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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’re 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. First up is BESS.
BESS might seem a simple design choice for developers – after all, it’s just a load of (admittedly quite heavy) containers in a field isn’t it…? The perception of BESS being easier to develop than, for example, wind farm projects, combined with the lower associated costs of development, means that there are lot of new BESS projects and developers emerging at the moment.
However, some early fundamental design decisions can cause significant issues when it comes to the detailed design stage, with significant cost and time implications due to the need to make material changes to the project design. Further complicating the design process, BESS technology and supply contracts have changed rapidly over the last few years and it is important that what is consented is truly buildable and meets the buyer’s long-term goals and risk profile.
Despite some projects being sold as Ready to Build (RtB) or ‘shovel ready’, at Locogen, we have come across issues relating to almost every aspect of permitting and design including: transportation/access problems, geotechnical/civil issues, noise impacts, substation design/layout (as a result of poor early assumptions), surface water management, and fire risk related matters (e.g. access and fire water).
Putting aside grid connection and substation related issues for now, the top three problems we have observed fall into the following three categories:
- Fire risk – lack of understanding on fire risk in relation to the impact on layout and design
- Battery Supply Agreement risks – increasingly complicated performance guarantee and operation requirements in the Battery Supply Agreements
- Noise impact risks – underestimating the importance of getting the Noise Impact Assessment right at the planning stage avoids later design risks
Fire risk
Possibly the biggest source of change over the last few years relates to fire risk. Cell chemistry has changed (NMC largely being replaced with LFP), battery cooling has changed (initial air-cooled designs replaced by water cooling), firefighting response has changed (flooding containers via dry riser pipes to ‘let it burn’), and public perception has changed (causing increased hostility to proposed BESS sites). Developers and fire authorities have been trying to keep up with these evolving requirements. An understanding of the current fire risks, how the project can be designed, and equipment specified to minimise risks is critical to making a project successful.
Performance guarantees and warranties
Beware the small print… As battery suppliers have sought to compete on the longest warranties and best degradation rates, so the small print to achieve those performance guarantees and operational conditions to maintain warranties has become increasingly detailed and complex. Calendric losses, FAT to SAT requirements, storage conditions, daily and annual cycle limits, limits on back-to-back cycles, charge rates differing from discharge rates, annual average SoC requirements, ambient temperature limitations, etc. There is a lot of small print behind the headline capacity and degradation warranties, and it is important to fully understand the implications and to make sure that requirements won’t place limits on how the BESS is operated before entering into contracts.
Noise impact
Batteries and inverters generate heat during operation and cooling fans are used to dissipate that heat. Cooling fans create noise and, combined with many sites being located in rural environments with low background noise levels, the impact of that noise can be significant. We have seen several projects where early design and noise specification assumptions used in the Noise Impact Assessment at the planning stage were not reflective of actual specifications and this can lead to an underestimation of the noise impact requiring a redesign of the site layout or, in the worst case, potential restrictions on operation or expensive remedial actions (acoustic fences are not cheap!). It is important to check the noise specification assumptions and modelling to make sure the plant can be constructed and operated as plans.
If your company is looking to acquire a BESS project, beware of poorly developed projects that have perhaps been a long time in planning and not kept up with technological and regulatory change. And if the project has a BSA, be sure to check the small print.
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.
