5 Tips on how to manage your solar contracts

renewable_energy_solarGood contract management is necessary to fulfill obligations, manage expectations and stay on top of deliverables. Successful solar independent power producers (IPP) have refined processes in place to systematically breakdown, track and deliver efficiently. This results in positive outcome, reduced risk, avoids breaches and leaves offtakers happy. Here are 5 tips to consider that will give you the foundation for proactive management and help fulfill your contracts.

1: Obligations

Track your obligations using software tools that will give you the ability to track sets of procedures that can be assigned to an individual, approved and audit trails are left. For example, you may have a mandate to NERC compliant. These procedures can be uploaded as a check list and followed through when the event may arise. Reoccurrence events can be scheduled so reminders are sent out to the stakeholder with deliverables to fulfil that obligation.

2: Track terms

Understand your terms and dissect them into a term-sheet that can be tracked across your portfolio. This will avoid any misunderstandings or unknown. For example, if you have TOU term on your PPA make sure you understand the rates for seasons, weekdays, weekends and time of day. Does the rate escalate, and what are your curtailment terms. What happens in the event the utility meter is different than your onsite meter? Using asset management software, you can track complex PPA rates, ability to cross reference production data, and even automate your invoicing which will eliminate human error. The system can generate invoices automatically and limit human involvement; just to validate and approve.

3: Track expiration dates & Insurance

Tracking when warranties expire, contracts are due for renewal or perhaps an escalated rate kicks in after 10 years. Having an asset tracking system will enable you to get reminders when these special events occur and action is required. Tracking insurance policies is critical to ensure that you can in fact make a claim when necessary.

4: Identify Risks

Every project comes with some level of risk; taking action such as maintenance will ensure that you deliver on your obligations and avoid financial loss. For example, maybe your site is located where degradation is expected due to weather so you can set reoccurring tickets to review the performance through preventative measures.

5: Develop KPI to track performance

Tracking the performance of a plant such as expected revenue generation vs. actuals, quantity of maintenance tickets, financial loss, maintenance costs, cash flow, capacity factor, actual irradiance vs estimate, NVP, IRR are some examples of key performance indicators that you should track. If you have a portfolio of assets, tracking them manually is a daunting task. Using asset management software, these KPIs can be tracked automatically in a dashboard.

Tracking such information will be extremely useful if you intend to operate a facility throughout its life-term and it will also be very useful if you intend to sell-off some of your assets to another party.

Author: Farid Najafi is the president of Arbox Renewable Energy. Arbox specializes in asset management software that provides features such as contract management, obligation tracking, KPI Dashboard and automated invoicing.

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