Site data risks in renewables projects

Due diligence, testing and planning, as well as clearly allocating risk in contracts and proactively managing contracts when the projects are underway, will help identify risks early, enabling parties to manage them effectively.

Why site data is important

Site conditions are critical to the success of any renewables project. They will determine whether the project is viable from an engineering perspective – whether developers and operators can do what they we want to and where they want to do it. They will also influence the financial viability of the project – the project might be technically possible, but the site conditions will determine whether it is possible at a price that makes the project an attractive endeavour.

Typically, the employer or developer is likely to be in possession of at least some site information. That information will likely be shared with prospective contractors at tender stage and may well form part of the contract documents. However, the employer will generally not warrant the accuracy of that data, unless the contract expressly says otherwise.

What site data is important

The site data that is important for assessing the risk profile of renewables projects will differ depending on the type of project in mind, though the risks remain the same – namely, cost overruns due to ‘changes’ from what was expected. Even whether a change has in fact occurred is often the subject of dispute which is why it is so important for the parties to have a clear picture of the site conditions from the outset.

Solar

A frequent issue that has been at the crux of commercial discussion and disputes relating to solar projects is network conditions. Specifically, the delineation of responsibility for addressing the weak network conditions, particularly in Australia. Documents that should be collated prior to contract in relation to the network conditions, include:

• reports prepared by the network service provider regarding the network conditions in the area;
• ·network studies that have been undertaken, including any requirements for stabilisers – such as harmonic filters;
• reports from the network operator regarding the identification of the location of the solar farm, particularly any sensitivities that may apply to the project as a result of the chosen location; and
• a copy of the generator performance standards – ideally the final copy – setting out the performance requirements to be met by a solar farm once it has been commissioned.

Onshore wind

In relation to onshore wind projects, important site data includes:

• ground condition data, including relevant geotechnical information and surveys conducted;
• relevant geotechnical hazard information, such as earthquake data, crucial not only for the design of the relevant foundations and structures but also for the design of any temporary works that may be necessary, such as crane pads and access roads;
• wind data – this is important for the design of the project as it will inform the very viability of the project, as well as the project’s anticipated performance metrics. Wind data will also be required for the design and layout of the towers on the project site;
• general weather data, such as average and high rainfall data, and average and high wind data, all of which may impact construction; and
• any data around existing services at the project site, including access roads, grid connections, existing pipelines or transmission lines – this data is also important for the planning and viability of the project.

Offshore wind

Among the most important factors for offshore wind, both fixed and floating, are:

• water depth;
• seabed conditions, at the site of the farm and along transmission routes; and
• the wave, current and wind loading, that will be applied to the structures.

Actively liaising with other stakeholders of marine environments, such as commercial fisheries, those undertaking oil and gas exploration and development, maritime security, environmental bodies, defence and marine parks is also required for a proper understanding of site conditions and potential risks.

Hydro

Often hydro projects will involve the construction of head and tail race tunnels in remote and difficult terrain. This means the extent of information which exists is likely to be scarce.

The geology of the land in question is important – it will determine how the tunnel is to be constructed and what level of support is required to be installed, with the consequent impact on price. As a result, some form of geological profile of the tunnel, any surface geological maps and any information in relation to the sub-surface conditions from exploratory boreholes or even a pilot tunnel will be vital.

Effectively managing site data risk

The best way to manage site data risk is to address the risks before they arise. In other words, by doing effective due diligence, testing and planning ahead of the project and during the negotiation of the contract. Once the project is awarded, proactive contract management is vital.

Careful contracting will also help mitigate risk, such as by ensuring the status of employer information is clearly set out – i.e. whether it can it be relied on – and that risk allocation is clear. Often, preliminary investigations conducted by the developer to establish the feasibility of the project are not conclusive or sufficient to allow for the risk to be accurately priced. If risk is transferred to the contractor, parties should price and plan accordingly or make provisional sums available for further testing and investigation such that the contractor can verify the information.

Parties might also consider entering into an early works agreement. This can be done once a preferred bidder is identified for the project, and while the principal EPC contract is being negotiated. The early works agreement can be negotiated at a relatively low cost to allow the preferred bidder to conduct more detailed geotechnical surveys at the project site. Data from those surveys can then be used to significantly de-risk the project and result in more balanced pricing during final negotiations of the EPC contract, at which stage the early works agreement can be wrapped up into the final contract.  

Emerging disputes

It is also important that site conditions continue to be monitored throughout the project. Site conditions and site information should be revisited during construction and throughout the design life of the asset, particularly after weather events. There is a potential for structures to suffer premature fatigue or to fail altogether, or for ground conditions to become dangerous. If there is cause to make a claim, for example for an extension of time or a variation, notices should be submitted on time and in accordance with the contract – when issues are not notified contemporaneously it can be fatal to a claim depending on the contractual regime.

Technical experts should be involved early, once parties become aware of an event or issue that may give rise to a claim or claims. Expert advice from a third party can assist in the early resolution of claims. Further, persuasive, independent evidence may well be required in order to demonstrate what site conditions could reasonably be expected based on the site information that was available, standard industry knowledge and practice and any other relevant information. 

Often when a dispute does arise, parties do not have the records required to substantiate their claims. The value of having records of the ground conditions encountered, for example drilling or piling logs, and making sure they are accurate and safely stored, should not be underestimated.

Finally, rather than turning to the dispute resolution provisions in contracts, one option might be for the parties to seek to find a negotiated solution. Parties could, for example, agree to a different risk profile based on updated information about a site. This might help save a project and avoid parties retreating to entrenched positions.

The topic of site data risk was explored by Gemma Thomas and Aleesha Way along with colleagues Mark Raymont, Andrew Fawcett and Fiona Rossetter at a recent Pinsent Masons event.