PV Solar Development Process
With any solar development there are two stages with a total of 7 phases. This concept is something that I came across in a presentation published in 2017 titled Dii Desert EnergyIPP Solar PV Project Development Roadmap. This presentation oulines 8 decison gates with one in the middle of the feasibility phase.
The two stages are:
- FEED
- EPCO
These are acronyms that are used often in industry and they stand for, front end engineering development and engineer, procure, construct and operate.
Below I will introduce these phases and how they should be considered to ensure a successful project. Each of these phases could be a series of books in their own right, so if there is one that you would like for me to elaborate more on, let me know.
FEED Stage
With the feed stage there are three phases that flow into each other. they are:
- Business Development
- Feasibility Study
- Contracts and Financial Close
The goal at this stage is to determine if there is a high liklihood of the project succeeding and if not to stop before continuing farther. This is especially true during the business development and feasibility phases. When these phases are completely correctly, the project definition, risks, opportunities, etc. are well documented and understood by all stakeholders.
In some cases the project won't make sense at this time however in the future those situations may change, and having a well documented project at this stage may allow the project to have more opportunity when the time comes.
For example, maybe the project is in a remote location and the capital cost of the equipment and transportation is too high, or the expected revenue opportunity is too low. You determine this during the start of the FEED stage, but something changes in 2-3y time. This could be a government annoucement of a wharf upgrade, or a new rail line. It could be that the town is increasing its EV fleet and there is a need for more local generation. etc.
Let's take a look closer at these phases.
Business Development
The business development phase includes defining the project, if its an existing organization developing the project this will include aligning with the existing company vision, mission, etc and if its a new orgnaization developing them.
It also includes the project opportunity identification and site or sites identification, because without the suitable site there can be no project.
The Importance of the Site
Like other variable non-carbon emitting generation, site is critical. Solar is no different.
You will want to have a site that is close to the demand, relatively flat and sloped in a way that will maximize the generation of useful energy. This does not necessarily mean the maximum generation, you want to make sure that the cost of production is minimized and in some cases that may mean that the panels should be orientated in a way that isn't optimal for MWh/MW ratio over an annual period.
Depending on the permitting requirements the land may be able to be cut and filled to meet the generator demands, but in other cases the land may need to be left as is.
It really is critical to have the site of the project identified and secured as early in the process as possible. At the business development stage securing rights to the site may not be critical, but having a path of understanding the stakeholders/owners of the identified sites is critical.
It is much better to spend some time during the business development phase talking to some land owners, or engaging a site aquisition expert to do some exploratory site identification to ensure that there is enough available land for the identified project.
Feasibility Study
The feasibility study is something that includes most of the front end project development. In fact, Mr. Fadi Maalouf (the author of the earlier mentioned presentation) recommends including a full pre-feasibility study phase and having a decision gate there, and I agree.
However, for smaller projects (<5MWdc or so) this doesn't always make sense. Instead I recommend that the person who owns the Feasibility Study on behalf of the stakeholders develop it in a way that allows three different stopping points:
- Issued for Review
- Issued for Approval
- Issued for Financial
These would represent 30% complete, 60-75% complete and complete respectively. If you follow this process, I recommend that the decision gate be placed at the Issued for Approval document as this will have enough of the information to decide if the project is a go/no-go.
The chapters of this report should include:
- Conceptual Design
- Cost Plan
- Energy Yield
- Energy Tariff
- Licensing and Permitting Roadmap
- High-Level Project Schedule
- Risk Register
- Financial Model
These are too many to go into detail in a single article, but the goal of this phase is to determine if the project can fullfil the business needs outlined in the business development phase, within an acceptable liklihood of success.
As I mentioned above, it is better to learn now that there isn't a path for the project to succeed earlier in the process.
A couple things that may be identified during this phase that would result in the stopping of the project may be:
- An unclear permitting Roadmap
- not enough energy potential on the site to meet the project needs
- too high financial, land, procurement risks
- etc
Contracts and Financial Close
Once the project is through the decision gate after the feasibility study it is time to get the rest of the partners together that will take the project through to the operations phase of the project.
Some of the contracts that will need to be signed by the end of this phase include:
- Land leases
- Power Purchase Agreement (PPA)
- Major Vendor supplies
- Engineer, procure, construct firm (EPC)
- Grid Interconnection Agreement
- Project Insurances
- Legal Adisors
- Financing Agreements
- etc
There are a lot of documents that need to be put together and signed in a particular order to ensure success at this stage. It is not hard to have extended timelines because of the various interdependancies of some of these contracts.
The technical side
During this phase of the project there is a lot of negotiating, contracts, and financial modelling. None of those things are things that I'm an expert in.
The parts that JMK does assist with is the negotiations with the utility for the PPA, and grid interconnection agreement, development of the scope of work (SOW) for the various contracts from detailed design through to operations, and identifying any gaps that may exist early in this process.
JMK also advises on different contracting strategies from having an EPC complete everything, to assisting with a design-bid-build approach; and everything in between.
Closing
I think that's enough for this article. It started to get away from me.
There are still four phases to a successful project and I will make sure that I have that article published next week.
This post is part 3 of the "PV Solar System Design" series: