Roadmap 8
Bankability, warranty and contractual terms
Rationale for support
For most PV plant development projects operated by Com- pany X, 65 – 75 % of the investment is provided through debt financing from various lenders. Utility-scale PV plants are investments in the thousand- to several million € scale. The following items are needed to reduce risk and increase bankability:
- Improve EPC and O&M contracts
- Improve accuracy of design and construction mon- itoring
- Improve data-driven O&M
- Increase PR%, confidence in the estimated produc- tion and costs during the operations phase
- Give practical recommendations to ensure that the PV bankability meaning identified and quantified risks can be applied by all decision makers
The interest rate on the aforementioned debt can be typ- ically reduced by 1 percentage point if a risk framework is in place thus increasing the Internal Rate of Return (IRR) by up to 2 percentage points.
PV Bankability has been subject of specific analysis by H2020 SolarBankability project in 2015-2017 (www.solar- bankability.eu). The aim of this revisiting is establishing the recommendations regarding the warranty and contractual terms at three levels of risk: low, medium and high risk. The main equipment to be considered are PV modules, inverters and mounting structures and the contractual schemes will be EPC contract and O&M contract.
The main challenge is to predict the impact of new tech- nology developments entering the markets that will be dominant in the medium term. The players of the industry should have a road map of how the new technology de- velopments will impact the recommendations considered here.
Status
- Non optimised EPC contracts (depending on which stakeholders, KPIs definition for hand-over phase to be improved)
- Non optimised O&M strategies which leads to non-optimised O&M contracts (schedule mainte- nance is contractually determined and not based on hard facts)
- The current warranty terms of PV modules, invert- ers, supporting structures, EPC contract and O&M contract are not typically connected to the quality of the equipment and service offered. The gap is a risk that should be identified and quantified.
- Warranty and contractual terms are not well stand- ardized in the PV industry. There is no total trans- parency on how the manufacturers and contractors define internally their risks corresponding to their specific warranties and contractual terms. There- fore, it is quite impossible for developers and inves- tors to quantify the risk assumed in each individual project because the benchmarking is not possible with the mentioned lack of transparency.
- There is not an agreed Risk framework for PV plants as a de risking strategy
Targets, Type of Activity and TRL
Product warranties should be based on hard facts de- rived from statistical analysis and not on unrealistic requirements (i.e. cover infant failures, however in- clude cost of longer warranties in the cash flow mod- els). Moreover, the insurance companies/developer/ investors/lenders should have the elements from the information shared in the warranty terms to identify the associated risk and insurance cost.
O&M contracts based on new strategies (optimised predictive and corrective maintenance and opti- mised periodic maintenance)
EPC contracts giving the option of several warranty levels with different associated costs. The risk assumed will be quantified and benchmarking of dif- ferent projects will be possible.
Develop progressive repowering schemes to cost-optimise investments, assets, encourage re- use of components, use of land. Develop dynamic lifetime yield prediction tools to include revamping and repowering (TRL7)
Develop a de risking framework to achieve low WACC for PV as low risk investment (TRL7)
The role of digitalisation
Digitalisation will allow the sector to follow the history in terms of reliability and quality assurance (see roadmap 6 and 7) at component level. Choices made at a certain stage of the value chain will be recorded in digital platforms. Eco- nomic impact of these choices will be quantified. All of these will enable the creation of tailored made risk assessments.
KPIs
| KPI | Target Value (2030) |
|---|---|
| Typical WACC of utility scale PV | Reduced by 1 % compared to base level |
| O&M costs | Reduced by 33 % thanks to optimisation in contracts |
| Milestone | |
| Define standardized contractual KPIs for EPC Define the warranty levels of modules, inverters and supporting structures with associated risks | |