Design risk

Solar PV Solar PV

Description (What is the Risk)

The risk that the project has not been designed adequately for the purpose required.
Feasibility study.
Approval of designs.
Changes to design.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner will have principal responsibility for adequacy of the design of the facility and its compliance with the output / performance specification.

Any changes to the design after being awarded as a preferred bidder requires the consent of the contracting authority, although the contracting authority takes no responsibility for the inaccuracy of the design or the risk of delays in approving any changes.

Mitigation Measures (What can be done to minimize the risk)

Pass through obligations to the construction contractor and project relief principles equivalent to those set out in the power purchase agreement will need to be incorporated into the EPC contract.

The Private Partner may seek to be prescriptive with the EPC contractor regarding the output specification. It may seek a degree of cooperation and feedback during the development phase to ensure that an appropriate risk allocation for design responsibility is reached when finalising the output specification.

Government Support Arrangements (What other government measures may be needed to be taken)

Contracting Authority may include specific design requirements such as technology type and country of manufacture of solar PV panels and inverters which provide grid stability support.

Comparison with Emerging Market

Developed market solar PV projects benefit from the low risk nature of the technology. This allows Private Partners to submit competitive proposals with short design and construction timeframes.

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Description (What is the Risk)

The risk that the project has not been designed adequately for the purpose required.
Feasibility study.
Approval of designs.
Changes to design.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner will have principal responsibility for adequacy of the design of the facility and its compliance with the output / performance specification.

Any changes to the design after being awarded as a preferred bidder requires the consent of the Contracting Authority, although the Contracting Authority takes no responsibility for the inaccuracy of the design or the risk of delays in approving any changes.

Mitigation Measures (What can be done to minimize the risk)

Pass through obligations to the construction contractor and project relief principles equivalent to those set out in the Government agreements will need to be incorporated into the EPC contract.

The Private Partner may seek to be prescriptive with the EPC contractor regarding the output specification. It may seek a degree of cooperation and feedback during the development phase to ensure that an appropriate risk allocation for design responsibility is reached when finalising the output specification.

Government Support Arrangements (What other government measures may be needed to be taken)

Contracting Authority may prescribe the design of the project with a detailed minimum function specification. This may include requirements as technology type and country of manufacture of solar PV panels and inverters and performance ratio levels.

Comparison with Developed Market

Contracting Authorities may require Private Partners to localise part of the supply chain for the solar PV project. South Africa is one of the best examples of successful localisation for the solar PV sector. A recent trend is requiring Private Partners to install equipment which mitigates the impact of the project on the electricity network such as cloud monitoring equipment and inverters which provide some level of grid support service such as frequency response.

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