Resource or input risk

Solar PV Solar PV

Description (What is the Risk)

The risk that the supply of inputs or resources required for the operation of the project is interrupted or the cost increases.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner bears the principal responsibility to ensure an uninterrupted supply of inputs and solar power for the project and to manage the costs of those inputs.

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

Some of the cost risk can be managed by passing the risk through to the contractors although this will increase contractor's fees.

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

As noted in performance/price risk, the Contracting Authority may assume certain risks where the energy production of the project is affected by actions by third parties such as shading.

Comparison with Emerging Market

Private Partner usually performs the energy yield assessment for the site and assumes the risk that the energy yield forecasts are incorrect. ?There are limited other inputs for a solar PV project so the risk is generally seen as limited to the accuracy of such forecasts and the risk that the shading conditions change over time. In some countries there are concerns over the impact of climate change on the climatic conditions and in particular increased or different cloud patterns.

Overly optimistic energy yield forecasts are a key risk factor in solar PV projects.

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Description (What is the Risk)

The risk that the supply of inputs or resources required for the operation of the project is interrupted or the cost increases.

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Private Partner bears the principal responsibility to ensure an uninterrupted supply of inputs and solar power for the project and to manage the costs of those inputs.

There may be specific instances where the Private Partner may need the share this risk with the Contracting Authority, such as reliance on local source materials where these may be affected by labour disputes, embargos or other political risks, or where the Private Partner relies on the Contracting Authority to provide works or services or provide utility supplies.

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

Some of the cost risk can be managed by passing the risk through to the contractors although this will increase contractor's fees.

The agreements with the Contracting Authority allow for the Contracting Authority to share in certain identified risks in specific circumstances which provide relief to the Private Partner.

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

As noted in performance/price risk, the Contracting Authority may assume certain risks where the energy production of the project is affected by actions by third parties such as shading or lack of access to the electricity grid. The Contracting Authority may also take responsibility for failure to provide utilities required for the testing and commissioning process.

Comparison with Developed Market

The Contracting Authority may undertake the initial he energy yield assessment for the chosen site. However, the Private Partner will usually be required to review this assessment and the risk that the energy yield forecasts are incorrect. ?There are limited other inputs for a solar PV project so the risk is generally seen as limited to the accuracy of such forecasts and the risk that the shading conditions change over time. In some countries there are concerns over the impact of climate change on the climatic conditions and in particular increased or different cloud patterns.

Overly optimistic energy yield forecasts are a key risk factor in solar PV projects.

Back to Solar PV