Independent reviews of large solar projects can uncover associated hidden risks—or confirm confidence in the project

By Marie Schnitzer

As solar projects increase in size and complexity, more elements of project development and project construction become material to make financial decisions.

For smaller solar projects, the challenges that are faced by large utility scale projects are often non-issues. The typical challenges for large solar projects include, but are not limited to, permitting, access to transmission, and technology risks that encompass warranty and production guarantees. With smaller projects, there is typically no performance guarantee, no need to access transmission since many are behind the meter, and permitting issues are often limited to local jurisdictional electrical or building codes.

For larger projects, the issues can grow exponentially from those already mentioned to construction risks, supply chain management, operations and maintenance, contracts, multiple subcontractors, warranty, and technology risks, to name just a few.

The need for an independent review and assessment of project risk is amplified based on the complexity of these issues and the risks associated with each.

An independent review, which is often referred to as an independent engineering review, provides an investor or potential investor, developer, or other party the opportunity for an objective third party to assess the attributes of a solar project. The specific focus of the review or analysis is on the aspects of a project that could result in lower revenues for a multitude of reasons and, therefore, the return on investment risk. An experienced third party will review the project for technical and commercial robustness. Many aspects of the project will be addressed to ensure the cash flow over the project life. However, the solar resource itself is often overlooked as a critical component of this review.

A solar resource assessment will evaluate the quality of meteorological data used to characterize the project site. For larger projects, a properly managed on-site measurement program for a minimum of a year will increase confidence, thereby decreasing the uncertainty of energy production from the project site.

The quality of the long-term data set used in an assessment, be it modeled or measured, and its proximity to the actual project site are other factors that influence uncertainty around energy projections. Poorly characterized seasonal and inter-annual variability can lead to unexpected high or low energy production periods. These are only a portion of the factors used by an experienced analyst to best characterize the resource and energy potential at a project site.

An independent review is best completed by those with experience in the field and expertise in solar resource and energy assessments. Conducting this third-party review can uncover hidden risks associated with projects or confirm confidence in the project. This can translate into a more accurate assessment of the return on investment, a higher likelihood of project success, and satisfied stakeholders.

Marie Schnitzer is the Senior Director of Investor and Solar Services at AWS Truepower (www.awstruepower.com), an international leader and innovator in renewable energy consulting and information services providing solutions that support the full project lifecycle.

March/April 2012

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Independent reviews of large solar projects can uncover associated hidden risks—or confirm confidence in the project