The changing Generator Performance Standards landscape in EPC Contracts

Before I head down the path that winds its way through this post, I acknowledge that this topic is intensely complicated and differs from project to project.  I in no way claim to be a grid connection specialist.  This post only aims to set down some of my observations.  There are a multitude of people more qualified to discuss this, and in more depth.  If you’re one of those people, send me your thoughts.  We are all here to learn.  With my consultant’s disclaimer suitably covered, let’s kick off.

There are two aspects of grid connection works that I typically see in the projects I work on.  The first has to do with the negotiation and approval of the Generator Technical Performance Standards (GTPS) and the other has to do with connection works required to physically connect the facility to the grid.  This post deals with the first item, the GTPS.  I will attempt to tackle the second topic separately, as this is also fraught with interesting complexities.

Generator Technical Performance Standards.

This is a good paper by Dr Julian Eggleston of the Australian Energy Market Commission (AEMC) explaining the GTPS context, why they exist in the Australian electricity market, and how prospective generators go about complying with the requirements.  I’m not even going to pretend that I’m the right person to explain the process.

But in summary, there are three different access standards that are defined by the AEMC.  The paper referenced above provides a good overview of these:

A.      The automatic access standard

The automatic access standard reflects the level of performance required of a connection such that it does not adversely affect power system security or the quality of supply to network users, regardless of the size, technology and location of the connection point.

This means the automatic access standard should be set at a level that is a ‘safe harbour’ for connection applicants, and more importantly, for the power system and other network users. The automatic access standard is the level of performance that would be appropriate in any location of the power system, including under the poorest network conditions (relevant to that technical requirement) that are foreseeable across the power system.

B.       Minimum access standard

The minimum access standard reflects the lowest level of performance required of a connection such that it does not adversely affect power system security or the quality of supply to network users, taking into consideration the size, technology and location of the connection.

In practice, this means considering the lowest level of performance that may be acceptable for a connection to do no harm in the best network conditions (relevant to that technical requirement) that are currently seen across the power system. This is the key distinguishing factor between the automatic and minimum access standards.

As the access standards should reflect local power system conditions, it may be appropriate to set a minimum access standard for some technical requirements at no capability. However, for other requirements such as fault ride through capability, the access standards should set the minimum level of performance that is acceptable when connecting to the power system.

C.       Negotiated access standard

A negotiated access standard represents the point agreed by all parties to the negotiating process within the range provided by the automatic and the minimum access standard. It is the process that maintains system security and quality of supply at an efficient cost.

In practice, the projects we’ve seen always have some level of negotiation.  The automatic access standard would be overly expensive to implement and the minimum access standard is likely to not be adequate for the conditions specific to the proposed development. 

Projects that I was working on in 2017/18 placed the responsibility for grid connection modelling on the EPC Contractor.  They had to comply with the GTPS set out in the Connection Agreement, but then also had to do all works required to demonstrate that the facility could meet those standards.  They had to do the modelling, complete all the technical documentation and reporting and they were directly involved with the NSP in closing out any technical issues that were identified.  The Principal had ultimate registration responsibility, but the Contractor had to do most of the work to get the Principal to the finish line and bore the brunt of any changes in the interpretation of rules. Contractors, often new to the Australian market, were then responsible for meeting these standards that may be subject to change, with inverters that had not been tested in the market (and manufacturer models that were sometimes shaky at best.)

The upshot of all of this is that a number of Contractors struggled to demonstrate compliance.  And projects were delayed with an enormous financial impact on these Contractors.   In some cases these delays and associated damages were severe.  So severe that some Contractors have decided to pull out of the Australian renewables market altogether (e.g. Downer,  Biosar) and others have collapsed entirely (RCR Tomlinson.)

In 2018 I started to see some changes filter through in the EPC Contracts.  An example of this is the Contractor being able to rely on the GPS set out in the Connection Agreement.  Any changes required by the Market Operator deemed to be a change of interpretation of the Electricity Market Rules would be considered to be a change of law and the Contractor would be entitled to some sort of relief.  They were still responsible for the GPS modelling, but you could start to see some push back from the Contractors.

I went on maternity leave at the end of 2018 and came back to quite a different environment.  In the AEMC’s Final Determination on GTPS rule changes, effective from October 2018, they state the following:

AEMO considered the current arrangements for the negotiation of access standards are not adequate to support the ongoing security and efficient operation of the power system. It considered connection applicants often submit levels of performance at the level of the minimum access standard, which is not appropriate in many cases.

to address this, the final rule includes:

  • a requirement that when proposing a negotiated access standard a connection applicant must propose a level of performance that is as close as practicable to the automatic access standard, having regard to the need to protect plant from damage, power system conditions at the proposed location of the connection, and the commercial and technical feasibility of complying with the automatic access standard, and
  • where a negotiated access standard is proposed, a requirement for connection applicants to provide to the network service provider and AEMO reasons and evidence as to why the proposed negotiated access standard is appropriate.

My understanding of this determination is that a lot of the heavy lifting has to be done much earlier in the registration process than it used to.  We’re now seeing the modelling work taking place upfront, before the EPC Contract has even been signed. 

The Contractors are now responsible for meeting those standards, but they haven’t been lumped with the negotiations too.  They aren’t off the hook though. They still have a load of responsibilities.  They have to demonstrate that the facility designed and constructed complies with the GTPS.  They have to meet the requirements set out in the Connection Agreement, carry out any tests required by the NSP and have to complete R2 testing, submit the results to AEMO, and receive confirmation from AEMO that the results have been accepted.

Delay Liquidated Damages on solar farms

I’ve been finding myself doing a few technical due diligence reviews recently, and I thought it was time to do a write up about contracts again. It’s been a while. Today I thought I’d write about Delay Liquidated Damages.

Liquidated damages are a mechanism available to the Principal* when it is not possible to accurately predict what the financial impact would be from a failure on the part of the Contractor. The method for determining damages payable is then set out in the Contract with the idea being that the amount payable is commensurate with the loss the Principal would experience, as a result of that failure. It’s a best estimate, understood to be inexact and subject to negotiation.

Delay Liquidated Damages (DLDs) are payable if the project is not completed on time. They are becoming increasingly complicated. This is a small frustration for a technical advisor (or at least this technical advisor), as it becomes a bit trickier to assess the appropriateness of the rates set out and the methodology proposed.

In simpler days, the DLDs were typically a daily rate for any delay to achieving Commercial Operation/Provisional Acceptance (or whatever your final revenue generating milestone is called.) As an advisor I would then look at the rate and at how much energy was expected to be generated that day. I’d calculate the equivalent price/MWh and compare that against the assumptions in the financial model and by assessing the rate set out in the power purchase agreement, or looking at current market rates.

Things are becoming a bit more complex now. As facilities get bigger there are more completion stages – so damages may apply if each stage is delayed, but also if the facility is delayed as a whole. The energy yield assessment may not have been done on a staged approach. Typically we’d see some sort of output value per month based on the completed facility design. Maybe this will start to change.

Also, sometimes facilities can export power even if they’re not really finished according to the contract. So maybe they have approval to export 30% of their final capacity because they’re constrained for not successfully completing all their grid connection tests. And that 30% electricity that is exported results in some sort of revenue to the Principal. DLDs are then still payable because they haven’t completely finished, but the Principal would be double dipping if they claim the revenue and the full DLDs. After all, the DLDs are there to compensate the Principal for losses. If they’re getting some revenue then the losses aren’t all realised. So DLDs may be netted off against revenue realised.

Finally, DLDs can also be different for different months of the year. Say now a facility is meant to be finished in March (assuming one completion milestone…) March will have a different energy yield profile to August. So the daily compensation should be different. Imagine if Completion was scheduled for March, but through no fault of the Contractor (like grid connection delays), the Completion Date was extended to July. Then the Principal may be better or worse off if the DLDs remained the same if the Contractor was then further delayed. So linking DLDs to the month allows for a better alignment between DLDs and lost revenues.

There’s a lot to digest there.

*I use Principal in this post but different contracts may refer to the party as the Employer or Owner. Or Handsome Devil. The options are endless.

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Solar facility construction milestone and payment claim review

Large scale solar construction projects are typically made up of dozens of milestones, outlined in the contract, which need to be met before payments can be made to the contractor.  There are normally at least three parties involved in the processing of these payment claims, and they can cumbersome things to navigate.  This post looks at what the typical milestones in a solar project are and what documentation is important.

But first, a step back. To defining the milestones:

Prior to financial close (where the necessary contracts are executed, and financing is secured) there will likely be a bit of backwards and forwards on what the key project milestones will be, and how much of the overall lump sum contract price will be allocated to each.  The milestone schedule, payment schedule, project programme and financial model are all built and developed in parallel, and changing one may have an impact on the others.  The contractor is interested in making sure that they have healthy cashflow throughout the project.  Procurement activities in particular require a heavy outlay of cash, so they will want to get paid for completed procurement works, which typically take place towards the front end of the programme.  The owner, and lenders, will want to make sure that they are receiving value for these payments, so they will be interested in making sure that the payment amount is fair, given what works have been completed.

Some of the typical milestones (and therefore payment triggers) include the following:

Notice to proceed

This is a mobilisation payment, often made to the contractor upon the award of the contract.  For instance 10% of the contract price.  The evidence required from the contractor is typically a letter from the owner to the contractor confirming that they have permission to go ahead with the works under the contract and that any conditions precedent to them starting works have been met, or waived as required.  It may be accompanied by other documentation showing that the contractor has done all the necessary preparation works, such as securing insurance, accessing bank guarantees, appointing certain key personnel etc.  The level of complexity in assessing this milestone is very much dependent on the contract requirements, but it should not be overly complicated.

Equipment procurement

This shows that the contractor has place the orders for the equipment.  The evidence for these type of milestones is typically in an executed (and often redacted) contract with the equipment supplier.  Additional requirements may include the supplier’s quality management plan, factory acceptance test schedule, delivery plan, and transportation, storage and handling, and installation and operations & maintenance guidelines.  Reviewers should be checking that the specifications of what has been procured matches the contract employer’s requirements.  The product warranties should also match the contract.  Delivery schedules should be in line with the project schedule.  Key components and equipment in a solar facility included as milestones are typically PV modules, structures/trackers and inverters.

Equipment delivery

This is to demonstrate that the equipment procured has been successfully delivered.  These milestones should be accompanied by a lot of documentation.  This can be one of the most onerous milestone types and it’s very important that the contractor has good controls in place to make this easy to review.  For each equipment type, there should be a summary report which links actual equipment to containers or batches.  For instance, PV modules will likely be manufactured in batches.  Each PV module has a serial number, and these serial numbers are grouped together into pallets.  Which are grouped together into containers, which are grouped together into batches.  Which cumulatively make up the entire facility.

There should be documentation and reporting which allows someone to trace each module from the manufacturing line all the way to its delivery to site.  A summary report should be maintained, identifying the position of each container (ex-works, on a ship, at port, on site etc) and a reviewer should be able to identify which containers have been delivered to site.  This summary report should be supported by a myriad of documentation, including packing lists, waybills/bills of lading, serial number lists and delivery notes.  In addition, there should be factory acceptance test reports and any independent factory inspection reports provided, and any applicable certificates from the manufacturer.  The reviewer’s role here is not to go through everything in minute detail, but to carry out spot checks to verify that the contractor’s report is accurate, and that they are implementing proper logistical and document control throughout the whole process.  Site inspections are then often carried out to verify that the equipment is being delivered in good order and that the contractor is complying with the handling and storage guidelines.  It can be a big job, and messy and confusing paperwork makes it a whole lot bigger.

Keeping track of millions of components requires a lot of competent people doing competent people things
Keeping track of millions of components requires a lot of competent people doing competent people things

Construction completion

There are a lot of construction activities that can be considered for payment milestones: mobilisation to site, the completion of the boundary fence, access roads, O&M buildings and substations.  But it’s typically the repetitive activities that get most of the attention, which in the case of solar are largely piling, tracker installation, module installation and inverter (or MV power station) installation.

What’s important here is what is understood by both parties to be a completed construction activity?  On any project there will be some punch list activities that need to be closed out, but what is considered to be reasonable? Does everyone agree?  For electrical equipment, is it enough that the unit is physically in place or should it be connected, with cables plugged in?

How is the facility divided up into sections?  Is a milestone linked to an individual section of the facility?  Or can the contractor claim for a percentage of works completed, regardless of where the works are taking place.  Keep in mind that the first wave of construction activities can be fairly quick to do, but coming back and resolving quality issues, and closing off punch list items can take longer.

Quality documentation is the most important here, and what is inlcuded in the overall payment claim should match the contractor’s progress report, which, in turn, should align with the quality documentation.  Inspection and test plans (ITPs) should be followed, and there should be inspection and test checks that are provided.  Observations during walkarounds on site should align with the contractor’s quality documentation.

Mechanical Completion is often a key construction milestone.  For this, all construction activities should be completed, quality documentation should be available, the punchlist should be manageable, and not affect the facility’s performance or safety, the facility should be ready for commissioning, and all the little construction activities that may not have been included as individual milestones (such as the security system) should be in and ready to be commissioned.

Commissioning

Commissioning milestones may be separated into cold commissioning (commissioning activities that can be carried out before the facility is connected to the grid) and hot commissioning (after grid connection).  It is common that the owner, owner’s representative, independent or lender’s engineer may witness selected commissioning activities, to confirm that the data provided match the observations on site, and to verify that the contractor is following the commissioning plan.  But commissioning milestones are often overshadowed or substituted for major completion milestones, such as practical completion or even commercial operation.  These major milestones are influenced and informed by performance tests and grid compliance tests.

A portion of the contract price, such as 5%, is normally held for these milestones, and the contractor needs to demonstrate the facility’s performance and compliance with the network service provider/regulator/purchaser’s requirements.  The nature of tests to be conducted and paperwork to be provided is determined by the local regulatory requirements.

They will also need to show that the facility is able to perform, by applying the performance ratio (or equivalent) tests outlined in the contract.  Performance data should be provided for review, along with the application of calculations as defined in the contract, and any underperformance may be subject to performance liquidated damages.


I have worked on projects with nearly one hundred milestones, and others with only a few dozen.  What matters most is whether they are clearly defined, and whether the parties have agreed upfront what constitutes the completion of an activity and what information and documentation is required.  I couldn’t overstate the importance of having a session or two right at the beginning of the construction phase to clarify expectations as early as possible.

The tricky nature of design and construction overlap in solar projects

Design

Solar PV facilities have ever increasing pressure on construction timelines.  In theory they are fairly simple design and construct projects, and one of the major benefits of these facilities is that they can come online in a relatively short space of time, and start generating revenue quickly.

So standard processes and procedures used within the engineering sector may be put under increasing pressure, in order to realise an early commercial operation date.

In an ideal world, the facility design is carried out upfront.  Site investigations are conducted, studies are done, calculations are calculated and all of these feed into the design process.  Design docs are developed, and bundled up into neat and ordered packages, which are handed over to the owner for review and comment.  Once everyone has had their turn to check that the design is in good order, and fully compliant with standards and specs, equipment is procured, and construction management documentation, such as work method statements, are developed.  Controlled.  Organised.  And compliant.

The reality of these projects is vastly different.  Certain things are known from contract negotiation – which modules, mounting system and inverters will be used, what is the overall facility capacity, where are the roads going to be located.  Designs will also be nicked from previous projects, to save time and cost, altered and amended based on local conditions.  Everyone will be watching the procurement of long-lead items with a keen eye along with any other activity under the project’s critical path.

So it’s likely that the design will be put together in clumps and blobs.  Loosely bundled documents, with vague references to geotechnical reports and flood studies, will come through in a piecemeal fashion.  Often before it’s been reviewed internally by the contractor.  There is enormous pressure on the Owner to carry out their reviews and issue comments with no delay, as everyone’s watching the clock.  But this way of submitting documentation is onerous on an owner’s engineer.  It’s difficult to plan and allocate resources when you’re not sure when documents are going to come through.  It can be hard to keep the same people on the job, which means more time spent by your engineers getting up to speed with the contract specs.  And it can mean multiple iterations of your log of comments.  It chaotic, pressured and not a whole lot of fun.

So some things that are important:

  • When documents come through, the contractor should highlight any specific aspects of the design which may have an impact on the overall project schedule.  For instance, tracker system design, which needs to be reviewed against local standards may be important as equipment needs to be ordered.
  • The document register becomes an incredibly important tool.  It should be tracking what the latest version of the document is, what the changes were in this revision, when it was issued and what the current status is (issued for review, approval, construction etc)
  • Document control in general becomes incredibly important.
  • The document management system should be easy to use.  If you need to go into the system to download small bundles of documents frequently, then it needs to be easy to navigate and docs need to be easy to download.  Access should be easy to secure, so that people on the design review team can search for documents themselves.
  • Transmittals should include a list of documents included, along with the location of the document on the document management system, or direct links to the documents.
  • Construction documentation, such as inspection and test plans and work method statements, should be developed in parallel, so that when the design is agreed, the ITPs and WMSs are ready, and there is no delay to construction.
  • For very time constrained reviews, it may be appropriate to focus solely on the observations of non-compliance with either local standards or the contract specs.  Design preferences may need to be dropped.  This is for the owner to decide.  They are paying for the product and it is ultimately their decision as to whether they are going for a gold standard project, or a project that finishes on time.
  • The contract should transfer all design risk to the contractor.  If the owner comes across any non-compliance at any point, the contractor should be required to fix it.  Increased pressure on the design phase should not relieve the contractor of their obligations to deliver a compliant project.
  • The contractor should be fully in control of construction quality.  So that the owner can see that the facility is being built to spec, and that accelerated works have not resulted in a poor quality product.

It’s difficult.  There are competing pressures, multiple activities taking place at the same time, and all parties may have limited resources at their disposal.

What could possibly go wrong on a Solar PV project during construction? – Part 3

This post is the last (for now at least) in a three part series looking at some of the things that can go wrong during the construction of a solar PV facility. Part 1 of this topic looked at design, programme, labour and environmental conditions that could impact construction.  Part 2 focused on the importance of effective onsite management, including quality control, equipment management, housekeeping and safety.

External conditions/events

“The best laid plans of mice and men often go awry.”  No matter how carefully planned out a project is, progress will always be at the mercy of external events, outside the control of project teams.  Some events are possible to predict, and contingency plans, or mitigating plans can be created.  Other events come out of the blue, are totally unforeseen.

The contractor should be responsible for completing the project to the extent that they are able to control, or perhaps even influence, what is taking place.  But contracts will have ‘force majeure’ clauses included, to address what happens if something happens which is totally outside of the contractor’s control.

Regardless of who is responsible, works need to get back on track, and repair works or accelerated catch-up works may be required.

Weather conditions, like floods, heavy winds, lightning and hail, can lead to facility and equipment damage.  Material or equipment supply chain hold ups or shortages may occur (by way of example, a project that I worked on had their steel supplier’s factory burn down).  Permission to connect to the electrical grid can be delayed, through no fault of the contractor or employer.  Third party works may need to take place (for instance transmission lines, substations or access roads).  Third party inspections and/or approvals may be required.

Storm water management/drainage

This is closely linked to external events – as heavy rain is clearly a weather event.  And it is linked to the appropriateness of the design (which is discussed in Part 1.  But it’s important enough to merit its own mention.  Solar facilities are covered with impermeable, smooth, titled panels.  They act like a roof, without a gutter.  Rain runs off them easily, and, over time, this leaves little grooves in the ground beneath the bottom edge.  This water accumulates and then runs downhill.  Depending on the ground type (permeability), the facility slope and the amount of rain received, stormwater management can become an issue.  Moving water can erode away at ground, roads and earth surrounding the mounting structure base.  This is clearly an issue over the life of the plant, but the management of stormwater can also be a problem during construction if water rushes into trenches, washes away civil works, or affects other aspects of work.

It’s therefore important that the contractor is aware of rainfall patterns, and considers how stormwater will behave onsite.  Plans should be in place to manage the water, and drainage designs should consider protecting the facility both during construction, and over its operational life.

Access road degradation

For any equipment, people or materials to reach the site, it is naturally important that the facility can be accessed.  There is typically a portion of road, of varying length, linking public roads to the facility’s boundary.  It’s important that the responsibility for building and maintaining this road is clearly defined.  But regardless of who is responsible, this road will take quite a beating over the course of construction.  Trucks carrying modules, mounting structures, inverters, switchgear, concrete, and other components and materials will be travelling backwards and forwards for months.

If the road isn’t built properly, it will end up being heavily corrugated and can turn into a swamp with heavy rains.  This then affects the delivery of components and materials, and the accessibility of the site for people working there.  Because it’s outside of the site boundary, it can be overlooked, but can result in a logistical nightmare if it’s not built properly.

Connection quality

A problem for a number of projects in South Africa was in the power quality at the point of export.  Different countries have different connection requirements, which will be set out in the relevant codes, regulations and standards.  Equipment may be brought in from other countries, and designs carried out by foreign engineering professionals.  This can result in the facility not complying with the specified requirements.  Design adjustments, equipment tweaking or reprogramming and/or possible additional equipment may be required, and these may end up delaying the project.

It’s therefore clearly important that the designers are aware of local conditions and requirements, and design the facility appropriately.  Sufficient time for testing is also required, in case there are hiccups along the way.

Ground risk

The contract should define whether or not the contractor is liable for any sneaky surprises that may be lurking underground.  They will be develop their design according to the conditions that they have observed onsite.  The mounting structures, electrical equipment housing units and cable routing designs will all have been selected and developed accordingly.  If the actual conditions are different from than what was expected it can have an impact on the suitability of the design.  It’s therefore incredibly important that a thorough geotechnical assessment is carried out.

What could possibly go wrong on a Solar PV project during construction? – Part 2

Solar PV facilities should be fairly easy to build; the technology is not overly complicated, and the installation process should be a series of lego-like assembly.  So why does so much go wrong?  Part 1 of this topic looked at design, programme, labour and environmental conditions that could impact construction.  This post will look at the importance of effective onsite management.

Quality inspections / quality control

What should be included in the contractor’s contract is that all works are to be done to an acceptable level of quality, and that the contractor should be implementing a comprehensive quality assurance plan.  But PV facilities are made up of millions of components being installed, in addition to vast stretches of trenching being dug and filled, and other civil works taking place.  LV, MV and HV electrical works are on the go, and multiple teams are all working simultaneously, often within the same zone.  If the contractor doesn’t have their proverbial ducks in a row, construction works can be done sloppily, and without due care.

Step one is to ensure that before an activity begins the contractor makes sure that everyone has the right information.  Documentation control is incredibly important.  Have drawings and method statements been reviewed?  Is the document register updated?  Do all sub-contractors have the right plans?  Does everyone know what they’re supposed to do and how they’re supposed to do it?

If this important control is not in place, and people are working to the wrong plans or designs, trenches can go in the wrong place, concrete pours may need to be redone, modules may need to be removed and replaced, and so on.  An entire site can spiral into chaos if people don’t know what they’re meant to be doing.

But let’s assume that people have the right information.  There should then be detailed inspections and checks by the contractor’s quality team to make sure that the works delivered match the design.  Have cables been securely fastened?  Are bolts tightened?  Have all components been installed in accordance with the original equipment manufacturers’ requirements?  Are the pyranometers facing the right direction?

All of these tiny checks add up to two big important questions – is the facility safe to operate and can it operate as intended?

There should be a whole room full of files containing evidence of inspections.  Well, not quite, but the evidence should be there.  If the contractor isn’t recording their inspections and test results, it’s very difficult to be confident that they’re really in control of the facility’s overall quality.

If the employer is dissatisfied with the facility presented to them it can impact on whether milestone payments are made to the contractor, or whether the contractor can achieve practical completion (or whatever completion milestone is defined in the contract.)

This impacts on the project’s completion date, and if quality issues are not identified and then resolved, it can affect the facility’s operational efficiency and safety.  Not good.

Storage and handling of equipment

Some components, of the millions of components being used, will have requirements relating to the handling of equipment that could impact their warranties or how they perform in operation.  The importance of complying with these requirements cannot be overstated.

Equipment should be transported correctly, unloaded and then stored correctly.  It should be packaged suitably, and then, when the time comes to install it, it should be installed properly.  The facility design should ensure that the operational or environmental conditions will be within a range considered acceptable by the manufacturer.

If the contractor isn’t aware of these requirements, they won’t handle the equipment correctly and they run the risk of voiding warranties and affecting facility operation.  They also run the risk of damaging equipment so that replacements need to be ordered.  Some of the components on a PV site, especially made-to-order items, can have a very long lead time.

This can throw the project schedule off course.

General housekeeping

The condition of the site in general can be a good indicator of the contractor’s overall control of onsite activities.  Rubbish and litter lying around, concrete splatters, broken glass and piles of sand and rocks all provide an indication that small, but important, controls are not in place.  Inadequate housekeeping can also raise flags for the environmental officer or manager, who should be monitoring construction activities in accordance with the relevant environmental authorisation and/or environmental management plan.  Non-compliance with the EMP can result in onsite activities being stopped until the issue is corrected.

Safety

The contractor’s level of control of onsite activities will also have an impact on the safety of all persons working there.  There are multiple ways in which someone could really hurt themselves, or others.

  • PV modules sitting in the sun will be live.  Any person fiddling with the module, or with connectors, who may not know what they are doing could really injure themselves.
  • The same risk exists with other electrical equipment being used throughout the facility.
  • Heavy drilling and trenching machines may be operating and these naturally have the potential to injure someone quite seriously.
  • Anyone working near loud machinery should be wearing ear protection.
  • Fire is a concern on any PV facility.  Electrical fires or bush fires (particularly in drier climates) can occur.
  • Then there is a risk of other accidents happening.  People dropping equipment or material, or falling in holes, or misusing a tool, or even sunburn or heatstroke.

Injury or even death is a real risk, and it is up to the contractor to ensure that

  • safety considerations are emphasised during toolbox talks,
  • emergency procedures are in place and emergency equipment (like fire extinguishers) are available,
  • access controls are in place to prevent unauthorised persons from entering electrically active zones and
  • all workers are adequately trained before carrying out any activities.

There should be an appointed health and safety control officer, who is tasked with developing and implementing H&S procedures.  Any incidents or non-compliances should be taken seriously, and it’s important that safety is instilled within the site culture from the start of construction activities.

What could possibly go wrong on a Solar PV project during construction?

I gave a talk on EPC contracts at the All-Energy conference in Melbourne earlier this month.  The other speakers talked on the role of the lender’s independent engineer, the commercial & industrial solar PV sector and the transition from fossil fuels to renewables from an environmental management perspective.

One of the questions that was asked of us all right at the end was to do with large scale solar PV installations.  If solar PV facilities are effectively like large assemblies of lego pieces, what could possibly go wrong during construction?

It’s true, they should be fairly straight forward to construct, so why is it that some facilities are completed so much later than planned?

Design suitability

Solar PV facilities aren’t complicated to design for, but if the design is inappropriate, there are a myriad of issues that can result.  For example:

  • Overcomplicated mounting structures can be difficult to assemble, and may not handle slopes or undulations in the ground very well
  • Lightning may be more frequent and more severe than the electrical design allowed for
  • Geological conditions may make trenching and piling activities more difficult than expected
  • Electrical equipment selection may not comply with grid connection/code requirements

Programme of works – sequencing of activities

Constructing a PV facility means tracking and controlling the movement of millions of components, and managing the activity of hundreds of workers.  If the programme of works, or project schedule, is not well thought out, logical and comprehensive, the project risks onsite activities descending into chaos.

The project schedule should result in the efficient flow of components and equipment; be that the delivery of goods and machinery to site, the order and layout of any storage or laydown areas, and the timing of movement of components from storage to installation zones.

Installation activities should also be carried out efficiently, and in the right order.  Modules cannot be installed by the module installation teams if the mounting structure assembly teams have not completed their works.  If the mounting assembly teams are not working efficiently, the module installation teams will be sitting on their hands.  Modules (or other sensitive equipment) should not be installed if there are heavy duty civil works still to be done (like trenching) in the nearby areas.

Trenching activities can only be done if the trenching machines are available.  The availability of machinery becomes very important in sticking with the project programme.  And if there are lots of projects going on at the same time, in fairly remote areas, the availability of such equipment is not necessarily a given.

Labour management

Where is your contractor from?  Are they originally a foreign organisation who ran out of work in their home country so came to your shores seeking more opportunity?  And if so, have they hired local people to work on your project?

Each country, and indeed each region within each country, has its own labour environment, bringing its own set of issues and challenges.  If the contractor doesn’t have local capacity, they may not have a good understanding of what these issues and challenges are, or how to overcome disputes if they arise.

Strikes, go-slows or the downing of tools has an enormous impact on project execution, and the contractor needs to know how to find a resolution to labour issues as soon as possible.

Also, there may be expectations as to local working conditions, or assumptions around working practices that may not necessarily be written anywhere, but which the contractor may be expected to know.  The contractor could very well go through nasty culture shock on site, and throwing hands up in the air and stomping away from the workforce won’t really get things done.

Local knowledge and capacity is critical.

Compliance with environmental authorisations/management plan

Depending on the size of the facility, there is likely to be some form of environmental permit or authorisation, which is the result of an environmental impact assessment.  This permit may outline constraints that apply to the project (such as no-go areas around wetlands or areas of heritage significance) and it will likely require the project to have an environmental management plan that is implemented as the project progresses.

Compliance with the permit and the associated EMP is very important.  Non-compliance may result in delays, or perhaps even the withdrawal of granted permits.

Any new site findings can throw a real spanner in the project works.  Unearthing a burial site, for instance, can close down an entire section of a facility.

Watch this space – Part 2 coming soon.

Project planning within the energy sector (part 3 of 3)

This post is part three of a three part series on project planning within the energy sector.  Part one provides an introduction and some context, and bit on why project planning is important.  Part two looks at some of the considerations when planning a project within the public sector; mostly about how to go about procuring consultants to carry out the works.  This post looks at project planning within the private sector; from the perspective of an energy consultant.  Similar principles apply for contractors or suppliers responding to a request for proposals, but I typically wear a consultant’s hat.

Private sector project planning

While there are overlaps between project planning principles in the public and private sector, the focus of a consultancy (in particular) is very different from that of a project manager procuring the services of a contractor.  In general, a consultant is responding to the specifications developed by the client – outlined in a request for quotations, tenders, proposals etc.  They sit on the other side of the fence, and are now looking at the statement of works that someone else has developed, with a critical eye.

Deciding to go ahead with a project

Depending on how much work is out there, projects will typically be pursued if they are deemed to be sufficiently low risk with a good probability of making a profit.  The organisation should be capable of carrying out the stated statement of works, they should have resources available to do the works, be familiar with working in the project location (particularly if the project is to be carried out somewhere remote and/or in a different country) and the overall project focus should align with their corporate strategy.  The client should have a decent reputation, and should be likely to be able to pay invoices.

Responding to tender or proposal requests, or even short quotation requests, can be incredibly time consuming and therefore costly for a consultancy, and so this initial assessment of the call for submissions is very important.  How long will it take to prepare a bid submission?  Who is going to prepare the bid and how much does their time cost?  Does the overall project revenue potential merit preparing and submitting a bid?  And is the consultancy likely to win the bid?  Are there likely to be loads of competing bids?  All of these factors should be considered, and if the result of this go/no-go assessment comes out with an answer of ‘go’, you then move on into the preparation of bid submission.

Preparing the scope of works and associated quotation and schedules

Projects differ; there’s no getting around that, and this post would be infinitely long if I tried to cover all project types and permutations.  So I assume here that the client requires the services of a consultant, and that the consultant is required to provide a scope of works, for a fairly fixed or predictable price.  Other projects may allow the consultant to work on a time basis, which moves a lot of the scope risk onto the client, but for the purposes of this post, we’ll assume that the consultant is expected to give some sort of assurance as to how much the services for a piece of work will cost.

With that in mind, a client’s request for quotations/tenders etc will typically include a required statement of works, that may or may not be at a fairly high level of detail.  They will generally ask for the consultant to provide a methodology that will be followed, with the associated price, and expecting completion date(s).

Some clients may not have prepared this at all or (unfortunately) don’t really know what they are asking for, and will request the consultant to develop this on their own scope of works, based on their experience in the sector, their understanding of the overall project requirements and intended project outcomes.  There should have been some discussion with the client at least, to inform this understanding.

Regardless of how much information is forthcoming from the client, this means is that the consultant is typically required to drill down into the detail of what tasks and activities need to be completed during the project’s execution, when this should be done by and by whom, and how much this will cost.

The 75MW solar PV facility I worked on in De Aar, South Africa.  This was a big scope of works, with loads of assumptions and exclusions.
The 75MW solar PV facility I worked on in De Aar, South Africa. This was a big scope of works, with loads of assumptions and exclusions.

Defining the assumptions and exclusions

If the required statement of works has been thoroughly thought out by the client and is fleshed out in the procurement documents then developing the scope and methodology in the bid can be fairly straight forward.  Each task is included and costed accordingly, and laid out in a proposed project schedule.  If there is no statement of works provided, the consultant will need to give more time to developing the tasks and activities that need to be carried out, and costing these.

Regardless, the scope of work provided to the client should be clear, unambiguous and logical.  And what becomes increasingly important, particularly in bids that have a fixed price attached, or penalties associated with missed deadlines, are the associated assumptions and constraints.  This is where I’ve ended up spending a lot of my time on bid submissions, and they can make all the difference.

Spelling out your assumptions helps the client to understand how you have interpreted what they require, what kind of information or input you’ll require from the during project execution, how much information or documentation you’ll be required to review, what other external dependencies exist (e.g. receiving consents or comments from project stakeholders), how much time has been allocated to tasks outside of the consultant’s control, etc.  The consultant’s contract price and project schedule is developed accordingly, and any change in the assumptions may lead to a change in the price or completion date.  These assumptions are not necessarily fixed, they can be discussed further or negotiated with the client, but they give a basis of understanding for the tasks and activities listed in the scope of work, and protect the consultant from disputes arising from a lack of information or clarity.

Similarly, the consultant should also be explicit in what activities or functions are not included in their scope of works.  For example, the consultant may state that they are not responsible for any activities relating to the preparation or submission of any applications for project licences or consents.  This means that this activity has not been included in the overall project price, and if the client requires that the consultant carry out this work, it will be in addition to the stated scope of works.  There should also be a blanket statement somewhere saying that if it’s not in the scope of works, it’s considered to be an exclusion.

Exclusions, as with assumptions, protect the consultant from the client misunderstanding the intention of the stated scope of works, and protect the consultant from the dreaded scope creep.

A good amount of time should be given to thinking about what is not included.  If the consultant has a good understanding of the sector, and of the tasks and activities that are required for the type of project, they will have a good idea of what type of additional activities could be required that may not be listed in the statement of works, but may be expected by the client regardless.

Besides the above, other important project planning activities would apply.  Who will work on the project, and what kind of rate are they on?  What type of quality control activities will be in place to ensure the work is carried out properly?  What risks exist in the project and how will they be avoided or mitigated?

project planning upon appointment

If the bid is successful, and you are appointed, the next stage of project planning begins.  A kick off meeting with the client is always a good idea.  You contact your team to let everyone know how much of their time will be required and when.  You may receive project documentation and information from the client and you’ll probably set up the system for managing and filing said documentation and communications.

A pause here, before you set off on actually carrying out the project work, to confirm with the client as to the overall methodology, project tasks, communication strategies, reporting expectations etc, is recommended.  Particularly if all communication to date been limited to the content of your bid submission.  Any questions before we kick off?  Anything unclear in our scope?  Anything unreasonable in our assumptions?  Do you need any activities listed in our exclusions put back in (with an associated price adjustment)?  Have we misunderstood anything you’ve expected of our us in your statement of works?

Right, let’s get going then.

Project planning within the energy sector (part 2 of 3)

This post is part two of a three part series on project planning.  Part one provides an introduction and some context, and bit on why project planning is important.  Part three looks at project planning within the private sector.  This post looks at some of the considerations when planning a project within the public sector.

Almost all of the larger projects I was involved with while at the City of Cape Town involved the procurement of goods or services from external parties.  This post therefore focuses on some of the key planning considerations in public sector (mostly municipal, but some principles apply to other spheres of government) procurement.  Projects carried out in-house still require upfront planning, to avoid spending unnecessary time and resources on publicly funded projects (paid for in staff time).

Municipal/governmental projects

How does (south african) government procurement typically work

Government projects are interesting although they can be infinitely frustrating at times.  Projects that require the services or products of external consultants, contractors or suppliers, need to follow the applicable procurement rules.  These are bound by municipal and national legislation, and internal procurement policies and processes.  These processes need to be fair, transparent and in the public’s interest, as you’re typically spending public funds.  A lot of work therefore goes into the development of procurement documentation, and project planning is an absolutely crucial stage of any public procurement process.

This documentation is made up of several parts.  There’s the stuff that legal and (in Cape Town’s case) Supply Chain Management put together.  This outlines the nature of the contract being entered into, what the rights and responsibilities of each party are, what documentation needs to be provided, and what securities or bonds need to be put in place (if applicable).  They’re also very sticky on where pages need to have been signed…  The legal stuff will vary, depending on the type of project being undertaken.  A request for quotations will look different to a request for tenders, or a request for expressions of interest.  But the concept remains.  The documentation forms a legally binding contract.  The municipality is required to pay for goods or services rendered, and the contractor is required to provide those goods or services.

And these goods or services are described in the project specifications.

Solar water heaters installed on City clinics. One of my first energy projects for the munic.
Solar water heaters installed one of numerous City clinics. One of my first energy projects for the munic.

project specifications and functionality scoring

Within these documents is the required scope of works or specifications, for which the contractor must develop their quotation for the goods or services to be provided.  This outlines the overall project intention, the reason for appointing the contractor, and the relevant project details.  It may include project specific items such as:

  • project outcomes and deliverables (e.g. 100kW solar PV rooftop installation);
  • any technical details that are to be complied with (e.g. mounting structure should not result in any compromise to the building’s waterproofing);
  • location;
  • time-frame and/or required completion date;
  • requirements relating to the methodology or procedures to be adopted by the contractor in the provision of services (e.g. quality assurance protocols);
  • compliance requirements (e.g. compliance with local standards, consents, authorisations, licences etc.);
  • documentation submission requirements (e.g. progress reports, quality reports, O&M manuals, certificates of compliance etc.);
  • communication obligations (e.g. weekly meetings, communication protocols etc.);
  • health and safety obligations (e.g. H&S site plan, H&S officer appointment etc.); and/or
  • any other technical requirements to be complied with.

Bidders are then required to develop a quotation for the provision of good and/or services, and these submissions are reviewed accordingly.  In order to review each submission fairly, the procurement documentation should require the same type of information from each bidder.  Bids are typically reviewed against functionality scoring criteria, contract price and, in the case of South Africa, economic impact criteria, to promote Broad Based Black Economic Empowerment objectives.

Procurement documents will differ in the way they review bids and appoint successful bidders.  Some may list functionality related items as go/no-go or gate-keeping criteria.  For example, bidders may be required to provide, say:

  • evidence of five years’ experience within the sector;
  • evidence that they’ve completed projects totalling at least 200kW of solar PV installation;
  • the name and experience details of a professionally registered electrical engineer on staff to inspect and sign off on the system’s design and installation; and
  • at least three references for completed projects.

If they cannot provide the information requested, they are unable to proceed to the next review stage (i.e. price comparison).

Alternatively, functionality scoring could be weighted and used in the overall bid review process.  For instance, the criteria above could be assessed and scored and given a weighting of 30%, and the overall contract price could be given a weighting of 70%.  The winning bidder may therefore be the one that has proven experience, but who may not necessarily be the cheapest.  The City of Cape Town moved away from this type of scoring methodology while I was there, and rather used functionality as gate-keeping criteria.

What matters is that the methodology to be used in assessing and comparing submissions should be explicitly stated, with no wiggle room for bidders to claim they were unfairly excluded or marked down.  Quite a lot of thought needs to go into the scoring criteria.

Typically, on tenders (maybe not so much on requests for smaller quotations), bidders will be invited to a clarification meeting, where the tender objectives will be outlined, and bidders can ask questions of clarity.  These meetings should be minuted, and the minutes should be distributed to all potential bidders. (This is why bidders should be required to provide contact information when they download or collect procurement documentation.)

Any other clarifications that arise following separate queries, or following internal discussions, should also be distributed to all potential bidders.

Challenges within government tenders/quotations
  • In a fixed price contract, any changes to the contractor’s scope of works may result in a price adjustment.  A loosely defined scope of works could therefore lead to numerous change requests or variations during project implementation, and this could use up a part of, or all, of the allocated contingency funds.  If these funds are exceeded, further budget may need to be allocated to the project, which can be time consuming (or even impossible).
  • Inappropriate functionality scoring can allow inexperienced or unsuitable contractors to be appointed as the successful bidder.  This could make the project harder to implement, could result in a lower quality of work, or could lead to disputes about the delivered goods or services, and their compliance with the stated scope of works.
  • Questionable interpretation and implementation of functionality scoring or other procurement processes can result in other non-successful bidders appealing the procurement outcome.  This could result in either delays during appeal review (if the original decision is upheld), a change in the appointed contractor or a further delay or cancellation of the entire procurement process/reissuing of the tender/RFQ if material concerns with the process are uncovered.
  • If it’s a new sector or field of work for the municipality, there may not be strong institutional knowledge about the subject, and it can be tricky to access external expertise to inform the development of the procurement documentation without compromising the competitive process to be followed.  This needs to be carefully navigated by the project planner – to ensure that the specifications are solid, robust and comprehensive, without opening the process up to accusations of anti-competitive behaviour.
  • Spending money can be incredibly tricky in the public sector.  Funds have to be on a department’s budget before they can even think about proceeding with a project.  This is typically fine if the department has funds allocated to it each year, but it can become trickier if the project funds have been received from a grant funding agency (as was often the case on sustainable energy projects in Cape Town).  There are typically two occasions during the year where the budget can be adjusted, and this needs to be taken into consideration with project schedules.  Money coming into the City from an external party does not result in the City being able to spend those funds immediately.  In addition, applying for the funding can be a project on its own.  As is getting all legal parties to agree on the funding terms.  Then you need to follow the same procurement rules to spend the money, regardless of the funder’s terms.  It’s often a complicated and long-winded process.  Which is why partnering with an NGO sitting (where else) outside of government can make a project run much more smoothly.  They are able to spend the money quickly, and the City can benefit from having their expertise involved in the project.  This bypasses all sorts of procurement processes within the City, which should be fine if you’re not spending public funds.

Project planning within the energy sector (part 1 of 3)

Introduction

This post is part one of a three part series looking into project planning within the energy sector.  Part one gives an intro to the topic and outlines a bit of my background, and why project planning is important.  Part two looks at procurement within the public sector (South Africa’s public sector for the most part), and some of the challenges that exist.  Part three looks at project planning within the private sector, and what some of the key things to consider are when entering into a project as a consultant.

Why am I writing all of this?  A couple of weeks ago I was interviewed as part of the Engineers Without Borders Australia’s Leadership Rewired course.  The focus was on project planning, within the engineering sector in general, but my input naturally leaned towards energy projects.  Some of the questions that came out were interesting, and made me stop to consider some of the projects that I had worked on, some of the challenges I had experienced and what some of the main lessons were that I could share.  So these posts provide a little taster of some of what we discussed, and some of my thoughts.

Quick snippet on my background

It’s probably best to start with a little bit of context so you know where this is coming from.  Most of the projects I’ve worked on in energy have been while I was at either the City of Cape Town’s Energy and Climate Change unit, or within Arup’s energy consulting team, also in Cape Town.  In both positions I was employed as an engineer, although the focus of my roles at both were incredibly varied.  Before this, in London, I worked as a management accountant, while completing my CIMA studies.  So I have worked within roles that have had me doing operational based work (same type of tasks month-on-month) and roles that focus almost entirely on projects.

Projects win.  Hands down.

They provide interesting learning opportunities, introduce you to new people, and are constantly changing and challenging you.  I then completed my Project Management Professional certification.  It’s really a fancy piece of paper which says you have enough experience to merit having a fancy piece of paper, but it does give you a solid grounding in project management principles.

Why is project planning important?

If you’re at all familiar with the PMP course content, you’ll know that the vast majority of the information to be digested and regurgitated relates to the planning phase of a project.  So much goes into project planning.  And the more effort that’s put into defining the project properly upfront, the easier the actual implementation and control of the project are.

During project planning you’re developing the project scope of works, the schedule, the estimated project cost, and the project plans (communication, HR, quality, procurement).  You’re identifying key project stakeholders and identifying and assessing project risks.

Once the project is underway, you are monitoring the project’s execution against the schedules, specifications, budgets and plans developed during project planning.

There are naturally many types of project planning and execution methodologies out there.  My experience is largely with fixed price contracts, where the development of the scope is incredibly important, and there is a lot of value gained from solid and extensive upfront planning.  Other projects, which allow contractors to invoice on a time basis may need less planning work upfront, as a portion of the project work may be the development of the project objectives.  Or the project goals and deliverables may unfold, in stages, as the project progresses.

However, project planning doesn’t just happen at the beginning and then never happen again.  If a project is carried out in stages, each stage merits its own planning phase.  What are we looking to do here?  How are we going to do it?  Who is involved?  When does it need to be done by?  How much will it cost?  How will we know if we are shanking it?

Not asking these questions can lead a team down a winding path to nowhere.  Or rather, a winding path to Expensiveville.  Or its neighbour, Overduetown.