrying the costs of all inspections and testing.
Example 4: “Project owner agrees that solar contractor may rely on the documented site conditions provided by project owner. Discovery of any latent or unknown conditions which differ materially shall entitle solar contractor to a change order” – Project owners should be wary of assuming the liability of providing site condition details. Contractors should be required to do all of their own due diligence.
Other examples of commonly observed risky contract terms include ambiguous or undefined:
- project schedules
- project completion & commissioning requirements
- performance guarantees
As an independent energy advisor, TerraVerde Energy provides objective expertise to public agencies and commercial enterprises that are interested in deploying solar and energy storage systems. Over the past 10 years we have provided the due diligence, contract negation support, implementation oversight, and asset management services necessary to mitigate project risks and capitalize on the incredible opportunities available through the deployment of solar and energy storage projects.
Interested in learning more? Reach out to email@example.com to learn about our free executive briefing on the top risks for solar and energy storage project deployment.