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Let the Sun Shine: Best Practices For Solar EPC Contracts

Let the Sun Shine: Best Practices For Solar EPC Contracts


For a variety of reasons, the solar industry has experienced, and will continue to experience, record growth. According to the Solar Energy Industries Association and Wood Mackenzie, a global energy and chemical research company, the U.S. solar industry grew 43% and installed a record 19.2 gigawatts (GWdc) of capacity in 2020, a pandemic year. Wood Mackenzie further forecasts that the U.S. solar industry will install a cumulative 324 GWdc of new capacity over the next decade.

Additionally, as we wrote in a previous article, one key driver of the construction industry in 2021 and beyond will be the approval of President Biden’s “Build Back Better” plan.  The plan is expected to include sizeable investments for infrastructure, manufacturing and clean energy projects.  

Due to the anticipated demand for these types of projects in the coming years, particularly in the area of renewable energy, it is important to understand not only the benefits of clean energy but also best practices for solar construction contracts. 

Benefits of Clean Energy

If history has taught us anything, every time there has been a crisis, industries tend to adapt.  In the case of construction, we have seen advances in design and technology, to make projects more climate friendly, among other things. which encourages continued future growth in the area of clean energy. 

There are many benefits to using solar power, including but not limited to: 

From a construction perspective, Engineering, Procurement and Construction (EPC) contracts are the most common form of agreement used for complex projects such as these.  Arguably, these types of agreements are more complex than standard construction contracts.   As such, this article will give a brief overview of EPC contracts and identify key areas for review in advance of your next solar project.

EPC Contracting – General Concerns

EPC contracts cover everything from the design, equipment procurement and construction on a solar project.  In addition, they may attach other performance guarantees as well.  These can include specific start-up and testing procedures, output minimums and target energy capacities tied to calendar dates.  As such, the overall goal of a solar EPC contract is to minimize upfront risk while maximizing long-term plant profitability.  Of course, this is never an easy task on complex projects such as these, especially in light of dependence on utility companies.  

Key Considerations for any Solar EPC Project

Given the complex nature of solar projects and the corresponding EPC agreements, it is important that the project team work together and draft an agreement which appropriately manages risk while taking into account strict project deadlines.  Although the above areas are by no means meant to be an all-inclusive list of items to consider when negotiating your next EPC contract, they are most certainly some of the more highly contested subjects of contract negotiation. 

For more information or to discuss any of these topics, please contact one of the members of Gould & Ratner’s Construction Practice.
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