PPA and Electricity Regulatory
Every renewable energy project requires a credible pathway to commercialisation. Commercialisation typically requires contractual arrangements and meeting of regulatory requirements.
The contractual arrangements may take many forms, including power purchase agreements (PPAs), heat and cooling offtake agreements and green hydrogen gas purchase agreements (GPAs). We will assist you in developing the commercial structure and in drafting and negotiating these agreements. We will also ensure that they interact adequately with other contracts, such as the EPC contract or the network connection agreement.
The energy sector is heavily regulated and your project will likely require a variety of electricity permits or exemptions in order to operate. You will also need to meet a variety of ongoing compliance requirements. In Australia, each state and territory has its own requirements, creating a patchwork of obligations. We will guide you through these rules and help you meet your ongoing obligations.
Most energy projects connect, directly or indirectly, to the transmission or distribution network. The process of achieving grid connection depends on the regulatory environment as well as the specific requirements of each network operator. The process and documentation are heavily impacted by regulatory requirements.
We will help you navigate the network connection process and the degree to which you may be able to negotiate the network connection agreement. We will also ensure that your network connection agreement interacts well with other contractual arrangements, such as EPC contract, O&M contract and PPAs.
Where energy projects connect indirectly, they might form part of an embedded network or a microgrid. We support the establishments, construction and regulation.
In some instances, energy projects form part of an off-grid environment, such as remote settlements and mining operations. Even in these off-grid environments, the characteristics and requirements of connecting to an energy network apply, with some of requirements amplified and others eased.
EPC and Installation
Once your renewable energy is developed, it must be physically delivered. The contract under which this is done can take many different forms, including engineering, procurement and construction contract (EPC) contracts, design & construct contracts and installation contracts.
These contracts represent the means by which an investor is seeking to ensure that the asset will be built on time, on budget and to the required standard. They must deal with a range of specific risks in the renewable energy sector, including (technical) network connection risk, ground condition risk, component quality risk, performance guarantees, supply chain risk (e.g. trade disruptions) and exposure to foreign exchange movements.
Splitting of Contracts
In many countries you will encounter the “splitting” of contracts along offshore/onshore components or along individual works/supply packages. The drivers for these arrangements include taxation/tariff treatment, construction licensing and the increasing cost pressure in delivering renewable energy assets.
O&M and Asset Management
A wide range of organisations invest in renewable assets. Renewable energy projects are attractive because they are physical assets and provide secure long-term cash flows. Investors include private equity and infrastructure funds, listed entities, corporates, government entities, high net-worth individuals (HNIs) and community groups. What most of them have in common is that they have no expertise or capability in operating and maintaining an energy asset. This expertise is often acquired under a operation and maintenance (O&M) contract with a qualified service provider
O&M contracts enable an investor to ensure that the asset will be maintained and operated to certain performance standards, within a defined budget and in compliance with all ongoing legal and regulatory requirements. These contracts must deal with a range of specific risks in the renewable energy sector, including scheduled/unscheduled maintenance, performance guarantees and availability guarantees, spare parts management and regulatory requirements.
Managing the Asset
While an O&M contract transfers much of the risk of operating and maintaining a renewable energy asset, the contract itself must be managed by the investor, along with insurances, landholder arrangements, offtaker relationships and corporate and tax compliance. Where the investor is looking to take a passive role, these managerial tasks are often delegated under an asset management contract.
Manufacturing of renewable energy technologies is highly concentrated on China/East Asia, Europe and the United States. The cost of components to be imported into the country in which the project is located often represents the majority of the cost of the delivery of the project. Managing the supply chain is a critical function for either the investor or the contractor in charge of procurement.
These supply contracts represent the means by which the purchase is seeking to ensure that the components will be delivered on time, on budget and to the required quality standard. They must deal with a range of specific risks in the renewable energy sector, including quality risk (defects, serial defects and fleet-wide defects), performance risk, (seaborne) logistics risks, foreign exchange risk, sovereign risk (trade restrictions and anti-dumping) and enforcement risk.