Onboarding Best Practice Guidelines

3.1. Development, engineering and procurement

Site assessment: risk assessment - mechanical

Before the beginning of the construction phase the different stakeholders, especially the investors and lenders, must assess the quality of the developed project, to come to a final decision to build the project, sign the relevant contracts and utter the notice to proceed (NTP). Then, the financial stakeholders have to choose an EPC service provider. Finally, the project has to be handed over to the EPC service provider without losing important information. 

Selection of EPC projects

To select EPC projects and assess their quality, investors and lenders scrutinise certain factors, which often condense into checklists and internal guidelines (also called “ex-ante KPIs”). The content of this support strongly depends on several stakeholder traits (strategy, experience, etc.). For example, for one investor an activity in a certain region might be excluded, whereas another investor might be specialised in that region. Furthermore, the content of such support depends on the size of the project, while the complexity of the assessment will increase with project price. In the selection of the EPC project risk analysis and mitigation will play an important role. 

Profitability

An important point for all stakeholders is the assessment of project profitability. Since the business plan needs to be realistic and solid, it is important to make sure that all important cost parameters have been considered. At least one yield study, done according to industry standards, should underpin expected production. Technical and legal due diligence studies must make sure that this production can be converted into revenue.

Quantitative assessment of a project’s profitability follows these qualitative verifications. An important KPI for a project’s profitability is the Internal Rate of Return (IRR). “Internal” refers to the fact that the calculation excludes external factors like inflation and cost of capital. According to the IRR formula, a project can be pursued if the internal rate of return is greater than the minimum required rate of return.

Technical Quality

One of the overarching engineering KPIs is expected performance ratio (PR) / expected yield, which is an input parameter into the business plan. Multiple parameters determine expected PR. We can only mention some of them here. A more detailed list is part of a technical due diligence / yield study. However, other aspects may be equally important, for example pre-qualification metrics (such as e.g., manufacturer, and main component ratings) and design rating.

Handover from project developer to EPC service provider

At the contracting stage, when selecting or appointing an EPC service provider, the developer should hand over all the important documentation about the project and preliminary works (see Annex F, section Basic Design – Development Documentation). This will be the basis for the scope of work negotiation with the EPC service provider and the share of responsibilities between the Asset Owner and the EPC service provider. The main topics to be discussed by both parties include the site description with its particularities, the permitting process and the associated constraints from legal authorities and the technical specifications from the grid connection side.

Site description (including site surveys and site data)

To ensure the best understanding and the most accurate design of the PV plant, a detailed description of the site and all associated constraints should be delivered to the EPC service provider. To pass on responsibilities to the contractor all preliminary studies and surveys should be shared. These documents will allow identifying the requirements and identifying the need for extended study. The main information to be shared is listed in Annex F, section Basic Design. If applicable, some documents from the Pre-Construction Documentation should also be considered.

Permitting process

Developers are typically in charge of obtaining building permits and all authorisations (e.g., from environmental authorities) related to executing works. EPC contracts should mention that service providers need to comply with any relevant permits and authorisations to maintain them. Specific aspects related to the construction period or design of a PV installation can be requested by the relevant authorities and it should be the service provider’s responsibility to provide these during the construction stage:

-          Environmental mitigation measures to be implemented (plant trees, restoring grass, exclusion zones for levelling and grading works, measures towards flora and fauna)

-          Aesthetic measures for visualisation of the project, landscape integration or sight impact on the neighbouring buildings (electrical cabinet design, height of structures, hedges to be planted)

-          Fire and emergency mitigation measures

Grid connection process

The development stage also involves identifying the most suitable point of interconnection with the local network and the best strategy for connecting. This is often discussed at early stages with the network or grid operator, who is normally involved in the technical specification definition, and sometimes (in some countries systematically) in the completion of the works. To ensure timely grid connection and smooth communication between the network operator and the EPC service provider it is important to share the following:

-          Grid connection technical specifications, often prepared by the local network operator

-          Network operating conditions to be complied with during the operation phase

Additionally, in case of a specific Power Purchase Agreement (PPA), it is recommended that this information is shared with the EPC service provider. If commercial aspects need to be kept confidential then the technical specifications with which the EPC service provider has to comply should be shared, at the very least.

Construction preparatory phase

The construction preparatory phase includes those planning and preparatory activities that ensure the smooth realisation of the PV plant. For this purpose, it is important that the construction project is correctly set up according to project management principles: the Asset Owner and the EPC service provider define project organisation and objectives, arrange main parts of the project in a work-breakdown structure (WBS), deduce a time schedule with clearly defined work packages, including responsibilities/accountabilities (responsibility matrix, for example, a RACI matrix), interdependencies, duration and resources. This time schedule shall be the reference for monitoring the project’s progress from both a physical and cost control perspective and needs to be regularly updated.

Site survey

The site survey aims at checking that there are no physical and geographical constraints or inconsistencies with the assumptions and technical details defined in the Execution design. If there are inconsistencies between the execution design and the site survey, the EPC service provider should consider doing another topographical survey with a drone.

The survey is also necessary for checking the actual status of the site and for planning the preliminary activities necessary to prepare the site for the mobilisation of personnel and equipment and the start of the main construction activities.

While the effective mobilisation of the EPC service provider and their subcontractors usually takes place once contracts enter into force (in general when a notice to proceed is issued by the Asset Owner), the execution of certain early works, sometimes also called preliminary works, is a project strategy that is becoming more frequent.

With reference to construction activities set-up, the key topics to be investigated during the site survey are:

-       Mapping of the construction site (allotment and boundaries, topography, etc.)

·     Definition of the area for temporary facilities and storage/warehouse

·     Identification and mapping (geolocalisation) of interferences to be considered during construction, for which drones can be used

·     Assessment of critical elements for construction and identification of mitigating actions (technical risks, rests of bombs, hazardous waste, but also archaeological discoveries)

·     Detailed survey of transportation facilities and routing and other logistic items

·     Execution of the pull-out test, necessary for the final test of the selected foundation design of the mounting structures

Stakeholder management

The primary tool for understanding the context in which the project is implemented is to identify and understand the stakeholders involved in, or affected by, the project. This allows one to become aware of their expectations and to determine the effective, potential, or perceived impact that the project can have on them identifying methods for involving them.

The identification of the stakeholders and their needs and expectations requires suitable knowledge of the relationships that exist between the different actors that are present and active in a given context. For this purpose, all subjects that could influence or be influenced by the project must be considered.

It is important that the identification of the stakeholders is not limited to local and administrative authorities but should also consider people and organisations that are relevant for local communities, as they represent their interests and identity.

Construction plan preparation

Construction Planning aims at planning all construction activities properly and guaranteeing that resources are available and scheduled consistently with activities. This avoids any unplanned stops.

After definition of the project scope of work, the project management team structures the project by organising the activities in a hierarchical structure, the Work Breakdown Structure (WBS). Only the activities identified with the WBS shall be within the project scope and, therefore, can be planned and controlled. There is only one WBS per project. A well-defined WBS:

·     Provides complete definition of the project scope at different levels

·     Allocates tasks and responsibilities

·     Defines a numbering system, which is used as reference in project plans, reports, and technical documentation

·     Provides an input to integrate cost and schedule data

·     Ensures the alignment with the contracting execution strategy

·     Facilitates the roll up of cost, progress, and schedule performance information for reporting purposes

All parties (the Asset Owner, the EPC service provider and other service providers) involved in the project should comply with the WBS and related coding system. Clear and effective communication between the Asset Owner, the EPC service provider and other service providers (and in general, all third parties involved in the project), and constant monitoring of the construction work progress according to the WBS, are key to ensuring full alignment on scope of work, objectives, deliverables, and timing.

WBS’s lowest hierarchical items are the work packages (WP). By defining each WP in detail and considering dependencies, the project plan is created. Each WP should contain at least the following information:

·     Name

·     Unique number/code

·     Version and status information

·     Description of content and results to be obtained

·     Prerequisites and dependencies (deliverables required etc.)

·     Projected duration

·     Resource requirements (people, material, tools, vehicles, etc.)

·       Person responsible for the WP

A detailed scheduling of the activities, including milestones, is essential to completing the work in a timely manner. Proper scheduling of the works is mandatory for correctly managing and controlling the progress of the project. If the work plan has not been prepared appropriately, mistakes and delays cannot be identified, and corrections cannot be implemented. Furthermore, the project plan needs to be updated regularly.

Project managers derive subordinate plans and documents from the central project plan. For example, the EPC service provider and other service providers will have planning, scheduling, reporting, and documentation obligations, according to the stipulated contract. With reference to the WBS, contractors should be responsible for the lower-level activities schedules and plans. A typical document for this phase is the mobilisation plan, which includes:

·        Construction site organisation chart: the subcontractors (civil and electro-mechanical) need to provide the construction site organisation chart which indicates all the expected positions, the staff residence times and the expected hours.

·       List of site vehicles and equipment: subcontractors must provide the list of vehicles and equipment they intend to use for different kinds of work, accompanied by certificates of suitability and maintenance and/or testing sheets.

Work plan and mobilisation plan guarantee in-time arrival and accommodation of construction site personnel and assembly materials. They also ensure that the different elements of the construction phase are properly coordinated.

Based on the defined project schedule (baseline), the associated physical progress curve should be determined, to establish a reference plan for the percentage of physical completion of the project at each date. This is key for proper project monitoring.

To calculate the project’s physical progress, one must define specific calculation rules to apply to each elementary activity type, as well as determine the weighting criteria.

The construction plan should also define processes and procedures relating to the interface of the construction team with the rest of the project staff, in particular with the engineering, EHS and quality management teams.  It should be assured, for example, that all the project changes proposed by the EPC service provider and other service providers are checked and approved by engineering department (change management). Furthermore, the construction activities should be verified in accordance with the quality control plan and HSSE procedures (quality management). Other control activities concern cost/budget, HSSE compliance, documentation, etc. 

Check and finalisation of works permits

Country-specific legislation and regulations around HSSE and construction activities are continuously evolving. It is critical to be sure that all works, administrative permits, and authorisations have been obtained to avoid breach of any legal provision. Such a breach could result in severe consequences, both in terms of personal and administrative sanctions and in downtime and delay in the execution of the activities.

A useful tool to ensure full compliance is the prescription and authorisation checklist which should identify all the relevant legislation and regulations applicable to the specific project and location. It also lists all requisites necessary to start the construction activities (authorisations, particular training requirements for certain works, such as works at height, land lease agreements, etc).

Activation of external suppliers (services and materials)

Once all preliminary activities have been assessed and completed, the construction activities are ready to start. All subcontractors and suppliers must be activated according to the specific clauses of the relevant contracts and based on the scheduled activities. The scope of this phase is to ensure that all resources are present at the site in a timely manner to avoid any downtime and delay.