Nine Ways to Achieve Price Certainty on Your Next Wind Project

As the price of Power Purchase Agreements (PPAs) continues its downward trend, more and more pressure is put on the developer and its business partners, most notably the Engineering, Procurement and Construction contractor (EPC), to provide the lowest possible price with certainty.

Determining the price of constructing a wind power facility involves highly experienced construction professionals and expertise at the earliest stages of a project. Knowledgeable owner/developers and EPC contractors understand that many factors can influence the overall cost of a project. For this reason, fostering open dialogue between the EPC/owner/developer parties at the earliest stages of project planning will deliver price certainty.

Estimating: A Professional Process Best Done by Veteran EPCs
For every step of wind farm construction, there are multiple factors that can drive up the cost. It is critical to have a solid understanding of the factors that have the greatest impact on price once construction is underway. With this in mind, we offer the following tips: 

1. Select your construction partner early to optimize the design and eliminate waste. If the EPC is involved early in the initial development/project planning phases, all involved parties will better understand the project upfront and be able to anticipate the relevant costs associated with access roads, collection, environmental concerns, public roads, and landowner issues.
2. Lock in prices early for volatile commodity items. The prices of reinforcing steel, copper, aluminum, etc. are constantly shifting. While occasionally fluctuating prices can result in cost savings, it is more common for prices to escalate; therefore, it is a better idea to fix prices early for commodities and work within those parameters.
3. Negotiate a fair public road agreement. Meet with county and local officials to negotiate a fair and reasonable road agreement that ensures roads will be restored to no more than “like conditions” at the end of the project. If not addressed early in the process, road improvement requirements can cause delays in construction and costs can spiral out of control.
4. Lock down turbine locations early in the process and complete the geotechnical work to minimize unexpected work associated with subsurface conditions or other constraints. The initial, preliminary project layout is generally based on wind conditions and project constraints. However, it isn’t until the turbines are micro-sited that you are able to select the best locations for the turbines. Delaying this process will prevent accurate pricing, so the earlier in the planning process you micro-site and lock down the turbine locations the better in terms of optimizing the design. Also, it is a good idea to select a few alternate sites in case you need to relocate a turbine to avoid subsurface conditions.
5. Centralize the location of the substation. The more central the substation’s location within the project site, the less expensive it will be for installation of the collection system and gen tie. Securing control of the land necessary for the optimum location is essential early on.
6. Provide all business partners with the most current constraints map and the latest version of the layout. An accurate constraints map and layout shows a great deal of information about a project site, including identifying landowners who have land lease agreements and those who do not, where collection will be installed, road layout, and crane travel paths. There are often additional expenses associated with WTG erection equipment travel on non-participating landowner property. Avoiding or planning for these costs is part of being able to deliver price certainty at a wind project’s inception.
7. Satisfy all environmental permitting requirements with a thorough environmental plan for each wind project. It is important to understand and review all environmental permits early in the process, as it is becoming increasingly common for wind projects to have significant environmental costs, which may cost more during the actual construction if not addressed upfront. Environmental issues, if not addressed properly, can stall or even halt project construction. This includes the identification of endangered species, cultural and historical considerations, wetland preservation, and water sources.
8. Secure the FAA (Federal Aviation Administration) “No Hazard Determination.” Before construction begins, confirm that the wind turbines do not affect flight paths for commercial air traffic. Moving turbine locations during mid or late phases of the project will be very costly. Securing this permit early, along with micro-siting, will provide cost certainty.
9. Obtain an interconnection agreement. An important part of project costs are the requirements to interconnect to the grid. Signing an interconnection agreement early on, or at least having a final draft, will help determine necessary costs and schedule implications.

Recognizing and Planning for Uncertainty
Accurate planning for cost control also acknowledges that there is some degree of uncertainty in any construction project. An owner/developer or EPC cannot control every single element that goes into wind construction, but the project can be planned well enough so that the final price will not be dramatically altered. Even elements, such as weather, that are beyond the control of the EPC or owner/developer can be planned with a predictable level of accuracy using historical data. That is why the more experienced contractors and owner/developers are able to deliver a higher degree of price certainty with less overall risk. This cost certainty is in and of itself worth a substantial savings in the end.