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1SERIS Industry Day, August 2017
SERIS Industry Day
Engineering, Procurement & Construction (EPC)
Selecting your EPC, and proper project execution
Christophe INGLIN
[email protected] Industry Day, August 2017 2
Contents
• What is EPC contracting?
• The dangers of inexperience
• Module due diligence trumps warranties
• Selecting the right EPC
[email protected] Industry Day, August 2017 3
EPC contracting is common in several industry sectors
Lump sum turnkey EPC contracts:
� Reduce project risk by transferring
construction risk to EPC
• Single point of responsibility & accountability
for owners and lenders
• Reduced risk for project owner and lender
• Better cost control (lump sum price for agreed
scope of work)
• Timely procurement & installation (optimises
working capital)
• Better quality & reliability (workmanship &
performance warranties)
� Improve project bankability (faster
financial close, lower interest rates)
Oil & Gas
Infrastructure
Power plants
Petrochemical
Buildings
[email protected] Industry Day, August 2017 4
Develop
EPC companies are central to the PV plant value chain
Select site
Engineer FinanceProcure
& construct
Operate&
maintain
� Select site
� Feasibility study
� Geotechnical
study
� Grid impact
study
� Grid connection
rights
� Land rights
� Project rights
� Select
technology
� Design plant
layout
� Design
structures
� Calculate yields
� Calculate costs
� Cashflow
� Tax treatment
� Sensitivity
analysis
� Debt & equity
� Legal structure
� Turnkey
construction
� Select suppliers
� Manage supply
chain
� Manage site
� Assure quality
� Commission
plant
� Monitor in real-
time
� Maintain
periodically
� Manage
commercial asset
A good EPC ensures PV projects are properly designed, constructed and operated;
profitably and on schedule
Execute
Core EPC activity
Significant EPC involvement
Supporting role for EPC
[email protected] Industry Day, August 2017 5
EPC contractors coordinate multiple scopes of work
(Project developer)
Project investor/owner
EPC contractor (sometimes off-shore/on-shore split)
SuppliersProfessional Engineers
Specialist consultants
Sub-contractors
Lender
Lender’s EngineerOwner’s Engineer
[email protected] Industry Day, August 2017 6
Where do PV EPCs come from?
Origin Examples Pros Cons
Module
manufacturers
extending
downstream
• Comprehensive
performance warranty
• Restricted module choice
• Channel conflict
• Not main mgmt focus
BOS & racking
manufacturers
extending
downstream
• Core electrical design &
commissioning (esp. AC)
• Structural
design/installation
• Restricted BOS choice
• Channel conflict
• Not main mgmt focus
Specialist PV EPCs • Technology independent
• PV design expertise
• Core company focus = PV
• Financial capability
• Weaker non-core,
eg civil engineering
Owner’s engineers /
Project management
companies
• Technology independent
• Well-informed on price &
performance benchmarks
• Role conflict
• Channel conflict
General EPC
contractors (civil,
structural, M&E)
• Project mgmt. for large,
complex contracts
• Balance sheet
• Overheads too high for
smaller projects
• Most staff lack specialised
PV experience
[email protected] Industry Day, August 2017 7
Contents
• What is EPC contracting?
• The dangers of inexperience
• Module due diligence trumps warranties
• Selecting the right EPC
[email protected] Industry Day, August 2017 8
Did these contractors understand what they were doing?
… and who wrote the tender criteria in the first place?
The tree was there first… Who needs straight lines?
[email protected] Industry Day, August 2017 9
Loose contacts lead to DC arcs, causing hot spots and even fires
[email protected] Industry Day, August 2017 10
Structure not designed for high wind load conditions
[email protected] Industry Day, August 2017 11
Never walk on modules! Excessive pressure will crack cells
Avoid standing/walking on PV modules or overtightening frame clamps!
• HSE risk - PV module glass surface can be slippery to walk on
• Excess load causes micro-cracks, which reduce power output
• Max load of 5’400Pa ≡ 550kg/m²
• Standing on one foot exerts ~8’000kg/m²
[email protected] Industry Day, August 2017 12
Micro-cracks lead to power loss over time
After thermal cycling
PMPP = 6.3Wp
Before thermal cycling
PMPP = 7.9Wp
Source: MBJ Solutions GmbH
Electroluminescence test reveals thermal cycling stress cracks
The reduced current affects the entire string of modules
[email protected] Industry Day, August 2017 13
After commissioning: power plants or flower plants?
Solar farm in Germany, 2011Credit: Knut Loeschke
Rooftop PV in CaliforniaCredit: True South
Power plant maintenance requires some gardening work
Power plant layout to consider access for grass cutting and module cleaning
• Consider turning radii of service vehicles
• Consider location of water dispensing points
[email protected] Industry Day, August 2017 14
Contents
• What is EPC contracting?
• The dangers of inexperience
• Module due diligence trumps warranties
• Selecting the right EPC
[email protected] Industry Day, August 2017 15
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2010
2011
Top 25 thin film & crystalline cell producers (2010-11)
Production data: Photon International (2012/3)
• Global prod. = 37’185MWp
• Top 25 total = 25’453MWp (68%)
• Top 25 each >450MWp
• What are the survival prospects for
producers outside the top 25?
• How credible is their 25-yr warranty?
Defaulted on bonds,
insolvent, acquired by
Shunfeng
Defaulted
on bonds,
insolvent
Insolvent, acquired by
Hanwha & Hanergy Bankrupt
Acquired
by Foxconn
[email protected] Industry Day, August 2017 16
Better if you do not to have to rely on warranties!
• Even the best warranties will be expensive to enforce
• Who pays forensic cost of establishing warranty claim?
• Who pays cost of dismantling and shipping modules to factory or test institute?
• Who pays return shipping cost and reinstallation cost?
• What if original module format (dimensions) no longer in production?
• Who bears consequential losses, ie lost plant output before modules are replaced?
• Warranty is meant to reassure you of product quality. But low-quality
manufacturer is more likely to go bankrupt before 25-yr warranty term
ends.
• Isolated defects less of a concern than a systemic problem, triggering company’s
collapse
• Warranty insurance might not readily apply to sub-utility-scale projects
Proper due diligence aims to source modules that will never trigger a warranty case
[email protected] Industry Day, August 2017 17
How many listed companies will outlive a 25-yr warranty?
[email protected] Industry Day, August 2017 18
How many high-tech companies last 25 years?
Remember these former icons?
• Be cynical and bet module manufacturer
will not last 25 years…
• … then do your DD to source modules
that will outlast their makers.
Commodore Pet (1977)
Bankrupt 1994
Atari ST (1985)
Brand ceased 2001
Internet brand Born Died Age
Compuserve 1979 2009 21
Alta Vista 1995 2013 18
Netscape 1994 2008 14
Prodigy 1990 1999 10
[email protected] Industry Day, August 2017 19
Contents
• What is EPC contracting?
• The dangers of inexperience
• Module due diligence trumps warranties
• Selecting the right EPC
[email protected] Industry Day, August 2017 20
Don’t just look at price! Is the contractor is truly competent?
Track record – what have they really done?
For EPC, past performance = best
indicator of future performance
Relationship with key suppliers
Training and after-sales capability
Check references and customer
testimonials, plus kWp installed
Also check key personnel
Letters of authority and training certificates
Inverters and spare parts in stock
Monitoring capability
Documented technical competenceAccredited by recognised bodies
ISO9001, SEAS/WDA (system design)