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In this series, we’re discussing common pitfalls that can impact renewable energy developments, as seen first hand by our Due Diligence Team Lead, Steven Buckley.
Locogen provides technical due diligence services to clients looking to acquire solar, wind and battery energy storage system (BESS) projects. As you might expect, the approach to the level of design and the quality of the projects can vary significantly across different technologies and developers, and it is important to review each project in detail to identify and understand the project-specific risks.
Whilst the significant risk around grid connections is well known and frequently discussed, in this series we are sharing other lessons learned from some of the many projects where we have provided technical due diligence services, shining a light on each technology in turn. This article looks at solar.
At Locogen, on transactions where we have been carrying out the technical due diligence we have come across risks relating to many aspects of solar project design, planning and development. This includes grid connection, flood risk, archaeological risk, energy yield, transportation/access problems, geotechnical issues, and poor layout/design assumptions.
Putting aside grid connection-related issues for now, the most common risks we have observed fall into the following three categories:
- Layout design – lack of rigour on early planning-approved designs
- Panel layouts – submitted plans not optimised for constructability or operation
- Energy yield – variable quality of energy yield assessments
Layout design
Solar projects arguably benefit from the perception of being more benign than wind or BESS projects from a design and planning perspective. However, this perception can mean that important design decisions are over-simplified and not given the necessary level of focus during early design stages.
We have seen a number of solar sites recently, from a range of developers, that are coming on to the market labelled as ‘Ready to Build’ (RtB). To be offered as RtB, projects should ideally have a final, planning-approved site layout. There are typically a range of factors that influence solar layouts, such as: row spacing, buffer distances from boundaries, landscaping requirements, drainage ditches, frame heights, access tracks, inverter/transformer stations etc. With all these parameters correctly accounted for, the layout can take shape and the design submitted for planning approval should be as near final as possible.
However, with a range of developers and different approaches, we are seeing some of these layout-influencing factors not always being correctly accounted for. This can impact how ‘Ready to Build’ the projects actually are, as any changes made to layouts carry both timing- and planning-related risks due to the need to seek variations to correct omissions and errors in layouts.
As part of our due diligence scope, we always examine the layouts to check that fundamental design, layout and buffer requirements have been correctly implemented. Things that we commonly spot include:
- access tracks and turning heads not fully incorporated,
- inadequate number of inverter/transformer stations,
- and substation designs being incorrect.
These omissions create risks and, to avoid compliance issues further down the line, it is necessary to go back to the local planning authority to seek variations for such issues, which can be material or non-material depending upon the nature of the changes required.
In addition to the site itself, the importance of associated consents for ancillary/offsite works such as utility crossings and highways works in place should also not be ignored. We have seen RtB projects where these consents are not yet in place and such consents can take a long time to secure.
Panel layouts
Another aspect of design that we commonly see on projects is a frame/panel setup that is not optimised for capacity and energy yield. Tilt angles may need to be adjusted and frame heights may need to be increased, which presents a risk due to the potential increased visual impact and requires a variation to the consented plans.
Energy yield assessments
Finally, as well as the planning- and delay-related risks associated with layouts and designs, it is important to highlight that these aspects can also have a significant impact on the project energy yield analysis. We have seen the quality of the energy yield analysis and the overall accuracy in terms of how the analysis represents the site and layout vary significantly between projects.
For instance, we have reviewed vendor energy yields where unrealistic loss parameters are used, making the predicted yield too optimistic. Another example is where overly simplified layouts are used that do not include terrain or nearby shading objects.
A review of the energy yield analysis is an obvious necessity as part of the due diligence and, where the vendor-provided analysis is of poor quality, we are happy to provide an independent, bankable energy yield analysis as part of our services.
If your company is looking to acquire a solar PV project, make sure the layout, design aspects and energy yield assessment are thoroughly reviewed to avoid delays and impacts to financial assumptions.
At Locogen, we deliver due diligence that supports action. If your team is assessing new opportunities or looking to manage risk within a portfolio, please contact us today.
