How to minimise risk in BESS construction
Insights into risks in battery storage construction from a panel of experts convened by Tamarindo’s Energy Storage Report in partnership with Eversheds Sutherland
April 08, 2024
Annual battery storage installations are set to soar in the coming years. Modelling by research company Rystad Energy has projected that annual battery storage installations will surpass 400GWh by 2030, which would represent almost a ten-fold increase on the 2022 level, when installations totalled 43GWh. As McKinsey & Company has highlighted “Battery storage is an essential enabler of renewable energy generation, helping alternatives make a steady contribution to the world’s energy needs despite the inherently intermittent character of the underlying sources.”
In order to maximise the prospect of projected battery storage installations being realised, it is vital that steps are taken to minimise the risks associated with the construction of such projects. As the BESS sector evolves, asset owners are increasingly utilising a range of contracting structures for construction and procurement – in addition to traditional EPC [engineering, procurement and construction] contracts, the use of EPCm [engineering, procurement and construction management] contracts and other multi-contract approaches is a growing trend. EPCm contracts can be an appealing option for energy storage projects given their potential for lowering costs, increasing flexibility, and speeding up the completion of projects. However, an EPCm contract can also potentially pose significant risks with regard to possible liabilities and raise doubts about channels for seeking recourse if disputes do arise.
Tamarindo’s Energy Storage Report, in partnership with Eversheds Sutherland, convened a panel of energy storage industry experts – including representatives from Gore Street Capital, NextEnergy Capital, Anesco, Field Energy, AMP Clean Energy and Constantine Energy Storage – to discuss the most significant energy storage-related construction challenges. The panel also explored the relative merits of traditional EPC contracts and some of the newer contracting methods using an EPCm approach. In addition, the panel analysed the risks associated with different approaches. Panellists said sourcing EPC partners with sufficient experience was a major challenge, while adding that it was crucial to perform effective due diligence on supply chains because of the huge variation in the quality of suppliers. Meanwhile, the significant increase in BESS construction disputes in the last 18 months was also highlighted. Panellists also said there had been a clear shift from EPC to EPCm contracts in the last three years, with one advantage of EPCm being a greater tendency for projects to be completed in a timely manner.