Wind Farm Contracts and Agreements
The Importance of Contracts
Developing a wind farm is a very serious industrial project. The process often takes a number of years to initiate and the wind farm itself will be expected to operate efficiently for decades. In order to ensure that the wind farm development is built and operates as efficiently as possible it is vital that the correct and appropriate contractual procedures are followed and that any agreements and contracts are arranged at the outset.
- Wind Farm Installation
- Equipment and Installation
- Commercial Agreements
Wind Farm Installation
Contracts associated to the installation of a wind farm include:
- Services and Consulting - wind measurement, projects, environmental studies, feasibility studies...
- Equipment and Installation - civil works, commissioning, communications, procurement and delivery...
Experienced and technically skilled parties must carry out the Services and Consulting process. They must be recognised by the project financiers to enable the due diligence and financing process. In order to correctly assess the feasibility of a project and to reduce any risks involved, it is advisable to employ an experienced, recognised professional engineering consultant.
Equipment and Installation
There are two options for the provision of Equipment and Installation:
Independent contracts with different companies
- Price optimization
- Flexibility in equipment choice
- Higher promoter management
- Clear responsibility established
Turnkey contract with one company
- Single contract
- Clear responsibility
- Easier coordination
- More expensive
- Less independence
It will be necessary to receive warranties from the equipment suppliers in relation to performance, mechanical warranty, availability, electrical and environmental warranties.
- Performance Warranty: usually defined by the power curve and preferred by the manufacturer, warranty level is usually approximately 95%.
- Mechanical Warranty: incorporates the time for repairs, quality and availability of spare parts, costs of retrofits etc.
- Warranty: including a clear definition based on the assignment of lost hours, warranty level is usually approximately 97%.
- Electrical Warranty: associated to the compliance of the requirements established by the utility regarding network integration.
- Environmental Warranty: related to noise, electromagnetic interference, visual impact, oil leakage etc.
Owners of turbines approaching the end of their warranty period should consider installing condition monitoring equipment at least a year before the warranty period ends. This will identify or predict any problems which might arise in major components after the warranty has expired thus allowing the problem to be rectified under warranty.
Like any industrial undertaking it is important to secure agreement regarding all commercial aspects of the wind farm development prior to the development commencing. Frequently, landowners come together to establish wind farms across their collective lands and the distribution of funds from a wind project must be transparent upfront.
The risks and benefits of investing in the wind farm at different stages throughout the project development should be made available and should be managed by an independent business advisor. Templates for agreements, leases and documentation pertaining to the financing and development of renewable energy projects can provide useful insight into the structure of such agreements.