A developer installs a distributed energy system on the state or buildings. In return, the agency undertakes to purchase the electricity produced by the system. These power purchase payments are reimbursed to the proponent during the term of the contract. The proponent owns, operates and maintains the system for the duration of the contract. During the negotiation of a PPA, the parties must decide who bears the financial risk of the losses incurred when the buyer, the transfer owner or the transferring authority exercises its right of reduction. Many PPAs are structured as “take it or pay” agreements, meaning that the buyer pays the seller not only for wind power that was actually delivered to the place of delivery, but also for “available capacity” or energy that would have been delivered without the cut-off. Reduction provisions are very important because they can have a direct impact on the required price or profitability of the project. The issues addressed by the parties in the turbine supply and balance sheet agreements include the scope of work, payment terms, completion measures, warranty obligations and limitations of liability (in particular with respect to the turbine supplier`s liability and the balance of the facility`s manufacturer`s liability for non-performance of its obligations on certain key dates related to the turbine supplier`s power purchase obligations. promoter). These issues are discussed below. A. Funding Issues. A wind energy project proponent often requires some form of significant debt financing or joint venture financing to pay for the design, engineering, procurement, construction and commissioning of the project.
Financial institutions and potential investors will request an opportunity to review and comment on the range of turbine supply and balance sheet agreements (as well as related operating, maintenance and guarantee agreements) before providing funds. The provisions of the agreements that give the lender or investor the opportunity to take over the project if the project proponent (the borrower) is in default and all provisions indicating the extent and nature of the damage available to a contractor in the event of late completion or non-production of the expected quantities of electricity from a developer`s project are of particular interest to potential lenders. In addition, financial institutions will want to comment on the payment plans, security, guarantee and inspection provisions set out in the project agreements. The Parties generally agree to calculate the available capacity on the basis of wind data available during the reduction period and power curve data for wind turbines. The seller is often required to build and maintain a weather tower that can measure and record representative wind data 24 hours a day, and this data can be used to calculate the payment due by the buyer for restricted energy. I. Construction-related agreements. The various agreements that a project promoter must conclude for: IV are decisive for the development of a wind project. Typical EPC agreement structure for a wind project. Given the many factors that influence the development of a wind project, a uniform contractual structure does not apply to all projects. However, the following example is typical of the number of developers who solve some common problems. PPAs often deal with milestones that must be achieved in order to conduct business operations.
Construction or development milestones are designed to allow the buyer and seller to track the progress of the project`s development. The PPA can determine various milestones, including: obtaining all required permits for construction; Execution of a works contract; Start of construction; Proof of purchase of wind turbines by the seller; and, ultimately, commercial exploitation. When the EFA deals with milestones, the seller must generally comply with the dates set out in the PPA for each of the milestones or risk paying damages for delay. Damages for late payment are often calculated by paying an amount in dollars (e.B. $5) is multiplied by the number of MW of contract capacity for each day the seller fails to reach a milestone. For example, if the seller is sixty days late to make a tree rope stone for a 25 MW project, the delay damage can be $7,500 ($5 x 25 MW x 60 days). Failure to comply with tree rope stone for commercial exploitation may result in much higher penalties, para. B example penalties of $100 to $1000 per day per MW. The PPA may also include a provision that allows the seller to claim any late payment damages paid to the buyer for earlier missed steps if the seller is able to deliver the project to the commercial exploitation stage. These commercial operating conditions may require the seller to prove to the buyer that: Pricing conditions may remain stable or worsen or defuse over the life of the project. For example, the Minnesota Community Energy Development Act (C-BED) (Minnesota Statutes, Section 216B.1612) requires utilities to develop a tariff with a higher rate during the first 10 years of the project, recognizing that wind projects have high initial investment costs.
C-BED PPAs reflect this structure by offering a higher rate in the first ten years of the project and a lower rate in the last 10 years. Repowering projects can be full repowering projects or partial repowering projects. During a complete repowering, the old turbines, foundations and electrical systems will be decommissioned, demolished and removed from the project, and after that, new turbines will be built on new foundations specifically designed for the new turbines. When the re-engined site is added to new collection circuits and control systems, it can extend the life of a project by at least another 10 years. Developers are able to reuse previously built access roads, platforms and sleeping areas, and can upgrade substations and shared facilities instead of building new facilities, reducing these overall costs compared to a new production plant. This chapter provides an overview of the contractual structures that typically apply to the construction of wind energy projects, including (i) the design, engineering and construction of project infrastructure facilities (p.B. Access roads, foundations, crane coatings, substations, transmission lines and maintenance facilities), (ii) purchase of wind turbine generators and associated equipment, (iii) construction of wind turbine generators and (iv) construction of auxiliary installations. This discussion is written from the perspective of a wind energy project proponent; However, the information listed below should be of interest to design and engineering, construction, operation and maintenance companies and major equipment suppliers.
As with any complex negotiated transaction, there is considerable value that can be gained or lost by all parties, and therefore significant potential for creative legal and business strategies to increase value for all parties. B. Repowering. There are also new ways to recommission first-generation wind energy projects in the United States. The state of California was one of the first places in North America to implement large-scale wind energy projects in the 1980s. With technological advances in wind turbine design, developers are looking for opportunities to re-engine existing sites with proven wind resources with modern wind turbines capable of generating greater generation capacity with fewer wind turbines. Many buyers require sellers to provide some form of credit enhancement to cover expected damage to the buyer if the project does not reach the tree parts or is not commercially operational by the agreed date. Since sellers are often special purpose vehicles whose only assets are project assets, buyers may be concerned about their ability to claim damages to which they are entitled if the project is not completed on time.
Such credit enhancement may take various forms, including creditworthy affiliate guarantees, cash guarantees or escrow accounts, irrevocable reserve letters of credit or performance obligations. Meeting credit improvement requirements can be a major challenge for project developers, who often have to rely on financial partners to provide the necessary credit or capital. In addition, the cost of meeting these requirements can significantly increase the overall costs of the project or change the agreements between the developer and the financial partners. From a delivery and construction perspective, the implementation of an offshore wind project is a major logistical challenge. Such projects typically involve multiple contracts and require the coordination of complex maritime logistics in a changing supply chain, increasing the risk of delays, cost overruns, and weather-related delays. Several delivery and transit locations can cause problems with the U.S. flag carrier Jones Act. At the time of writing, there are also no installation or maintenance vessels permanently stationed on the West coast or East Coast capable of constructing large offshore units or performing major warranty work. These vessels must come from Europe or the Gulf Coast. Therefore, the construction risk for offshore wind projects is higher than for onshore wind projects. Given the unique and challenging nature of offshore wind projects, successful execution depends on the participation of experienced contractors and wind turbine suppliers, careful structuring of the interface between equipment suppliers and specialized contractors, and an appropriate construction schedule that takes into account the impact of weather-related delays and other risks typically associated with complex vessel designs. are.
Although pricing conditions are often considered the most important element of a PPA, PPAs generally contain many important provisions that address issues such as the duration of the agreement, the commissioning process, the purchase and sale of energy, reduction agreements, transfer issues, milestones and defects, insurance and environmental loans, attributes or credits. .