Utility-Scale Solar Photovoltaic

Power Plants
A Project Developers Guide

In partnership with
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Cover Image: SunEdison Amanecer project in Chile, by Juan Payeras/IFC

Table of Contents
FOREWORD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1 EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2 PHOTOVOLTAIC (PV) PROJECT DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3 SOLAR PV TECHNOLOGY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

4 THE SOLAR RESOURCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

5 ENERGY YIELD PREDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

6 SITE SELECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

7 PLANT DESIGN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

8 PERMITS, LICENSING AND ENVIRONMENTAL CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 94

9 EPC CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

10 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

11 OPERATION AND MAINTENANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

12 POLICIES AND SUPPORT MECHANISMS FOR SOLAR PV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

13 POWER PURCHASE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

14 FINANCING SOLAR PV POWER PROJECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

15 FINANCIAL ANALYSIS PROJECT COSTS AND REVENUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

ANNEX 1: COMMON CONSTRUCTION MISTAKES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

ANNEX 2: EPC CONTRACT HEADS OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

ANNEX 3: O&M CONTRACT HEADS OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

ANNEX 4: ROOFTOP PV SYSTEMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

Table of Contents i
 List of Figures
Figure 1: Project Development Stages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Figure 2: Overview of Solar PV Power Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Figure 3: PV Technology Classes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Figure 4: Development of Research Cell Efficiencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Figure 5: PV Array Tilt and Azimuth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Figure 6: Benefit of Dual Axis Tracking System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Figure 7: PV System Configurations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Figure 8: Transformer and Transformerless Inverter Schematic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Figure 9: Efficiency Curves of Low, Medium and High Efficiency Inverters as Functions
of the Input Power to Inverter Rated Capacity Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Figure 10: Effect of Tilt on Solar Energy Capture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Figure 11: Pyranometer Measuring GHI Image . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Figure 12: Annual Sum of GHI, average 1994-2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Figure 13: Annual Share of DHI to GHI, average 1994-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Figure 14: Inter-annual Variability in GHI (relative standard deviation) 1994-2010. . . . . . . . . . . . . . 47

Figure 15: Uncertainty in Energy Yield Prediction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Figure 16: Shading Angle Diagram. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Figure 17: Voltage and Power Dependency Graphs of Inverter Efficiency. . . . . . . . . . . . . . . . . . . . . . . 77

Figure 18: Typical Transformer Locations and Voltage Levels in a Solar Plant
where Export to Grid is at HV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Figure 19: PV System Monitoring Schematic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Figure 20: Typical EPC Construction Phase and Handover Protocol . . . . . . . . . . . . . . . . . . . . . . . . . 106

Figure 21: O&M Workers at a Large-scale Solar PV Plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

ii A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Figure 22: Spacing between Module Rows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Figure 23 Module Installation on a Large Tracking System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Figure 24: Module Cleaning Using Crane. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Figure 25 Module Cleaning Using Brush Trolley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Figure 26: Module Cleaning Using Dust Broom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Figure 27: Corporate Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

Figure 28: Equity Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Figure 29: Project Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

Figure 30: Project Risk versus Project Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

Figure 31: Forecasted Average Capex Costs for Multi-MW Solar PV Park, 20102020. . . . . . . . . . . 174

Figure 32: A
 verage Breakdown Costs for a Ground-mounted Solar PV Project. . . . . . . . . . . . . . . . . 175

Figure 33: Small-scale PV System Schematic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196

Figure 34: Non-domestic PV Rooftop Schematic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197

Figure 35: BAPV (Left) and BIPV (Right) Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

Figure 36: Reduction in Module Efficiency with Average Temperature Coefficient . . . . . . . . . . . . . 199

List of Figures iii

 List of Tables
Table 1: Characteristics of some PV Technology Classes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Table 2: PV Module Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Table 3: Indicative List of Inverter-related Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Table 4: Inter-annual Variation in Global Horizontal Irradiation as calculated

from SolarGIS Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Table 5: Solar Resource Datasets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Table 6: Losses in a PV Power Plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Table 7: Area Required for Megawatt-scale Solar Power Plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Table 8: PV Module Selection Criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Table 9: Comparison of Module Technical Specifications at STC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Table 10: Inverter Selection Criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Table 11: Datasheet Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Table 12: Transformer Specification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Table 13: Definition of Ingress Protection (IP) Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Table 14: Recommended Number of Pyranometers Depending on Plant Capacity. . . . . . . . . . . . . . 90

Table 15: Performance Optimisation Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Table 16: Annotated Wiring Diagram Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Table 17: Typical EPC Payment Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Table 18: Solar PV Project Interfaces. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Table 19: IFC-financed, Utility-scale PV Plants in Chile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

Table 20: Solar PV Project Risk Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

Table 21: 2013/14 Solar PV Capex and Opex Cost Variations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Table 22: Average Benchmark Costs for Ground-mounted Solar PV Development . . . . . . . . . . . . . 176

Table 23: Key Inputs to the Financial Model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178

iv A Guide to Utility-Scale Solar Photovoltaic Power Plants

List of Abbreviations
C Degrees Centigrade EMI Electromagnetic Interference
A Amp EPC Engineering, Procurement and
AC Alternating Current Construction

AEDP Alternative Energy Development Plan EPIA European Photovoltaic Industry

Association
a-Si Amorphous Silicon
EPFI Equator Principles Financial Institutions
BAPV Building Applied Photovoltaic
ERU Emission Reduction Units
BIPV Building Integrated Photovoltaic
EU European Union
BOO Build-Own-Operate
EUA EU Allowance
BoP Balance of Plant
FAC Final Acceptance Certificate
c-Si Crystalline Silicon
FiT Feed-in Tariff
CB Circuit Breaker
GCR Ground Cover Ratio
CDM Clean Development Mechanism
GHG Greenhouse gas
CdTe Cadmium Telluride
GHI Global Horizontal Irradiation
CE Conformance European (European
Commission) GSM Global System for Mobile Communications

CER Certified Emission Reduction GTI Global Tilted Irradiation

CERC Central Electricity Regulatory Commission HV High Voltage

CFADS Cash Flow Available for Debt Service IAC Intermediate Acceptance Certificate

CIGS/CIS Copper Indium (Gallium) Di-Selenide ICC International Chamber of Commerce

CIS Copper Indium Selenide ICSID International Centre for Settlement of

Investment Disputes
CSC Cost Settlement Center
IEA International Energy Agency
CSP Concentrated Solar Power
IEC International Electrotechnical Commission
DC Direct Current
IEE Initial Environmental Examination
DIN Deutsches Institut fr Normung
IFC International Finance Corporation
DNI Direct Normal Irradiation
IGBT Insulated Gate Bipolar Transistor
DSCR Debt Service Coverage Ratio
IP International Protection Rating or Internet
DSRA Debt Service Reserve Account Protocol
DSP Digital Signal Processing IPs Indigenous Peoples
EHS Environmental, Health and Safety IPP Independent Power Producer
EIA Environmental Impact Assessment IRENA International Renewable Energy Agency
EN European Norm IRR Internal Rate of Return

List of Abbreviations v
 List of Abbreviations (continued)
ISC Short-Circuit Current PID Potential Induced Degradation
JI Joint Implementation PIR Passive Infrared
JNNSM Jawaharlal Nehru National Solar Mission PPA Power Purchase Agreement
kWh Kilowatt Hour PR Performance Ratio
LCOE Levelised Cost of Electricity PV Photovoltaic
LD Liquidated Damages REC Renewable Energy Certificate
LLCR Loan Life Coverage Ratio REC Renewable Energy Credit
LPS Lightning Protection System REIPPP Renewable Energy Independent Power
LTV Loan to Value Producer Procurement

LV Low Voltage ROI Return on Investment

MCB Miniature Circuit Breakers ROW Right of way

MPP Maximum Power Point RPO Renewable Purchase Obligation

MPPT Maximum Power Point Tracking SCADA Supervisory Control and Data Acquisition

MRA Maintenance Reserve Account SERC State Electricity Regulatory Commission

MTTF Mean Time to Failure SPV Special Purpose Vehicle

MV Medium Voltage STC Standard Test Conditions

MVA Mega-volt ampere TCO Total Cost of Ownership

MW Megawatt TCP Transmission Control Protocol

MWp Megawatt Peak TGC Tradable Green Certificate

NAPCC National Action Plan on Climate Change THD Total Harmonic Distortion

NCRE Non-Conventional Renewable Energy UL Underwriters Laboratories, Inc.

NHSFO Non Honoring of Sovereign Financial UNFCCC United Nations Framework Convention on
Obligations Climate Change

NPV Net Present Value UV Ultraviolet

NREL National Renewable Energy Laboratory VOC Open Circuit Voltage

NVVN National Thermal Power Corporation V Volt

Vidyut Vyapar Nigam VAT Value-Added Tax
OECD Organisation for Economic Cooperation VDE Verband der Elektrotechnik, Elektronik und
and Development Informationstechnik
OEM Original Equipment Manufacturer WACC Weighted Average Cost of Capital
O&M Operations and Maintenance Wp Watt Peak

vi A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Foreword

Although it currently represents a small percentage of global power generation, installations of solar
photovoltaic (PV) power plants are growing rapidly for both utility-scale and distributed power generation
applications. Reductions in costs driven by technological advances, economies of scale in manufacturing,
and innovations in financing have brought solar power within reach of grid parity in an increasing
number of markets. Continued advancements and further cost reductions will expand these opportunities,
including in developing countries where favourable solar conditions exist. Policy environments for
renewable energy in the developing world are being refined, drawing on the lessons learned from
the successes and failures of policies adopted in first-mover markets. We now see several regulatory
models being successfully deployed in the developing world with consequent increase in investment and
installations. Solar is proving to be viable in more places and for more applications than many industry
experts predicted even a few years ago.

At the same time, this rapid market growth has been accompanied by an observed uneven expertise and
know-how demonstrated by new market entrants. Building capacity and knowledge on the practical
aspects of solar power project development, particularly for smaller developers, will help ensure that new
PV projects are well-designed, well-executed, and built to last.

Enhancing access to power is a key priority for the International Finance Corporation (IFC), and solar
power is an area where we have significant expertise. IFC has invested in more than 55 solar power
projects globally representing about 1,400 MW of capacity, with key recent transactions in Thailand, the
Philippines, India, China, Jordan, Mexico, South Africa, Honduras, and Chile.

We trust that this publication will help build capacity amongst key stakeholders, as solar power continues
to become a more and more important contributor to meeting the energy needs in emerging economies.

John Kellenberg
Manager, Energy & Efficiency Resource Advisory

Foreword 1
 Acknowledgements

This publication is an expanded and updated version of the Utility-Scale Solar Power Plants guidebook
published by IFC in 2011. Both versions (2011 and present) were developed by Sgurr Energy under
contract for IFC, with substantial contributions from IFC staff. Ben Lumby was the lead author and
technical editor within Sgurr Energy and was greatly assisted by Vicky McLean. Stratos Tavoulareas
(IFC) managed the development of the book and contributed extensively to the content with additional
input from IFC colleagues Alex Blake and Lauren Inouye.

The authors are grateful for the input and peer review of IFC technical and finance experts
Guido Agostinelli, Pep Bardouille, Katharina Gassner, Chandra Govindarajalu, Rory Jones,
Hemant Mandal, Elena Merle-Beral, Alasdair Miller, Alejandro Moreno, Juan Payeras and Bryanne Tait.
Jeremy Levin and John Kellenberg provided valuable input, guidance and management support
throughout. Additionally, this publication would not have been possible without the input of SgurrEnergy
team members working from the head office in Glasgow (UK) and offices in India, South Africa, France,
Canada, U.S. and China.

IFC would like to thank the governments of Ireland, Luxembourg, the Netherlands, Norway, and
Switzerland for their support in producing this report.

2 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Executive Summary 1
With an installed capacity greater than 137 GWs worldwide
and annual additions of about 40 GWs in recent years,1 solar
The World Bank Group
photovoltaic (PV) technology has become an increasingly
(including the International important energy supply option. A substantial decline in the
Bank for Reconstruction and cost of solar PV power plants (80% reduction since 2008)2
Development, the International has improved solar PVs competitiveness, reducing the needs
Development Association, IFC, for subsidies and enabling solar to compete with other power
generation options in some markets. While the majority of
and the Multilateral Investment
operating solar projects is in developed economies, the drop in
Guarantee Agency) helps client prices coupled with unreliable grid power and the high cost of
countries secure the affordable, diesel generators has driven fast-growing interest in solar PV
reliable, and sustainable energy technology in emerging economies as well.
supply needed to end extreme
Many emerging economies have an excellent solar resource,
poverty and promote shared and have adopted policies to encourage the development of the
prosperity. solar industry to realize the benefits that expanded use of PV
technology can have on their economies and on improving energy
security, as well as on the local and global environmental. Also,
solar installations can be built relatively quickly, often in 612
months, compared to hydro and fossil fuel projects that require
more than 45 years to complete. This presents a major incentive
in rapidly-growing, emerging markets with a high unmet demand
and urgent need for power. Assuming that PV technology prices
continue to fall relative to competing sources of electricity, the
market penetration rate of utility-scale solar power projects can
be expected to continue growing rapidly, including in emerging
markets.

The World Bank Group (including the International Bank for

Reconstruction and Development, the International Development
Association, IFC, and the Multilateral Investment Guarantee
Agency) helps client countries secure the affordable, reliable, and
sustainable energy supply needed to end extreme poverty and
promote shared prosperity. The approach mirrors the objectives

1 Source: IEA, Trends 2014 in Photovoltaic Applications

2 Source: IRENA, Rethinking Energy 2014

1: Executive Summary 3
of the Sustainable Energy for All Initiative achieving Project development activities are interrelated and
universal access, accelerating improvements in energy often are carried out in parallel. Technical aspects
efficiency, and doubling the global share of renewable that determine the plant design and energy yield are
energy by 2030. The World Bank Group recognizes that accompanied by efforts to secure permits/licenses
each country determines its own path for achieving its and financing. Assessments are repeated at increasing
energy aspirations, and that each countrys transition levels of detail and certainty as the project moves
to a sustainable energy sector involves a unique mix forward. For example, a preliminary design is initially
of resource opportunities and challenges, prompting a developed (prefeasibility study) along with a high-level
different emphasis on access, efficiency, and renewable assessment of the regulatory environment and price of
energy. power, enabling a back of the envelope analysis to
be carried out to determine whether the project meets
Enhancing access to power is a key priority for IFC, investor requirements. If the project looks promising, the
which supports private sector investment in renewable developer decides to proceed further. If the project does
energy solutions. As of May 2015, IFC has made over not appear to meet hurdle rates, changes to the design or
350 investments in power in more than 65 countries. We financing adjustments may be considered, or the project
are often at the forefront of markets opening to private development may be terminated. Similar analysis is
participation. IFC has invested in more than 55 solar repeated in the feasibility study at a more granular level of
projects, representing about 1,400 MW of capacity, with detail, ultimately leading to another go/no-go decision.
key transactions in Thailand, the Philippines, India, China, Throughout the project development process, there are
Jordan, Mexico, South Africa, Honduras, and Chile. several key decision points when modifications are made,
and the decision to proceed further is re-assessed. Changes
The objective of this guidebook is to enhance the readers
are common until financial closure is achieved. After this,
understanding of how to successfully develop, finance,
the focus shifts to procuring the equipment, construction,
construct, and operate utility-scale solar PV power plants.
and commissioning the power plant within the projected
It is aimed at project developers entering the market, and
schedule and budget.
meant as a reference source for contractors, investors,
government decision makers, and other stakeholders This guide covers the key building blocks to developing a
working on PV projects in emerging markets. This report successful utility-scale solar power project (the threshold
is a substantially expanded version (second edition) of for utility-scale depends on the market, but generally at
an earlier IFC publication, Utility-Scale Solar Power least 5 MW). Most lessons learned in this segment of the
Plants, which was released in 2011. Substantial progress solar industry are drawn from experiences in developed
in the number of PV projects implemented globally and markets. However, this guide makes an effort to anticipate
dramatic reduction in PV technology prices justified the and address the concerns of projects in emerging
need for an update in this fast moving market. economies. In doing so, the guidebook covers the key three
themes:
The guidebook focuses on aspects of project development
that are specific to solar. From this perspective it covers 1. Optimum power plant design: A key project
all aspects of the overall project development process development challenge is to design a PV power
including site identification, plant design, energy yield, plant that is optimally balanced in terms of cost and
permits/licenses, contractual arrangements, and financing, performance for a specific site.
giving sparser coverage to general project development 2. Project implementation: Achieving project completion
basics that are not specific to solar. on time and within budget with a power plant
that operates efficiently and reliably, and generates
the expected energy and revenue, is another key

4 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 concern for developers. Key aspects of project 1.1 OPTIMUM POWER PLANT AND PROJECT
implementation include: permits and licensing, DESIGN
selection and contracting of the Engineering, PV plant design is developed initially as part of a
Procurement and Construction (EPC) company, power prefeasibility study which is based on preliminary energy
plant construction, and operations and maintenance resource and yield estimates, as well as other site-specific
(O&M). requirements and constraints. The plant design is further
3. Commercial and financing aspects: PV regulatory improved during the feasibility study, which considers site
frameworks and specific types of incentives/support measurements, site topography, and environmental and
mechanisms for the development of PV projects, such social considerations. Key design features include the type
as preferential tariffs and other direct and indirect of PV module used, tilting angle, mounting and tracking
financial supports, have an important impact on the systems, inverters, and module arrangement. Optimization
financial viability of the project, as they affect the of plant design involves considerations such as shading,
revenue stream. Power Purchase Agreements (PPAs) performance degradation, and trade-offs between
specify the terms under which the off-taker purchases increased investment (e.g., for tracking) and energy
the power produced by the PV plant; this is the most yield. Usually, the feasibility study also develops design
important document to obtain financing. specifications on which the equipment to be procured is
based. PV technology options are described in Section 3,
The project development process starts once interest has and the PV plant design in Section 7.
been established in a specific power market. Assessment
of the market opportunity takes into account broad issues Solar energy resource depends on solar irradiation of the
at the national level, such as the regulatory environment, geographic location as well as local issues like shading.
prevailing power prices, structure of the power market, the Initially, solar resource assessment can be done based
credit-worthiness of potential off-takers, and any specific on satellite data or other sources, but as the project
financial incentives for developing solar PV power plants. development moves forward, ground-based measurements
The first tangible steps in the process are development of are desirable to provide an increased level of confidence.
a concept and identification of a site. The project will then Solar resource is covered in Section 4.
proceed through several development stages, including
the prefeasibility study, a more detailed feasibility study, Energy yield is a critical parameter that determines (along
permitting and financing, and finally engineering (detailed with the capital costs and the tariff) the financial viability
design), construction, and commercial operation of the of the project. Probability-based energy yield (for example
power plant. As the project developer initiates preparatory P50, P75, P90) are modelled over the operating life of
activities including securing a land lease agreement and the project. A thorough analysis of the solar resource and
permits, preliminary financing schemes are assessed. projected energy yield are critical inputs for the financial
Energy resource assessment and activities related to analysis. Details on the methodology, solar data sources
project financing run in parallel with the project design and key issues to be considered when estimating the
(e.g., engineering, construction, etc.). Detailed information energy resource and project energy yield are provided in
on these overlapping work streams and guidance Section 5.
on coordination and successful execution of project
activities is provided throughout all fifteen sections of Site selection is based on many considerations, such as
this guidebook, beginning with an overview of the project whether the PV plant is close to the grid, and whether
development process in Section 2. A summary of key the process for obtaining a grid connection agreement
aspects of project development is provided in this section. is transparent and predictable. Close cooperation
with the grid company is essential in obtaining a grid

1: Executive Summary 5
connection agreement. The agreement, as well as Section 8 of the report provides more information on
applicable regulations should clearly state the conditions permits, licensing and environmental considerations.
of the PV developers access to the grid, and provide the
guidelines for design, ownership, and operation of the Engineering, procurement and construction can be broken
grid connection. Access to land is also a basic requirement into multiple contracts, but care must be taken to spell
for project development. Project land must be purchased out responsibilities, so that all parties are clear on who
or leased for longer than the debt coverage period; a is managing various risks and the overall process. In
minimum of 1520 years is desirable, although a 4050 some cases, overall coordination is performed by the PV
year lease is often signed. In addition to the project site, plant owner (if it has the in-house engineering expertise
the developer needs to secure access to the land over which and experience in similar projects) or by an engineering
the grid connection will be laid out. Land use issues are company that is hired as a management contractor acting
reviewed along with the technical aspects of site selection on behalf of the owner. However, the most common
in Section 6. approach in building PV plants is turn-key responsibility
through an EPC contract. An EPC contract involves
1.2 PROJECT IMPLEMENTATION one organization (the EPC Contractor) who has full
responsibility to complete the project on time, under
The objective of the project implementation process is to
budget, and within the specified performance. The EPC
complete the project on schedule and within the allocated
contactor is paid a higher fee in return for managing
budget, with a PV power plant that operates efficiently
and taking responsibility for all the risks of the project.
and reliably, and generates the expected volumes of energy
Section 9 provides more details on the development of
and revenue. In order to achieve this objective, a number
a contracting strategy, and Annex 2 contains Heads
of key activities need to be completed successfully.
of Terms for an EPC contract. Section 10 reviews the
construction process.
Permits and licensing is often a very bureaucratic process
involving multiple agencies in the central and local
Operation and Maintenance (O&M) of PV plants can
governments which may not coordinate their procedures
be performed by the owner or contractors. Regular
and requirements. The list of permits/agreements needed
maintenance (including cleaning of the PV modules) is
is usually very long and differs from country to country.
relatively easy and can be done by local staff trained by
Typically, at least the following are needed: 1) Land lease
the equipment suppliers. Monitoring of plant performance
agreement; 2) Site access permit; 3) Building permits; 4)
can be achieved remotely by the original equipment
Environmental permit; 5) Grid connection agreement;
manufacturer (OEM) or other asset manager. Spare parts,
and 6) Operator/generation license. Understanding
both for plant inventory and in response to equipment
the requirements and the local context is essential.
failures, need to be purchased from the OEM or an
Consultations with the relevant authorities, the local
alternative supplier. Section 11 provides more information
community, and stakeholders are also important for a
on O&M contracting structures and best practices, while
smoother approval process.
an overview of key terms for an O&M term sheet is found
in Annex 3.
Environmental and social assessments should be performed
early in the project planning process and actions should be
Annex 4 provides an overview of the rooftop solar
taken to mitigate potential adverse impacts.
market. This is an important development as distributed
PV systems have grown and are expected to continue
Grid connection agreement is critical to ensure that the
growing substantially. These PV systems are installed on
PV plant can evacuate the power generated to the grid.
rooftops of residential buildings (typically 1050 kW) and

6 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

commercial/industrial buildings (up to 12 MWs). From Power projects are typically financed on a back-to-back
the design and construction point of view, key aspects are: basis, meaning that all contracts eventually rely on a
optimal orientation and shading from adjacent (present bankable PPA. In other words, a PPA with a creditworthy
and future) buildings and plants. Permits are easier to off-taker covering adequately all the key risks of the
obtain, but they differ from large utility-scale PV plants, as project provides a sound basis for the project developer
different agencies are involved (mostly local authorities). to sign EPC and O&M contracts, lease or purchase land,
etc., so the project can be implemented.
Depending on the regulatory framework affecting such
installations, net metering or gross metering may be As the project takes shape, the developer begins
available; this is something that (along with the regulated negotiations with the off-taker (often but not always
tariff for electricity sold to the grid) will determine the a state-owned utility in most emerging economies) on
payback period and overall attractiveness of the project. the price, duration, and terms of the PPA. In many
However, purchasing the PV system is not the only markets, PV projects have benefitted from regulatory
option for the owner of a building. There are companies support providing above-market price for power. For
offering lease agreements including leasing the PV plant example, under a Feed-in Tariff (FiT) program, the price
or installing the PV plant and paying the owner of the of electricity from renewable energy is specified for a set
building a rental. Under such agreements, electricity may period of time, usually 1025 years. In another example,
be sold to the building owner at below-market prices. terms of the PPA may be pre-determined through a tender
process in which the developer is submitting a competitive
1.3 COMMERCIAL AND FINANCING ASPECTS bid (e.g., reverse auction). In a third example, utilities
may have an obligation to source a portion of their
Activities related to project financing run in parallel
total energy from renewable sources, and then negotiate
with the project design and permitting. As the project
with developers according to their own priorities and
developer initiates preparatory activities including
parameters. In the (relatively rare) instance of a merchant-
securing land lease agreement and permits, preliminary
solar power plant, power will be sold in the open market
financing schemes are also assessed. Adequate funds
(i.e., day-ahead, hour-ahead markets) at fluctuating
should be allocated to complete the initial stages of
rates rather than at a pre-determined tariff. However, in
project development, most importantly for the energy
the future (if PV prices continue to decline) regulatory
resource assessment, site selection, land lease agreement,
support may not be needed and merchant PV plants may
and preliminary permits/licenses. Depending on the
become more common.
financing requirements of the project and how much
of their own equity the developer can commit to the
The grid connection and dispatching need to be clarified in
project, the developer may seek another sponsor. It is
the PPA. In most countries, the regulation requires the grid
not unusual for the initial project developer to sell part
operator to take all the electricity produced by renewable
or all of the rights to the project to another sponsor who
facilities (obligation to take), but curtailment rules need
will complete the project, often a sponsor with greater
to be included clearly in the PPA. Section 12 provides
technical expertise and financial resources. As the project
more information on the regulatory support mechanisms
progresses, the developer/sponsor will reach out to
used for PV projects. Section 13 describes key elements
potential debt financiers to get an idea of current lending
of PPAs that are specific to solar, and explains several
rates, requirements and terms, and as the project develops,
solar-specific risks that this key legal document is used to
they will undergo due diligence. The experience and
mitigate, such as indexing the power-purchase price (tariff)
creditworthiness of the sponsor is critical for achieving
to a foreign currency to avoid devaluation risks.
financial closure and obtaining attractive financing.

1: Executive Summary 7
Key risks associated with PV projects: The appropriate financing arrangement depends on
the specifics of each PV project, including investor risk
Completion risks affected by permitting/licensing and
appetite. The most common arrangement for such projects
construction delays.
generally is to use a project finance type arrangement,
Energy yield: how much energy the facility will be typically with at least 30 percent equity and the remainder
producing depends on the energy resource and the as debt. However, all equity financing may be chosen in
design of the PV plant. An incorrect estimation of certain situations. For example, if local commercial debt
the energy resource, an unforeseen change in weather is difficult to access or is expensive, or the due diligence
patterns and performance degradation of the PV plant process for obtaining debt is expected to slow down a
could significantly affect the revenue of the project. project and tariffs are sufficiently high, equity investors
Regulatory environment: Changes impacting the may be incentivized to back the entire project. While debt
amount of power the off-taker is obligated to purchase is cheaper than equity, all equity financing can allow for
and the price they pay can clearly impact the project, speedier project development, a priority in markets where
especially when applied retroactively. While this is a specified amount of construction must be achieved by
not the norm, several countries (including developed a certain deadline in order to be eligible for incentives.
markets generally seen as credible!) have implemented This dynamic is not unique to solar, but as solar projects
retroactive changes, raising the risk associated have historically been smaller, it has been more feasible
regulatory incentives. A comprehensive assessment for developers to finance them without debt financing,
of the power sector provides useful insight into the or at least to delay debt financing until the projects were
sustainability of such regulations. Developers are operational, and presented a significantly lower risk
advised to consider the viability of their projects profile to lenders. For solar projects that are among the
without subsidies or special treatment, particularly if first in their market, local banks may be reluctant to
such consideration makes the effective price of power lend until they have evidence of successful projects; in
well above the levelised cost of power in the existing such circumstances, seeking financing from development
power market. finance institutions like the IFC, which is willing to be
a first-mover in new markets for renewables, may be a
Off-taker creditworthiness: A thorough due diligence
solution. Sections 14 and 15 provide more specifics on
of the off-taker is an essential step before financing is
financing, due diligence, and the typical financial analysis
finalized.
carried out.

Boxes

Boxes elaborate on a wide variety of topics. They provide case studies and on the ground lessons learned from a variety of countries.

Issues and lessons described in these boxes will inform the actions of developers, lenders and contractors thereby promoting good practice
in the industry. This will help facilitate financing within the solar sector.

Many of the lessons learned reduce to the same fundamental point: for a successful project it is essential to have suitable expertise
within the project team. This does not only apply to technical expertise but also to financial, legal and other relevant fields. Suitable
expertise can be incorporated in a variety of ways: by hiring staff, using consultants or partnering with other organisations.

8 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Photovoltaic (PV) Project Development 2
2.1 PROJECT DEVELOPMENT OVERVIEW

Even though each solar PV This section provides an overview of the project development
project may follow a different process, from inception of the idea to the start of commercial
operation. In broad terms, this process applies to the
road map, the key steps for
development of any privately-financed, utility-scale power
developing a solar PV project are plant. Aspects of the process that are unique to the use of solar
well established. PV technology, such as assessment of solar energy yield, site
selection, and technology selection are emphasized more in the
subsections below.

Developing a PV project is a process involving many stages

and requires a multidisciplinary team of experts. The project
developer starts by identifying a power market that offers
adequate risk-reward opportunities, then identifies a promising
site and secures the land-use rights for this site, carries out two
separate rounds of technical-financial assessments (prefeasibility
study and feasibility study), obtains all required permits and
licenses, secures power purchase and interconnection agreements,
arranges financing, and selects a team to design and construct the
project (often an EPC contractor), supervises plant construction,
and carries out testing and start-up. As the project moves from
one stage to the next, the technical-financial assessments become
more detailed until a final design is developed and construction
starts.

It is important to emphasize the back-to-back nature of many

project contracts and documents; a PPA is needed in order for
financing to be completed. However, this must be preceded by a
grid connection agreement, construction and site access permits,
land lease agreement, etc. Throughout this process, technical,
commercial, and legal/regulatory experts are involved, working
in parallel on distinct yet interdependent activities. While clear
responsibilities can be identified for each expert, most project
activities are related and the work of one expert influences the
work of other experts; hence close coordination is needed. It is
crucial to emphasize this latter point. Although this guide lays
out the process as a series of steps, some project development

2: Photovoltaic (PV) Project Development 9

activities must happen in parallel. It is up to the individual
developer or project manager to oversee the activities Figure 1: Project Development Stages
and ensure they are coordinated and synchronized
appropriately. BANK MAIN ACTIVITIES
PERSPECTIVE (DEVELOPER)
The key steps for developing a solar PV project are well STAGE 1 SITE IDENTIFICATION/CONCEPT
established, and yet there is no definitive detailed road Identication of potential site(s)
map a developer can follow. The approach taken in Funding of project development
Development of rough technical concept
each project depends on site-specific parameters and
the developers priorities, risk appetite, regulatory STAGE 2 PRE-FEASIBILITY STUDY
requirements, and the types of financing support Assessment of dierent technical options
Approximate cost/benets
mechanisms (i.e., above market rates/subsidies or tax
Permitting needs
credits) available in a given market. However, in all cases, Market assessment
certain activities need to be completed that can broadly be
STAGE 3 FEASIBILITY STUDY
organized in the following five stages:
Technical and nancial evaluation of
preferred option
1. Concept development and site identification.
First contact with Assessment of nancing options
project development Initiation of permitting process
2. Prefeasibility study. Development of rough technical concept
3. Feasibility study.
STATE 4 FINANCING/CONTRACTS
4. Permitting, financing and contracts. Permitting
Contracting strategy
5. Engineering, construction and commercial operation. Due diligence Supplier selection and contract negotiation
Financing concept Financing of project
These stages are described in the following subsections and STATE 5 DETAILED DESIGN
show in Figure 1. A checklist of key tasks corresponding Preparation of detailed design for all
with each stage is provided at the end of the respective relevant lots
Loan agreement Preparation of project implementation
sub-section. schedule
Finalization of permitting process
2.2 STAGE 1 CONCEPT DEVELOPMENT AND SITE STATE 6 CONSTRUCTION
IDENTIFICATION
Construction supervision
The concept development stage includes identification Independent review
of the investment opportunity at a specific site and the of construction

formulation of a strategy for project development. It STATE 7 COMMISSIONING

is assumed at this stage that a target market has been Performance testing
identified and the project developer understands any Independent review Preparation of as build design (if required)
of commissioning
special prerequisites for investing in that specific country
and power sector. These market-level decisions require a
detailed assessment that carefully considers the riskreward
appetite of the project developer and potential investors. long-term leasing, an accessible grid connection or a
binding regulatory commitment to connect the site to the
2.2.1 SITE IDENTIFICATION transmission network, and no serious environmental or
A desirable site has favourable local climate, good solar social concerns associated with the development of a PV
resource (irradiation), land available for purchasing or project. Many countries require that the site be part of

10 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

a list pre-approved by the government; this needs to be peak and off-peak hours. Developers need to understand
confirmed at the outset of the site identification process. the regulatory requirements for qualifying for financial
Section 6 provides more details on site selection. support in order to secure the highest available tariff
and, critically, must be acutely aware of cut-off dates for
2.2.2 THE PV PROJECT particular support mechanisms. Failure to understand
At least a preliminary (conceptual) design should be support mechanism rules and regulatory dynamics could
developed that helps estimate installed capacity or result in a significant loss of revenue and have a negative
megawatts (MW), expectations, approximate investment impact on project economics. Regulatory frameworks
requirements, energy yield, expected tariff and associated and support mechanisms (e.g., financial incentives) are
revenue. This way, a preliminary assessment of costs and discussed further in Section 12.
benefits can be made, including return on investment
2.2.5 OFF-TAKER DUE DILIGENCE
(ROI). A preliminary financial model is often developed at
this stage. Credit-worthiness of the off-taker is critical and should be
a primary focus of the due diligence to determine the level
2.2.3 OUTLINE OF PROJECT STRUCTURE of risk associated with a PPA. As a legal contract between
At the concept stage, a developer may not be ready to the solar plant operator and the purchaser of the electricity
invest significant resources, and may leave the project produced, a PPA defines future project revenues. It is
structure undefined. However, it is important to think therefore critical to understand at the outset whether there
about structuring issues at an early stage. In emerging are standardized terms in a given market for developing a
markets, the formation of a project company can be PPA, or whether the agreement will be negotiated ad-hoc.
challenging, and may involve requirements to appoint If the agreement is not part of a structured program, such
country nationals to management positions. International as a government tender, there may be other standardized
developers/investors will need to carefully consider terms required by the off-taker or broader regulatory
such requirements, as well as any potential concerns framework. In many developing countries, there is only
about taxes and repatriation of profits. If a developer one company responsible for purchasing and distributing
is exploring a portfolio of opportunities in a new power. Even in countries that have begun privatization of
market, it may be worthwhile to establish or purchase a power generation, this company is often partially or fully
placeholder Special Purpose Vehicle (SPV) that can be state owned. Understanding the off-takers role compared
utilized when a project moves towards development. to other regulatory authorities, as well as the off-takers
creditworthiness and the expected tenor and terms of the
2.2.4 THE REGULATORY FRAMEWORK AND SUPPORT PPA, is paramount, as these will impact the terms of the
MECHANISMS debt financing and, therefore, the viability of the project.
Often, support mechanisms (e.g., incentives) play a large
2.2.6 FINANCING STRATEGY
role in the economics of PV projects, especially compared
to traditional power generating technologies. Support At the concept stage, available funds are usually minimal,
mechanisms for solar and other types of renewables but the developer should still begin to sketch out an
can take many forms, including direct subsidies, tax or internal budget that will meet requirements as the project
investment credits, or favourable FiTs. Many countries moves ahead. At this time, the developer should also
set strict criteria for new renewable projects to qualify consider whether a secondary equity investor will be
for financial support. Such criteria for solar PV will vary needed. As the project progresses through the concept
by country and may also differ based on project size phase, the developer will begin to explore debt financing
(i.e., commercial rooftop solar versus projects over 1 options; availability and terms vary widely across markets.
or 5 MW). Also, actual financial support may vary for It is important for developers to begin conversations with

2: Photovoltaic (PV) Project Development 11

local financiers early, particularly in markets where there resources. The prefeasibility study can be carried out as a
is less familiarity with solar technologies, as negotiations desktop study even though a site visit is desirable. Given
can take substantially longer in this context. This assumes the uncertainty of data available at this stage, viability will
use of a project finance structure, which for solar power be determined in reference to a minimum financial hurdle
projects is commonly a mixture of non-recourse debt and rate, and will take into account a wide margin of error
equity. Financing is discussed in greater detail in Section (e.g., +/-30%) to compensate for the lack of site-specific
14. assessment data.

The concept stage is an iterative process that aims to A prefeasibility study should, at a minimum, include an
develop an understanding of the risk, project-specific assessment of:
costs and revenues that enable an assessment of project
The project site and boundary area, ensuring access to
economics. The developers objective is to obtain sufficient
the site is possible, both legally and technically.
information to make an informed decision about the
probability that the project can be taken forward. If the A conceptual design of the project giving different
project looks promising, the developer is likely to decide options of technology (if applicable) and the financial
to proceed to the next stage. impacts, including estimation of installed capacity.

The approximate costs for land, equipment,

development, construction and operation of the
Concept Stage Checklist
project, as well as predicted revenue.
The checklist below covers key questions and factors the
developer should consider when deciding whether to proceed to
Estimated energy yield of the project. While site-
the next stage, which is to conduct a prefeasibility study. specific analysis should be performed at a later stage,
for prefeasibility purposes, published, high-level
Project structure outlined.
solar resource data and estimates of plant losses, or
Does the country and power sector provide adequate
an assumed performance ratio (based on nominal
risk-reward benefits to private investors?
values seen in existing projects) can be used. Seasonal
Regulatory support and tariffs, especially the duration and
production estimates should be taken into account.
timeline for any incentives for solar power.

Suitable site identified taking account of site constraints. The anticipated electricity tariff to be received based on
Grid access (proximity, capacity, and policy provisions for market analysis in a deregulated market, a published
access). FiT in a market with specific incentives for renewables,
Appropriate funds available to carry out the feasibility or the relevant components of the tariff in a market
assessments.
under consideration.
Identification of off-taker and available infrastructure to
take the power generated. A financial model to determine the commercial viability
of the project for further investment purposes.

Grid connection cost and likelihood of achieving a

2.3 STAGE 2 PREFEASIBILITY STUDY connection within the required timeline.
The aim of a prefeasibility study is to develop a Identification of key environmental and social
preliminary plant design and investment requirements, considerations and other potential deal-breakers.
which allow further assessment of the financial viability
of a project. This assessment involves more detail than Permitting requirements, costs, and likelihood of
the previous stage and determines whether to proceed achieving consent.
further with the project and commit additional financial

12 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Assessment of the current regulatory environment,
stability assessment and possible risk of future changes Prefeasibility Checklist
(for example, likelihood of changes during upcoming
Below is a checklist of key considerations for the developer
regional/national elections). during the prefeasibility stage:

An initial concept of the projects legal/corporate Assessment of the site and boundary areas including access
structure; this should be formulated to take advantage permissions and restrictions.

of existing/future incentives. At the prefeasibility stage, Conceptual design completed including consideration of
technology options and their financial impacts.
the developer may begin making assumptions about the
project company which, if the project moves ahead, Approximate costs for land, equipment, delivery, construc-
tion, and operation identified along with predicted revenue.
would be set up to develop and own the specific project
Indicative energy yield completed.
or portfolio.
Identification of anticipated electricity tariff to be received,
Solutions to specific challenges; as challenges to and review of expected terms/conditions of PPAs in the
relevant market.
the project arise, possible solutions will begin to be
identified. For example, if the power off-taker does not High-level financial analysis completed.

have a strong credit rating, the developer may want to Cost and likelihood of achieving grid connection in the re-
explore the possibility of a sovereign guarantee, and/or quired timescales identified.

support from an export credit agency or a multilateral Main environmental constraints identified along with other
potential deal breakers.
institution for example, a partial risk guarantee from
the World Bank. Assessment of current and potential future regulatory envi-
ronment completed.

Preliminary timeline for project activities; while the An initial concept of the projects legal/corporate structure.

scheduled workflow will inevitably change significantly,

Solutions to project challenges.
it is important to begin to understand the spacing and
timing of key required activities at an early stage.
Permitting requirements/costs identified.

Preliminary project timeline/workflow showing spacing of

key activities drafted.
2.4 STAGE 3 FEASIBILITY STUDY

The feasibility phase will build on the work undertaken

at the prefeasibility stage by repeating the assessment in 2.4.1 TECHNICAL DESIGN OF SYSTEM
more detail using site-specific data, such as solar resource Outline system design. Essentially, this is a plan for the
measurements, and should consider any previously projects physical development, including the lay-out,
identified constraints in more detail. If multiple sites are identification of equipment, and costs, etc. The system
being assessed, then the preferred site needs to be selected. design is often required to obtain permits/consents.
The objective of the feasibility study is to provide more To select an initial conceptual design, it is worthwhile
detailed information on the potential project design, the to evaluate various design configurations and module
investment requirements, and to plan for financing and sizes, so that a design can be selected that is optimised
implementation. If the results of the study are favourable, for the site.
the developer should be prepared to invest more to Assessment of shading and initial solar PV plant
advance the project to the financing stage. layout. This is discussed in Section 7. The process
enables optimisation and typically takes into account:
A typical scope for a feasibility study is outlined below
in terms of key technical, regulatory, financial, and Shading angles.
commercial aspects.
Operations and maintenance (O&M) requirements.

2: Photovoltaic (PV) Project Development 13

 Module cleaning strategy. solar modules and other critical components of
plant infrastructure. Examples include delays at
Tilt angle, orientation, and tracking.
customs and difficult negotiations on the terms
Temperature and wind profiles of the site. of sale with manufacturers lacking a local sales
Cable runs and electrical loss minimisation. representative or distributor.

Production of a detailed site plan, including site Inverter selection. Manufacturers are predominately
surveys, topographic contours, depiction of access based in Europe and North America, though
routes, and other civil works requirements. others are emerging in China and Japan. As above,
importation can result in delays to project schedules.
Calculation of solar resource and environmental
See Section 3.5 for further information.
characteristics, especially those that will impact
performance of technical requirements (temperature, Mounting frame or tracking system selection,
wind speed, and geological hazards). These are including consideration of site specific conditions.
discussed in Section 4. While the accuracy of satellite
2.4.2 PERMITTING AND ENVIRONMENTAL, HEALTH
data is increasing and is acceptable in many cases, it is
AND SAFETY (EHS) REQUIREMENTS
often desirable to implement site-specific measurements
Detailed review and inventory of all necessary permits
of irradiation3 as early in the project planning process
and licences needed for constructing and operating
as possible; the feasibility study stage is a good time to
the power plant. Examples are environmental permits,
bring such data into the planning process. Note that
land use permits, and generator licences. For more
irradiation levels often vary across seasons, and this
information, see Section 8.
needs to be accounted for in the financing model.
Pre-application discussions with the relevant
Electrical cabling design and single line diagrams (see
consenting authority about the schedule for permitting,
Section 7.4).
to understand the financial implications.
Electrical connections and monitoring equipment.
Detailed review of environmental and social
Grid connection design, including transformers and considerations, such as wildlife conservation or other
metering, etc. designations that may affect permissible activities at
the project sites; this is usually performed with a desk-
Full energy yield analysis using screened solar data and
based assessment and if possible supplemented by an
the optimised layout (discussed in Section 5).
initial site survey.
Assessment of all technology options and cost/benefit
Initial consultation with key stakeholders, including
analysis of potential suppliers given the project
local community stakeholders, as relevant.
location, including:
Grid connection issues. This should be a more detailed
Module selection. This is an optimized selection
assessment of likelihood, cost, and timing of grid
based on the feasibility phase output, current
connection, as well as transmission line capacities and
availability, and pricing in the market place. Note
constraints. This may also include submission of an
that in countries where the solar industry is still in
initial application into the grid interconnection queue
its infancy, there may be challenges when importing
or achieving a feasibility stage tariff approval from
the regulator.

3 Irradiation is a measure of the energy incident on a unit area of a surface in a

given time period. This is obtained by integrating the irradiance over defined
time limits and is measured in energy per square meter (often kWh/m2).

14 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

2.4.3 FINANCIAL FEASIBILITY OF PROJECT Investment and funding requirements and the
Financial modelling to determine commercial viability investment concept. This should include equity
and attractiveness of the project is discussed further contribution amounts and sources, equity partner
in Section 14. Such modelling includes all costs and requirements and financing assumptions to be included
revenues. It should also involve a sensitivity analysis to in the financial model.
start assessing the project risks.
A project structure and risk-mitigation strategy. In
Further assessment of the anticipated electricity tariff. many emerging markets, to make a project bankable
This is especially pertinent in markets where the tariff (i.e., able to attract reasonably-priced debt financing)
is expected to fluctuate, either by: it is typically necessary to secure credit enhancements,
which can be either private (letters of credit, escrow
Deliberate design, such as in a power market where
accounts) or governmental (sovereign guarantees).
the developer is an Independent Power Producer
(IPP) selling power in a wholesale or spot exchange; Procurement of Owners Engineer. As the intention to
proceed with the project grows, so too the technical
Market forces, such as use of Renewable Energy
scope for the EPC or other technical tendering
Credits (RECs) or another market-based instrument,
procurement contracts needs to be drafted and
which could contribute to the developers revenue;
reviewed by the Owners Engineer. The EPCs Owners
or
Engineer scope of work may also include support for
Potential for revision of negotiated tariffs, such the technical procurement (e.g., PV plant components)
as if the government decides to revise the tariffs and technical design review. The same firm usually
retroactively (uncommon but has occurred) or the follows through as the Owners Engineer during the
off-taker asks for re-negotiation. construction phase.

2.4.4 PROJECT DEVELOPMENT/COMMERCIAL ASPECTS Tender and award of Owners Counsel to support
Project implementation plan Level 1 (minimum) contracts development and negotiation as well as any
including a Gantt chart laying out the project timeline, relevant legal-structuring needs and company set-up
resource requirements, project development budget, during the development phase.
procurement concept (e.g., full turnkey or multi-
It should be noted that the feasibility study may overlap
contracting approach), and O&M concept.
with activities related to permitting, financing, and
Option agreements for land access for all privately held contracts (see next phase) that are being carried out in
land or access roads, or a concession agreement with parallel. Coordination of all technical, commercial, and
the relevant authority. regulatory activities is essential for the success of the
Evaluation of the commercial structure of the project. project.
This includes evaluating the project company or
companies, which may involve a Special Purpose
Vehicle (SPV), depending on company structures
allowed under local law. This also includes evaluating
any off-shore parent-company structures and
incorporation location based on legal, financial and tax
criteria corresponding to the project.

2: Photovoltaic (PV) Project Development 15

 Environmental and social assessments (agreed
Feasibility Checklist in consultation with permitting authority and
other statutory bodies), which may include a full
Below is a checklist for developers with the key considerations
that must be addressed during the feasibility stage.
Environmental and Social Impact Assessment (ESIA).

Preparation and submission of a grid connection

Detailed site plan produced.
application.
Solar resource assessed including assessment of shading.
Review of the design and any permit/consent
Environmental characteristics that may affect performance
conditions; revision of design or consents as needed.
identified.

Detailed review of environmental and social considerations Contractor prequalification, ranking, and short list
conducted.
selection.
Detailed review of required permits and licences undertaken.
Decision on the financing approach (e.g., sources and
Assessment of Capex for technology and supplier options;
proportions of equity and debt, including construction
cost/benefit for options and project location completed.
financing).
Pre-application discussions with relevant consenting
authority undertaken.
Securing financing for the project as described in
Initial consultations with key stakeholders including from
Section 14.
the community completed.

Grid connection assessment completed. Decision on contracting strategy (i.e., EPC contract or
multi-contract).
Predicted energy yields established.

Preparation of solar PV module tender documentation.

Further assessment of anticipated electricity tariff
undertaken. Supplier/contractor selection and contract negotiations.
Financial analysis carried out. Preliminary financing planned.
Preparation of construction or balance of plant tender
Project implementation plan developed. documentation.
Options agreements for land access (where required) Preparation of PPA documentation and final
secured.
negotiations.
Evaluation and concept of the commercial structure of the
project and project company(s) carried out. Preparation of O&M concept and contracts, as
relevant.
2.5 STAGE 4 PERMITTING, CONTRACTS AND Preparation of Owners Engineer tender (if technical
FINANCING advisor is not continued into construction).
After the feasibility stage and assuming that the project Contracting and procurement of relevant insurances
still seems to be financially viable, the project moves to (i.e., construction, operation, etc.).
the next stage. This includes obtaining final permits,
securing project finance and pre-implementation activities Preparation of Lenders Engineers and Lenders Council
(commercial contracts). The timing and sequencing of tenders.
this stage will vary significantly by project, but this phase Finalisation of grid interconnection agreement with
usually includes the following activities: grid operator or relevant authority.
Engagement of relevant community or stakeholders. Preparation of detailed, bankable financial model
Preparation and submission of relevant permit and covering the full lifecycle of the plant. Typically this
licence applications and associated documents for the will only be completed after negotiating the EPC or
proposed project. equipment and Balance of Plant (BoP) contracts, as

16 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 well as O&M contracts, so that the financial model can documents will be required when submitting permitting
incorporate final costs of capital and O&M. applications (i.e., environmental assessment, transport
studies, etc.) as well as timescales for consent to be
Completion of a project risk analysis.
granted following submission. Supporting documentation
Transportation analysis as necessary for difficult-to- requirements and response time will usually vary with
reach project locations. the size of the PV plant, its location, and contextual
Finalisation of all land, surface area, and access sensitivities.
agreementsand trigger land agreement options to
Obtaining permits sometimes requires amending the
convert to long-term leases or easements, as necessary.
design of the PV plant, so that it conforms to the
Finalisation of the detailed project implementation requirements of the local authority and addresses the
plan. concerns of other key agencies during the permitting
process. Hence, it is difficult to overemphasize the
The remainder of this section provides more information
importance of early discussions with relevant parties, so
on the three key activities of this phase: permitting,
that their feedback can be incorporated into the design
financing, and contracts.
process at an early stage.

2.5.1 PERMITTING
Once consents are obtained, it is important to consider
An approved permit must be obtained before construction any attached conditions that must be addressed prior
of a project commences. Permit requirements vary widely to and/or during construction. Consent conditions will
between different countries and regions and are discussed depend on site-specific characteristics and may present
in detail in Section 8. In general, the type of permits may constraints to the development timeline. For example,
include, but are not limited to: a condition of consent may be that construction is not
permitted during certain times of the year to avoid
Land lease agreement(s).
disturbing a particular species breeding season. A review
Access agreements. of all conditions should be carried out after consent is
Planning/land use consents. obtained to establish requirements and to open a dialogue
to clarify any uncertainties with the relevant authority.
Building/construction permits.
It is likely that meeting certain conditions will require
Environmental permits (forestry, endangered species, preparing additional documents for the consenting
EIA, etc.). authority, whose written approval may be required before
the development can proceed.
Social impacts (i.e., cultural heritage/archaeological
sites, stakeholder consultations). 2.5.1.1 Environmental and social considerations
Energy permit. The likely environmental and social effects of a solar
Grid connection application. project should be considered and the impact of the project
assessed. Part of this assessment could be done as a desk-
Operator/generation licences.
top study, but a site visit is essential in order to assess the
current situation of the site and surrounding environment.
It is important to consider the permitting requirements
National legislation should be reviewed to determine any
at an early stage, as the application timeline for different
country-specific requirements related to developing solar
permits will vary. The best approach is usually through
projects. Similarly, referring to international best practices
early discussions with the relevant consenting authority.
will ensure adverse project impacts are minimized and
Such discussions should establish what supporting
positive relationships developed with stakeholders.

2: Photovoltaic (PV) Project Development 17

Environmental and social considerations are covered in and comprehensive documentation that enable reliable
detail in Section 8. revenue projections are particularly critical, because the
lender depends entirely on the cash flow of the project for
Outcomes of environmental and social assessments, repayment, as opposed to the balance sheet of the sponsor.
as well as stakeholder consultation, often provide Commercial banks in new markets may not be familiar
feedback into the design process. Sometimes this includes with solar projects, so developers should be prepared for a
design changes, or developing measures to mitigate any rigorous due diligence process, and incorporate sufficient
significant impacts. It is therefore important that these time in the project schedule to identify and address lender
assessments are carried out in a timely manner that requirements.
allows for any potentially necessary design amendments.
Furthermore, leading lending institutions will require that Throughout the planning process, the developer constantly
the project adhere to rigorous environmental standards assesses and tries to manage risks, so there is favourable
and principles, such as the Equator Principles (EPs)4 and/ risk-reward balance. More information on some of the
or IFC Performance Standards (IFC PSs). Further details typical risks specific to solar PV projects is found in
on environmental and social considerations and lending Section 10.
requirements are provided in Section 8.
More details on PV project financing are provided in
2.5.2 FINANCING Section 13.

Financing a solar PV project is similar in principle to

2.5.3 CONTRACTS
financing other types of power projects, however, certain
2.5.3.1 Contract Strategy
risks that are unique to solar PV must be accounted for in
the financing plan. Risks associated specifically with solar Contracts present developers with several important
PV projects are related to the energy resource (irradiation), considerations. Perhaps foremost is establishing a project
project siting and permitting, solar technology (relatively company or SPV (special purpose vehicle); if not already
new), potential degradation of PV modules, and reliability initiated, an SPV should be formally established. The
of long-term plant performance, as well as potential developer typically creates and owns the project company,
uncertainty of the tariff and revenue collection. potentially with equity co-investment from another
financial backer (sponsor), such as an infrastructure fund.
PV project financing generally involves two key
All contracts, land agreements, financing and secured
components:
project permits and licenses need to be issued in the
Equity, from one or more investors, injected directly name of the SPV; transferring these later to the SPV can
or via a special purpose vehicle (SPV or project be very difficult and time consuming. Also, lenders often
company). insist upon the rights of assignability (e.g., the right for
project assets and liabilities to be assigned to them in the
Non- or limited-recourse debt from one or more
event of default). Considering assignability at early stages
lenders, secured against the assets owned by the SPV.
of incorporation can save significant time later in the
In order to obtain financing, the developer must prepare development process.
comprehensive documentation of the project, so that
financiers may carry out their due diligence to assess With regard to procurement and construction of the
the risks of the prospective investment. Detailed design PV plant, a strategy needs to be developed to address
technology, construction, and performance risks, while
still meeting investment requirements. There are two
4 A list of all EP financial institutions can be found at
main contracting methods that a developer may consider:
http://www.equator-principles.com/index.php/members-reporting

18 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

multiple contracts or a single EPC contract. In the
former case, multiple contractors are engaged to deliver/ Checklist for Permitting, Financing, and Contracts
construct different parts of the PV plant, but one company
Below is a checklist of critical issues that a developer needs to
(typically the owner/developer or the Owners Engineer consider during the stage of project development that involves
or a third party) retains the responsibility of integrating securing permitting, contracts, and financing.
all components and services provided under the various
Preparation and submission of relevant permit and license
contracts. In the case of an EPC contract, one company applications.
is assigned full responsibility for completing the entire Environmental and social assessments (as required)
project. The next sub-section discusses key contract- completed.

related activities. In addition, contractual aspects are Grid connection application prepared and submitted. Grid
connection agreement signed.
covered in more detail in Section 9, and a template EPC
Contract Heads of Terms is provided in Annex 2. Review of design and permit/consent conditions completed.

Contracting strategy approach determined.

A multi-contract approach requires significantly more
management effort on the part of the developer, and also
Financing structure decided. Financing secured for the
project.
exposes the developer to significantly more risk. However,
Community or stakeholder engagement completed.
a multi-contract approach is generally cheaper than an
EPC. While the EPC option is higher cost, it transfers a Solar PV tender documentation prepared.

substantial amount of risk from the developer to the EPC Supplier selection and ranking undertaken.

contractor. PPA documentation prepared.

If an EPC is chosen, it is critical that the developer O&M concept and contracts prepared.

ensures that the EPC contract clearly defines expectations, Owners Engineer tender prepared.
requirements, and responsibilities. The developer should
Relevant insurance procured and contracted.
be certain that the contract is satisfactory in this regard
before signing, as it will be much easier and more Lenders Engineer and Lenders Council tenders prepared.

economical to make changes to the contract before it is Tendering and evaluation of bidders for all contracts carried
out.
signed. If the developer has little or no experience, or is
unsure of any aspect of the project, he should seek advice Contract negotiations completed.

from a consultant experienced in the respective topic. It is Bank-grade energy yield completed.
highly recommended that an Owners Engineer is engaged
Detailed bankable financial model completed.
during the development and construction phase, in order
to ensure the quality of all contractor work, as well as Transportation analysis (if required) carried out.

the meeting of timelines and maintenance of budgets. The All land and access agreements finalised.
Owners Engineer can also ensure consistency between
Project risk analysis completed.
the OEM (Original Equipment Manufacturer) of the solar
modules and warranty requirements across other contracts PPA finalised with off-taker.

and their respective works. Detailed project implementation plan finalised.

There is no single preferred contracting approach. The

Technical and legal due diligence completed (if required).

approach taken will depend on the experience, capabilities

and cost-sensitivity of the developer. However, turnkey
EPC contracts are most commonly used in the solar
industry.

2: Photovoltaic (PV) Project Development 19

2.5.3.2 Coordination of Contract Signing 2.6.1 ENGINEERING AND PROCUREMENT

It is critical that the developer or project sponsor The key aspects of EPC activities are discussed below.
closely coordinates the structure, terms and timelines Section 9 provides more information on EPC contracts,
for execution of key strategic documents. Without as well as the alternative approach that involves the
close coordination, there are likely to be conflicts developer managing multiple contracts.
or contradictions between documents, or worse, the
2.6.1.1 Development of Detailed PV Design
developer can create financial obligations that cannot
be met. Critical path analysis is essential to identify The EPC contractor will prepare the necessary detail
interdependencies and key activities that require close documentation for the solar PV plant to be tendered
monitoring to avoid project delays. and constructed. The following documentation will be
prepared:
Project timelines and corresponding contractual signing
Detailed layout design.
should be coordinated to avoid sub-optimal bargaining
positions in reaching financial close. Examples of poor Detailed civil design (buildings, foundations, drainage,
coordination include: access roads).

The signing of a PPA without knowing the Detailed electrical design.

requirements of the grid interconnection agency and/or
Revised energy yield.
without having a grid connection agreement.
Construction plans.
Signing of an EPC contract without the necessary
financial commitment from investors. If the financing is Project schedule.
not yet in place, a developer should commit only to an Interface matrix.
EPC agreement that is not binding until financial close
Commissioning plans.
is reached.

Signing of an EPC contract before all permits and Key electrical systems must be designed in rigorous detail.
licenses are obtained. This will include equipment required for protection,
earthing and interconnection to the grid. The following
The EPC contract and PPA should be negotiated in parallel designs and specifications should be prepared:
to the financing, as some financial institutions may need to
Overall single line diagrams.
request changes to the contract terms.
Medium voltage (MV) and low voltage (LV) switch
2.6 STAGE 5 ENGINEERING, PROCUREMENT, gear line diagrams.
CONSTRUCTION AND COMMERCIAL
OPERATION Protection systems.

A single EPC contract is most commonly used for Interconnection systems and design.
developing PV plants. In this case, one contractor is Auxiliary power requirements.
responsible for the complete project. The EPC contractor
Control systems.
is required to confirm the solar energy resource, develop
the detailed design of the PV plant, estimate its energy
Civil engineering items should be developed to a level
yield, procure the equipment according to specifications
suitable for construction. These will include designs
agreed upon with the developer, construct the PV plant,
of array foundations and buildings, as well as roads
carry out the acceptance tests, and transfer the plant for
and infrastructure required for implementation and
commercial operation to its owner/operator.
operation. The design basis criteria should be determined

20 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

in accordance with national standards and site specific Mounting frame and module layout.
constraints such as geotechnical conditions. For example,
Inverter locations and foundations/housings.
wind loadings should be calculated to ensure that the
design will be suitable for the project location. Security measures.
Initial electrical layouts:
2.6.1.2 Energy Yield
Schematics of module connections through to the
A bank-grade energy yield will be required to secure
inverter.
financing. Most often investors will require a P90 energy
yield, or an estimate of the annual energy production Single line diagrams showing anticipated cable
which is reached with a probability of 90 percent. It routes.
is advised that this energy yield is either carried out or
Grid connection and potential substation
reviewed by an independent specialist. This will ensure
requirements.
that confidence can be placed in the results and will help
Bill of materials for major equipment.
attract investment.
Energy yield analysis.
The energy yield should include:
Losses assumed with regard to the energy yield
An assessment of the inter-annual variation and yield
forecast.
confidence levels.
Financial model inputs including:
Consideration of site-specific factors, including soiling
or snow, and the cleaning regime specified in the O&M Long term O&M costs and contingencies (up to the
contract. end of the design life and/or debt term).

Full shading review of the PV generator including near Availability assumptions.

and far shading. Degradation of module performance assumptions.
Detailed losses and performance degradation over Spare parts inventory cost.
time.
Connection cost for electricity and services.
A review of the proposed design to ensure that
Cash flow model including maintenance of a
parameters are within design tolerances.
specified debt service coverage ratio (DSCR)5 if
2.6.1.3 Detailed Project Documentation applicable, and contingency reserve to be used for
inverter replacement, weather damage, and other
The EPC contractor will develop a detailed project report,
unexpected costs associated with plant operation.
which along with all project documentation (drawings,
etc.) is housed in a data room that provides easy access Copies of all contracts negotiated:
to all parties involved in the project. This information
PPA.
will be used to secure financing from banks or investors.
Documentation should be presented in a clearly organized EPC Contract.
way. Examples of the information that should be included Equity subscription agreement and incorporation
are detailed below: documents for project SPV.
Site layout showing the location of modules, inverters,
and buildings.

Indicative plans showing:

5 DSCR is the ratio of cash available for debt servicing to interest, principal and
lease payments.

2: Photovoltaic (PV) Project Development 21

 Copies of applicable insurance and other risk- Risk management.
mitigation.
Coordination among all organizations involved in the
Other documents, such as currency hedging project.
agreements, etc., as applicable.
More information on construction is provided in Section
Details of the permitting and planning status.
10.
Environmental impact, restrictions, and mitigation
plans. Commercial operation commences after commissioning,
which includes performance and reliability tests specified
2.6.2 CONSTRUCTION AND COMMERCIAL OPERATION in the contract. Such tests may be conducted for individual
After the contract(s) have been awarded (whether multiple components and then for the overall system. Component-
or a single EPC), the role of the developer is to oversee by-component testing is always needed, but especially
the implementation of the project. This can be done so in the case of multiple contracts in order to assess
using the developers own staff, if they have the expertise whether each contractor has fulfilled its obligations.
and experience, or by hiring an Owners Engineer. Each Successful tests are usually a trigger to release payments to
contractor designs, procures, and installs the components the contractor(s). Unsuccessful tests may result in design
of the PV plant under the terms of its contract. If multiple modifications, and even legal action if the PV plant cannot
contracts are awarded, coordination of schedule and meet performance and reliability guarantees.
interfaces is critical.
Upon completion of acceptance tests, the contractor(s)
Critical tasks that need to be carried out independently for should provide the plant owner with hand-over
each type of contract include: documentation, which should include design data,
drawings, O&M procedures, information about spare
Planning and sequencing of tasks.
parts, and any other information pertinent to complete
Cost management. handover of the plant and its successful future operation
and maintenance.

22 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Solar PV Technology 3
3.1 SOLAR PV TECHNOLOGY OVERVIEW

Modules are either mounted on This section discusses module technologies, mounting systems,
fixed angle frames or on sun- inverters and methods of quantifying plant performance.
It provides an overview of current commercially available
tracking frames. Fixed frames
technologies used in utility-scale solar PV projects. The purpose
are simpler to install, cheaper, is to provide a framework of understanding for developers and
and require less maintenance. investors before they commit to a specific technology.
However, tracking systems
PV cell technologies are broadly categorised as either crystalline
can increase yield by up to 45
or thin-film. Crystalline silicon (c-Si) cells provide high efficiency
percent. Tracking, particularly for modules. They are sub-divided into mono-crystalline silicon
areas with a high direct/diffuse (mono-c-Si) or multi-crystalline silicon (multi-c-Si). Mono-c-Si
irradiation ratio, also enables a cells are generally the most efficient, but are also more costly
smoother power output. than multi-c-Si. Thin-film cells provide a cheaper alternative, but
are less efficient.6 There are three main types of thin-film cells:
Cadmium Telluride (CdTe), Copper Indium (Gallium) Di-Selenide
(CIGS/CIS), and Amorphous Silicon (a-Si).

The performance of a PV module will decrease over time due to a

process known as degradation. The degradation rate depends on
the environmental conditions and the technology of the module.

Modules are either mounted on fixed-angle frames or on sun-

tracking frames. Fixed frames are simpler to install, cheaper and
require less maintenance. However, tracking systems can increase
yield by up to 45 percent. Tracking, particularly for areas with
a high direct/diffuse irradiation ratio also enables a smoother
power output.

Inverters convert direct current (DC) electricity generated by the

PV modules into AC electricity, ideally conforming to the local
grid requirements. They are arranged either in string or central
configurations. Central configuration inverters are considered to
be more suitable for multi-MW plants. String inverters enable

6 Less efficient modules mean that more area is required to produce the same power.

3: Solar PV Technology 23
individual string Maximum Power Point Tracking (MPPT)7 3.2 OVERVIEW OF GROUND MOUNTED PV
and require less specialised maintenance skills. String POWER PLANT
configurations offer more design flexibility. Figure 2 gives an overview of a megawatt-scale grid-
connected solar PV power plant. The main components
PV modules and inverters are all subject to certification,
include:
predominantly by the International Electrotechnical
Commission (IEC). New standards are currently under Solar PV modules: These convert solar radiation
development for evaluating PV module components and directly into electricity through the photovoltaic effect
materials. in a silent and clean process that requires no moving
parts. The PV effect is a semiconductor effect whereby
The performance ratio (PR) of a well-designed PV power solar radiation falling onto the semiconductor PV cells
plant will typically be in the region of 77 percent to 86 percent generates electron movement. The output from a solar
(with an annual average PR of 82 percent), degrading over the PV cell is DC electricity. A PV power plant contains
lifetime of the plant. In general, good quality PV modules may many cells connected together in modules and many
be expected to have a useful life of 25 to 30 years. modules connected together in strings8 to produce the
required DC power output.

7 The purpose of the MPPT system to sample the output of the cells and 8 Modules may be connected together in a series to produce a string of
apply the proper resistance (load) to obtain maximum power for any given modules. When connected in a series the voltage increases. Strings of modules
environmental conditions. connected in parallel increase the current output.

Figure 2: Overview of Solar PV Power Plant

Utility Grid

Sunlight

Solar Modules
LV/MV
Voltage
Step Up
Mounting Racks

AC Utility
Meter
Inverter
&
Transfers DC DC/AC Disconnects
Electricity to
Inverter
AC
Service
Transfers the Panel
Converted AC
Electricity

24 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Inverters: These are required to convert the DC Each material has unique characteristics that impact the
electricity to alternating current (AC) for connection cell performance, manufacturing method and cost.
to the utility grid. Many modules in series strings and
parallel strings are connected to the inverters. PV cells may be based on either silicon wafers (manufactured
by cutting wafers from a solid ingot block of silicon)
Module mounting (or tracking) systems: These allow
or thin-film technologies for which a thin layer of a
PV modules to be securely attached to the ground at a
semiconductor material is deposited on low-cost substrates.
fixed tilt angle, or on sun-tracking frames.
Step-up transformers: The output from the inverters PV cells can further be characterised according to the
generally requires a further step-up in voltage to reach the long-range structure of the semiconductor material,
AC grid voltage level. The step-up transformer takes the mono-crystalline, multi-crystalline (also known as
output from the inverters to the required grid voltage (for poly-crystalline) or less-ordered amorphous material.
example 25kV, 33kV, 38kV, or 110kV, depending on the
grid connection point and country standards). Figure 3 shows the most commonly used PV technologies:
The grid connection interface: This is where the Crystalline Silicon (c-Si): Modules are made from cells
electricity is exported into the grid network. The of either mono-crystalline or multi-crystalline silicon.
substation will also have the required grid interface Mono-c-Si cells are generally the most efficient, but are
switchgear such as circuit breakers (CBs) and also more costly than multi-c-Si.
disconnects for protection and isolation of the PV
Thin-film: Modules are made with a thin-film
power plant, as well as metering equipment. The
deposition of a semiconductor onto a substrate. This
substation and metering point are often external to the
class includes semiconductors made from:
PV power plant boundary and are typically located on
the network operators property.9 Amorphous Silicon (a-Si).

Cadmium Telluride (CdTe).

3.3 SOLAR PV MODULES
Copper Indium Selenide (CIS).
This section describes commercially available technology
options for solar PV modules, discusses module Copper Indium (Gallium) Di-Selenide (CIGS/CIS).
certification and describes how solar PV module
Heterojunction with intrinsic thin-film layer (HIT):
performance can degrade over time.
Modules are composed of a mono-thin c-Si wafer
surrounded by ultra-thin a-Si layers.
3.3.1 BACKGROUND ON PV MATERIALS

Unusual semiconducting properties required for PV cells limit Due to reduced manufacturing costs and maturity of the
the raw materials from which they may be manufactured. technology, wafer-based crystalline modules are expected
Silicon is the most common material, but cells using CdTe and to maintain a market share of up to 80 percent until at least
CIGS/CIS are also viable. Emerging PV technologies such as 2017.10 Thin-film (17 percent) and high efficiency (3 percent)
organic cells are made from polymers. However, they are not modules are expected to make up the remaining 20 percent.
commercially available yet.

9 Responsibility for this is defined in the grid connection contract. Normally, the 10 European Photovoltaic Industry Association, Global Market Outlook for
onus is on the grid operator to maintain the equipment in the grid operators Photovoltaics 2013-2017, http://www.epia.org/fileadmin/user_upload/
boundaryand there will be a cost to be paid by the PV plant owner. Publications/GMO_2013_-_Final_PDF.pdf, 2013 (accessed July 2014).

3: Solar PV Technology 25
 Figure 3: PV Technology Classes

Poly/Multi
Crystaline
Crystalline Silicon
Cells
Mono Crystalline HIT

Amorphous

Thin-film Silicon

Microcrystalline

Thin-film Cells CdTe

CIS/CIGS

3.3.2 CRYSTALLINE SILICON (c-Si) PV MODULES used and the simpler manufacturing process. However,
thin-film cells are less efficient.
C-Si modules consist of PV cells connected together and
encapsulated between a transparent front (usually glass)
A well-developed thin-film technology uses silicon in its
and a backing material (usually plastic or glass).
less-ordered, non-crystalline (amorphous) form. Other
technologies use CdTe and CIGS/CIS with active layers
Mono-c-Si wafers are sliced from a large single crystal
less than a few microns thick. Some thin-film technologies
ingot in a relatively expensive process.
have a less established track record than many crystalline
Cheaper, multi-c-Si wafers may be made by a variety of technologies. The main characteristics of thin-film
techniques. One of the technologies involves the carefully technologies are described in the following sections.
controlled casting of molten multi-silicon, which is then
3.3.3.1 Amorphous Silicon (a-Si)
sliced into wafers. These can be much larger than mono-
crystalline wafers. Multi-crystalline cells produced in this In a-Si technologies, the long-range order of c-Si is
way are currently cheaper, but the end product is generally not present and the atoms form a continuous random
not as efficient as mono-crystalline technology. network. Since a-Si absorbs light more effectively than
c-Si, the cells can be much thinner.
Both mono-crystalline and multi-crystalline module prices
have decreased considerably in the last two years. A-Si can be deposited on a wide range of both rigid and
flexible low-cost substrates. The low cost of a-Si makes
3.3.3 THIN-FILM PV MODULES it suitable for many applications where low cost is more
important than high efficiency.
Crystalline wafers provide high-efficiency solar cells, but
are relatively costly to manufacture. In comparison, thin-
film cells are typically cheaper due to both the materials

26 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

3.3.3.2 Cadmium Telluride (CdTe) of degradation include the quality of materials used in
manufacture, the manufacturing process, and the quality
CdTe is a compound of cadmium and tellurium. The
of assembly and packaging of the cells into the module.
cell consists of a semiconductor film stack deposited on
Maintenance has little effect on the degradation rate
transparent conducting oxide-coated glass. A continuous
of modules, which is predominantly dependent on the
manufacturing process using large area substrates can
specific characteristics of the module being used and the
be used. Modules based on CdTe produce a high energy
local climatic conditions. It is, therefore, important that
output across a wide range of climatic conditions with
reputable module manufacturers are chosen and power
good low light response and temperature response
warranties and degradation rates are carefully reviewed by
coefficients. CdTe modules are well established in the
an independent technical advisor.
industry and have a good track record.

3.3.3.3 Copper Indium (Gallium) Di-Selenide The extent and nature of degradation varies among module
(CIGS/CIS) technologies. For crystalline modules, the degradation rate
is typically higher in the first year upon initial exposure
CIGS/CIS is a semiconductor consisting of a compound of
to light and then stabilises. The initial irreversible light-
copper, indium, gallium and selenium.
induced degradation (LID) occurs due to defects that are
CIGS absorbs light more efficiently than c-Si, but modules activated on initial exposure to light. It can be caused by the
based on this semiconductor require somewhat thicker presence of boron, oxygen or other chemicals left behind
films than a-Si PV modules. Indium is a relatively expensive by the screen printing or etching process of cell production.
semiconductor material, but the quantities required are Depending on the wafer and cell quality, the LID can vary
extremely small compared to wafer-based technologies. from 0.5 percent-2.0 percent.12

Commercial production of CIGS/CIS modules is in the Amorphous silicon (a-Si) cells degrade through a process
early stages of development. However, it has the potential called the Staebler-Wronski Effect.13 This degradation can
to offer the highest conversion efficiency of all the thin- cause reductions of 1030 percent in the power output
film PV module technologies. of the module in the first six months of exposure to light.
Thereafter, the degradation stabilises and continues at a
3.3.4 HETEROJUNCTION WITH INTRINSIC THIN-FILM much slower rate.
LAYER (HIT)
A-Si modules are generally marketed at their stabilised
The HIT solar cell is composed of a mono-thin-crystalline
performance levels. Interestingly, degradation in a-Si
silicon wafer surrounded by ultra-thin amorphous silicon
modules is partially reversible with temperature. In other
layers. HIT modules are more efficient than typical
words, the performance of the modules may tend to
crystalline modules, but they are more expensive.
recover during the summer months, and drop again in the
3.3.5 MODULE DEGRADATION colder winter months.

The performance of a PV module decreases over time.

Degradation has different causes, which may include
effects of humidity, temperature, solar irradiation and
voltage bias effects; this is referred to as potential induced
degradation (PID).11 Other factors affecting the degree 12 Pingel et al., Initial degradation of industrial silicon solar cells in solar panels,
Solon SE, 2011. B.Sopori et al., Understanding Light-induced degradation of c-Si
solar cells, 2012 IEEE Photovoltaic Specialists Conference, Austin, Texas, June
3-8 2012, Conference Paper NREL/CP-5200-54200, June 2012. Accessed from
11 PID is dependent on temperature, humidity, and system voltage and ground http://www.nrel.gov/docs/fy12osti/54200.pdf (accessed July 2014).
polarity. It can be detected with a relatively short test. The degradation is 13 An effect in which the electronic properties of the semiconductor material
reversible by applying a suitable external voltage. degrade with light exposure.

3: Solar PV Technology 27
Additional degradation for both amorphous and efficiency technologies are more costly to manufacture, less
crystalline technologies occurs at the module level and efficient modules require a larger area to produce the same
may be caused by: nominal power. As a result, the cost advantages gained
at the module level may be offset by the cost incurred in
Effect of the environment on the surface of the module
providing additional power system infrastructure (cables
(for example, pollution).
and mounting frames) and the cost of land for a larger
Discolouration or haze of the encapsulant or glass. module area. Therefore, using the lowest cost module
Lamination defects. does not necessarily lead to the lowest cost per watt peak
(Wp)14 for the complete plant. The relationship between
Mechanical stress and humidity on the contacts.
the plant layout and module efficiency is discussed in
Cell contact breakdown. Section 7.2.

Wiring degradation.
At the time of writing, c-Si technology comprises almost
PV modules may have a long-term power output 80 percent of globally installed solar capacity and is likely
degradation rate of between 0.3 percent and 1.0 percent to remain dominant until at least 2017. As of 2014, CdTe
per annum. For crystalline modules, a generic degradation accounted for the large majority of installed thin-film
rate of 0.4 percent per annum is often considered capacity. CIGS is thought to have promising cost reduction
applicable. Some module manufacturers have carried out potential, however the market share is still low. A-Si seems
specific independent tests showing that lower degradation to have poor prospects for penetrating the utility-scale
rates can be safely assumed. For a-Si and CIGS modules, ground-mount market, mainly due to the reduced cost of
a generic degradation rate of 0.71.0 percent is often the more efficient crystalline technologies.
considered reasonable, however a degradation rate of
more than 1.5 percent has sometimes been observed. For 3.3.7 CERTIFICATION
CdTe a value of 0.40.6 percent is often applicable.
The International Electrotechnical Commission (IEC)
In general, good quality PV modules can be expected to issues internationally accepted standards for PV modules.
have a useful life of 25 to 30 years. The risk of increased Technical Committee 82, Solar photovoltaic energy
rates of degradation becomes higher thereafter. systems, is responsible for writing all IEC standards
pertaining to photovoltaics. PV modules will typically
3.3.6 MODULE EFFICIENCY

Table 1 shows the commercial efficiency of some PV

technology categories. As may be expected, while higher 14 Watt Peak value specifies the output power achieved by a solar module under
full solar radiation (under set Standard Test Conditions

Table 1: Characteristics of some PV Technology Classes

Heterojunction Copper Indium
with intrinsic Gallium Di-
Technology Crystalline Silicon Thin-film Layer Amorphous Silicon Cadmium Telluride Selenide
Category c-Si HIT a-Si CdTe CIGS or CIS
Current commercial efficiency 13%-21% 18%-20% 6%-9% 8%-16% 8%-14%
(Approx.)
Temperature co-efficient for -0.45%/oC 0.29%/oC -0.21%/oC -0.25%/oC -0.35%/oC
power a (Typical)
a The temperature co-efficient for power describes the dependence on power output with increasing temperature. Module power generally decreases as the module
temperature increases..

28 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

be tested for durability and reliability according to these portion of their market share in recent years. A 2014
standards. Standards IEC 61215 (for c-Si modules) survey by Photon International (Feb. 2014) indicated
and IEC 61646 (for thin-film modules) include tests for that there are 89 suppliers of PV modules and over
thermal cycling, humidity and freezing, mechanical stress 3,250 products currently available. The same survey
and twist, hail resistance and performance under standard indicated 129 suppliers in 2013. This is illustrative of
test conditions (STC).15 These are an accepted minimum the consolidation that has been occurring in the module
quality mark and indicate that the modules can withstand manufacturing industry.
extended use. However, they say very little about the
performance of the module under field conditions. Financial institutions often keep lists of module
manufacturers they consider bankable. However, these
An IEC standard for power and energy rating of PV lists can quickly become dated as manufacturers introduce
modules at different irradiance16 and temperature new products and quality procedures.
conditions became available in 2011. IEC 61853-1
Photovoltaic Module Performance Testing and Energy While there is no definitive and accepted list of modules
Rating provides the methodology for ascertaining that are considered bankable, Bloomberg New Energy
detailed module performance. An accurate protocol for Finance17 runs an annual survey of EPC contractors,
comparing the performance of different module models is debt lenders and independent technical consultants,
thus now available. and summarises which manufacturers are considered
bankable by the respondents. Market research
organisation NPD Solarbuzz18 also issues annual updates
IEC standards 61853-2-3-4 are currently under
of the top ten module manufacturers.
development. IEC 61853-2 will describe procedures for
measuring the effect of angle of incidence on module
When assessing the quality of a module for any specific
performance. IEC 61853-3 will describe the methodology
project, it is recommended that an independent technical
for calculating module energy ratings (watt-hours). IEC
advisor is approached to review the PV module technical
61853-4 will define the standard time periods and weather
specifications, quality assurance standards, track record
conditions that can be used for calculating energy ratings.
and experience, as well as compliance with relevant
international and national technical and safety standards.
An IEC standard relating to potential induced degradation
The expected degradation of the modules should be
(PID) is expected to be issued at the end of 2014.
ascertained and the module warranties should be reviewed
Table 2 summarises major PV quality standards. Standards and compared to industry norms.
in development for evaluating PV module components
3.3.9 MODULE TECHNOLOGY DEVELOPMENTS
(e.g., junction boxes) and materials (e.g., encapsulants and
edge seals) will give further direction to the industry. Solar PV module technology is developing rapidly.
While a wide variety of different technical approaches
3.3.8 MODULE MANUFACTURERS are being explored, the effects of these approaches are
Manufacturers of PV modules are based predominantly in focused on either improving module efficiency or reducing
Asia (China, Japan, Taiwan, India and Korea). European manufacturing costs.
and North American manufacturers have lost a significant

15 Standard Test Conditions are defined as followsirradiation: 1000 W/m,

temperature: 25C, AM: 1,5 (AM stands for Air Mass, the thickness of the
atmosphere; at the equator, air mass = 1, in Europe approx. 1,5). 17 Bloomberg New Energy Finance, Sustainable Energy in America 2015,
16 Irradiance is the power of the sunlight incident on a surface per unit area and http://about.bnef.com
is measured in power per square meter (W/m2). 18 Solar Buzz, Top Ten PV Module Suppliers in 2013, http://www.solarbuzz.com

3: Solar PV Technology 29
 Table 2: PV Module Standards
Test Description Comment
IEC 61215 Crystalline silicon (c-Si) terrestrial PV modules - Design Includes tests for thermal cycling, humidity and freezing,
qualification and type approval mechanical stress and twist and hail resistance. The
standard certification uses a 2,400Pa pressure.
Modules in heavy snow locations may be tested under
more stringent 5,400Pa conditions.
IEC 61646 Thin-film terrestrial PV modules - Design qualification and Very similar to the IEC 61215 certification, but an additional
type approval test specifically considers the additional degradation of
thin-film modules.
EN/IEC 61730 PV module safety qualification Part 2 of the certification defines three different Application
Classes:
1) Safety Class O - Restricted access applications.
2) Safety Class II - General applications.
3) Safety Class III - Low voltage (LV) applications.
IEC 60364-4-41 Protection against electric shock Module safety assessed based on:
1) Durability.
2) High dielectric strength.
3) Mechanical stability.
4) Insulation thickness and distances.
IEC 61701 Resistance to salt mist and corrosion Required for modules being installed near the coast or for
maritime applications.
IEC 61853-1 Photovoltaic Module Performance Testing and Energy Describes the requirements for evaluating PV module
Rating performance in terms of power rating over a range of
irradiances and temperatures.
IEC 62804 System voltage durability test for c-Si modules Describes the test procedure and conditions for conducting
(pending issue) a PID test. The PV module will be deemed to be PID
resistant if power loss is less than 5% following testing.
Conformit The certified product conforms to the European Union (EU) Mandatory in the European Economic Area.
Europenne (EC) health, safety and environmental requirements.
UL 1703 Comply with the National Electric Code, Occupational Underwriters Laboratories Inc. (UL) is an independent U.S.
Safety and Health Administration and the National Fire based product safety testing certification company which is
Prevention Association. The modules perform to at least a Nationally Recognised Testing Laboratory (NRTL).
90% of the manufacturers nominal power. Certification by an NRTL is mandatory in the U.S.

Incremental improvements are being made to conventional sufficiently transparent) then a stacked or multi-junction
c-Si cells. One of these improvements is the embedding of cell can be produced that performs better across a wider
the front contacts in laser-cut microscopic grooves in order range of the solar spectrum. This approach is taken to the
to reduce the surface area of the contacts and so increase extreme in III-V cells (named after the respective groups
the area of the cell that is exposed to solar radiation. of elements in the Periodic Table) in which the optimum
Similarly, another approach involves running the front materials are used for each part of the solar spectrum. III-V
contacts along the back of the cell and then directly cells are very expensive, but have achieved efficiencies in
through the cell to the front surface at certain points. excess of 40 percent. Less expensive approaches based on
the same basic concept include hybrid cells (consisting of
Different types of solar cells inherently perform better at stacked c-Si and thin-film cells) and multi-junction a-Si cells.
different parts of the solar spectrum. As such, one area of
interest is the stacking of cells of different types. If the right Other emerging technologies, which are not yet market-
combination of solar cells is stacked (and the modules are ready, but could be of commercial interest in the future,

30 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Figure 4: Development of Research Cell Efficiencies

Source: Data from United States National Renewable Energy Laboratory http://www.nrel.gov/ncpvl, accessed April 2014.

include spherical cells, sliver cells and dye-sensitized as its orientation or azimuth, as shown in Figure 5. The
or organic cells. Dye-sensitized solar cells have gained ideal azimuth for a system in the northern hemisphere is
attention recently because of their low production costs
and ease of fabrication. However, their low efficiency and
their instability over time is still a significant disadvantage.
Figure 5: PV Array Tilt and Azimuth
Figure 4 illustrates the development of the efficiencies of
research cells from 1975 to the present day. It should be
noted that commercially available cells lag signifcantly
behind research cells in terms of efficiency. See Box 1 for a
discussion of module risk on project economics.
W

3.4 MOUNTING AND TRACKING SYSTEMS Tilt

N
PV modules must be mounted on a structure to keep
them oriented in the correct direction and to provide
them with structural support and protection. Mounting
structures may be fixed or tracking. Fixed tilt arrays are S Azimuth
typically tilted away from the horizontal plane in order E

to maximise the annual irradiation they receive. The PV array facing south at xed tilt
optimum tilt angle is dependent on the latitude of the site
location. The direction the system is facing is referred to

3: Solar PV Technology 31
 Box 1: Module Risk

PV modules typically comprise approximately 50% of the system cost of a solar PV power plant. They are expected to have a functional life
for the duration of the project, typically in excess of 25 years. Module failure or abnormal degradation can therefore significantly impact
project economics. Careful selection of the PV modules is required. Although modules are an up-front capital cost, developers should think
of long-term revenues.

The bankability of a module may be understood in different ways by developers, financiers and module manufacturers. The bankability
usually includes an overall assessment of:
Module technical characteristics.
Quality of the manufacturing facility.
Certification and testing procedures.
Track record of the company and module.
Warranty conditions.
Company financial position.

To fully understand module risk, a full assessment of these criteria should be undertaken.

Current certification standards do not fully assess the technical adequacy of PV modules over the project life. A bath-tub failure curve
is typical for PV modules, with increased risk of failure during the early years (infant-failures), low risk for the mid-term of the project
(midlife-failures) and increased risk at the end of the project lifetime as modules deteriorate (wear-out-failures). From the lenders
perspective, revenues from projects are most important during the first 15 years to coincide with typical debt terms. A lender is therefore
well protected if the risk of infant-failure can be passed on to the EPC contractor or module manufacturer.

Most EPC contractors are willing to provide plant (PR) guarantees during the EPC warranty period (typically two years). Accompanied by a
linear power warranty provided by the module manufacturer, a degree of infant failure module risk is covered.

The interests of the owner can be protected still further with additional testing of the modules during the EPC warranty period
accompanied by appropriate termination scenarios whereby the owner has the right to reject the plant if it fails performance tests.
Examples of module testing include external or on-site flash testing of a sample of modules upon delivery and prior to the end of the EPC
warranty period, electro-luminescence testing and thermographic testing. These tests help to identify defects that may not affect the plant
power within the EPC warranty period, but may do so in the future.

Many module manufacturers now typically offer a 25-year linear power output warranty. However, during historical periods of PV module
over-supply, a large number of module manufacturers have entered insolvency, and many more have had poor financial positions. This
means that not all module manufacturers can be assumed to be in a position to honour long-term warranty claims. Some module
manufacturers, therefore, provide additional risk protection by offering third-party warranty insurance so that power output warranties
can still be honoured in the case of manufacturer bankruptcy.

Developers, owners and financiers are advised to consider incorporating such additional risk reduction strategies into project contracts in
order to match the project risk with their own risk profile requirements.

geographic south, and in the southern hemisphere it is Mounting structures will typically be fabricated from steel
geographic north. or aluminium, although there are also examples of systems
based on wooden beams. A good quality mounting
3.4.1 FIXED MOUNTING SYSTEMS structure may be expected to:
Fixed mounting systems keep the rows of modules at a Have undergone extensive testing to ensure the designs
fixed tilt angle19 while facing a fixed angle of orientation.20 meet or exceed the load conditions experienced at the
site. This would include the design of the corrosion
protection system to resist below-ground and
19The tilt angle or inclination angle is the angle of the PV modules from the atmospheric corrosion.
horizontal plane.
20 The orientation angle or azimuth is the angle of the PV modules relative to Have been designed specifically for the site location
south. Definitions may vary but 0 represents true south, -90 represents east,
180 represents north, and 90 represents west. with structural design calculations provided for

32 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 verification of the site-specific design, and a structural suitable even at places where the ground is difficult
warranty document provided. to penetrate due to rocky outcrops or subsurface
obstacles. This option has low tolerance to uneven
Allow the desired tilt angle to be achieved within a few
or sloping terrain, but requires no specialist skills for
degrees.
installation. Consideration must be given to the risk of
Allow field adjustments that may reduce installation soil movement or erosion.
time and compensate for inaccuracies in placement of
Driven piles: If a geotechnical survey proves suitable,
foundations.
a structural steel profile driven into the ground can
Minimise tools and expertise required for installation. result in low-cost, large-scale installations that can
Adhere to the conditions described in the module be quickly implemented. Specialist skills and pile
manufacturers installation manual. driving machinery are required, but may not always be
available.
Allow for thermal expansion, using expansion joints
where necessary in long sections, so that modules do Earth screws: Helical earth screws typically made of
not become unduly stressed. steel have good economics for large-scale installations
and are tolerant to uneven or sloping terrain. These
Purchasing quality structures from reputable require specialist skills and machinery to install.
manufacturers is generally a low-cost, low-risk option.
Bolted steel baseplates: In situations where the solar
Some manufacturers provide soil testing and qualification
plant is located over suitable existing concrete ground
in order to certify designs for a specific project location.
slabs, such as disused airfield runway strips, a steel
baseplate solution bolted directly to the existing
Alternatively, custom-designed structures may be used to
ground slabs may be appropriate.
solve specific engineering challenges or to reduce costs.
If this route is chosen, it is important to consider the
Fixed tilt mounting systems are simpler, cheaper and have
additional liabilities and cost for validating structural
lower maintenance requirements than tracking systems.
integrity. This apart, systems should be designed to ease
They are the preferred option for countries with a nascent
installation. In general, installation efficiencies can be
solar market and limited indigenous manufacturing of
achieved by using commercially available products.
tracking technology.

The topographic conditions of the site and information

3.4.2 TRACKING SYSTEMS
gathered during the geotechnical survey will influence the
choice of foundation type. This, in turn, will affect the In locations with a high proportion of direct irradiation,
choice of support system design as some designs are more single- or dual-axis tracking systems can be used to
suited to a particular foundation type. increase the average total annual irradiation. Tracking
systems follow the sun as it moves across the sky. These
Foundation options for ground-mounted PV systems are generally the only moving parts employed in a solar
include: PV power plant.

Concrete piers cast in-situ: These are most suited to

Single-axis trackers alter either the orientation or tilt-
small systems and have high tolerance to uneven and
angle only, while dual-axis tracking systems alter both
sloping terrain. They do not have large economies of
orientation and tilt angle. Dual-axis tracking systems
scale.
are able to face the sun more precisely than single-axis
Pre-cast concrete ballasts: This is a common choice systems.
for manufacturers with large economies of scale. It is

3: Solar PV Technology 33
Depending on the site and precise characteristics of the Aspects to take into account when considering the use of
solar irradiation, trackers may increase the annual energy tracking systems include:
yield by up to 27 percent for single-axis and 45 percent
Financial:
for dual-axis trackers. Tracking also produces a smoother
power output plateau, as shown in Figure 6. This helps Additional capital costs for the procurement and
meet peak demand in afternoons, which is common in hot installation of the tracking systems.
climates due to the use of air conditioning units.
Additional land area required to avoid shading
compared to a free field fixed tilt system of the same
Almost all tracking system plants use crystalline silicon (c-
nominal capacity.
Si) modules. This is because their higher efficiency reduces
additional capital and operating costs required for the Increased installation costs due to the need for large
tracking system (per kWp installed). However, relatively tracking systems that may require cranes to install.
inexpensive single-axis tracking systems are used with Higher maintenance cost for tracking systems due to
some thin-film modules. the moving parts and actuation systems.
Operational:
There are many manufacturers and products of solar PV
tracking systems. Most fall into one of six basic design Tracking angles: all trackers have angular limits,
classes (classic dual-axis, dual-axis mounted on a frame, which vary among different product types.
dual-axis on a rotating assembly, single-axis tracking on Depending on the angular limits, performance may
a tilted axis, tracking on a horizontal axis and single-axis be reduced.
tracking on a vertical axis). In general, the simpler the
High wind capability and storm mode: dual-axis
construction, the lower the extra yield compared to a fixed
tracking systems in particular need to go into a
system, and the lower the maintenance requirement.
storm mode when the wind speed is over 16-20m/s.
This may reduce the energy yield and hence revenues
at high wind speed sites.

Direct/diffuse irradiation ratio: tracking systems will

give greater benefits in locations that have a higher
Figure 6: Benefit of Dual Axis Tracking System direct irradiation component.

Improvement with tracking Without tracking

The higher financial and operational costs of tracker
installations, combined with the reduced costs of the
silicon-based modules has reduced the interest being
shown in tracking projects in recent years.
Output Power

Time of Day

Image courtesy of Future Mechatronic Systems

34 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

3.4.3 CERTIFICATION 3.5.1 INVERTER CONNECTION CONCEPTS

Support structures should adhere to country-specific There are two broad classes of inverters: central inverters
standards and regulations, and manufacturers should and string inverters. The central inverter configuration
conform to ISO 9001:2000. This specifies requirements shown in Figure 7 remains the first choice for many
for a quality management system where an organisation medium- and large-scale solar PV plants. A large number
needs to: of modules are connected in a series to form a high voltage
(HV) string. Strings are then connected in parallel to the
Demonstrate its ability to consistently provide
inverter.
products that meet customer and applicable regulatory
requirements.
Central inverters offer high reliability and simplicity of
Aim to enhance customer satisfaction through the installation. However, they have disadvantages: increased
effective application of the system. These include mismatch losses21 and absence of maximum power
processes for continual improvement, as well as the point tracking (MPPT)22 for each string. This may cause
assurance of conformity to customer and applicable problems for arrays that have multiple tilt and orientation
regulatory requirements. angles, or suffer from shading, or use different module
types.
3.5 INVERTERS
Central inverters are usually three-phase and can include
Inverters are solid state electronic devices. They
grid frequency transformers. These transformers increase
convert DC electricity generated by the PV modules
the weight and volume of the inverters, although they
into AC electricity, ideally conforming to the local grid
provide galvanic isolation from the grid. In other words,
requirements. Inverters can also perform a variety of
there is no electrical connection between the input and
functions to maximise the output of the plant. These
output voltagesa condition that is sometimes required
range from optimising the voltage across the strings
by national electrical safety regulations.
and monitoring string performance to logging data and
providing protection and isolation in case of irregularities
in the grid or with the PV modules.
21 Mismatch refers to losses due to PV modules with varying current/voltage
profiles being used in the same array.
22 Maximum Power Point Tracking is the capability of the inverter to adjust its
impedance so that the string is at an operating voltage that maximises the
power output.

Figure 7: PV System Configurations

Central Inverter String Inverter

3: Solar PV Technology 35
Central inverters are sometimes used in a master-slave equipment must be used, such as DC sensitive earth-
configuration. This means that some inverters shut down leakage circuit breakers (CB), and live parts must be
when the irradiance is low, allowing the other inverters to protected. IEC Protection Class II24 must be implemented
run more closely to optimal loading. When the irradiance across the installation. Transformerless inverters also
is high, the load is shared by all inverters. In effect, only cause increased electromagnetic interference (EMI).25
the required number of inverters is in operation at any one
time. As the operating time is distributed uniformly among Inverters with transformers provide galvanic isolation.
the inverters, design life can be extended. Central inverters are generally equipped with
transformers. Safe voltages (<120V) on the DC side are
In contrast, the string inverter concept uses multiple possible with this design. The presence of a transformer
inverters for multiple strings of modules. String inverters also leads to a reduction of leakage currents, which in turn
provide MPPT on a string level with all strings being reduces EMI. But this design has its disadvantages in the
independent of each other. This is useful in cases where form of losses (load and no-load26) and increased weight
modules cannot be installed with the same orientation or and size of the inverter.
where modules of different specifications are being used or
when there are shading issues. 3.5.2 INVERTER ELECTRICAL ARRANGEMENT

Inverters operate by use of power switching devices such

String inverters, which are usually in single phase, also
as thyristor or Insulated Gate Bipolar Transistor (IGBT)27
have other advantages. First of all, they can be serviced
to chop the DC current into a form of pulses that provide
and replaced by non-specialist personnel. Secondly, it is
a reproduction of an AC sinusoidal waveform. The nature
practical to keep spare string inverters on site. This makes
of the generated AC wave means that it may spread
it easy to handle unforeseen circumstances, as in the case
interference across the network. Therefore, filters must
of an inverter failure. In comparison, the failure of a large
be applied to limit Electromagnetic Compatibility (EMC)
central inverter, with a long lead time for repair, can lead
interference emitted into the grid. Circuit protection
to significant yield loss before it can be replaced.
functions should be included within a good inverter design.

Inverters may be transformerless or include a transformer

Inverters should be provided with controllers to measure
to step up the voltage. Transformerless inverters generally
the grid output and control the switching process.
have a higher efficiency, as they do not have transformer
In addition, the controller can provide the MPPT
losses.
functionality.

In the case of transformerless string inverters (see

Figure 8), the PV generator voltage must either be
significantly higher than the voltage on the AC side, or
DC-DC step-up converters must be used. The absence of
a transformer leads to higher efficiency, reduced weight,
reduced size (50-75 percent lighter than transformer- 24 IEC Protection Class II refers to a device that is double insulated and therefore
does not require earthing.
based models23) and lower cost due to the smaller number
25 Electromagnetic disturbance affects an electrical circuit due to either
of components. On the downside, additional protective electromagnetic induction or electromagnetic radiation emitted from an
external source. The disturbance may interrupt, obstruct, or otherwise degrade
or limit the effective performance of the circuit.
26 The load-dependent copper losses associated with the transformer coils
are called load losses. The load-independent iron losses produced by the
23 Navigant Consulting Inc., A Review of PV Inverter Technology Cost and transformer core magnetising current are called no-load losses.
Performance Projections, National Renewable Energy Laboratory, U.S. 27 Insulated Gate Bipolar Transistor is a three-terminal power semiconductor
Department of Energy, Jan 2006, http://www.nrel.gov/docs/fy06osti/38771.pdf device primarily used as an electronic switch and in newer devices is noted for
(accessed July 2014). combining high efficiency and fast switching.

36 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Figure 8: Transformer and Transformerless Inverter Schematic

MPP Tracking Power Inverter

Voltage Amplitude Decoupling

Voltage
Power MPP Tracking Amplitude
Decoupling + Inverter + Isolation

3.5.3 EFFICIENCY These losses are due to multiple factors: the presence of
a transformer and the associated magnetic and copper
A number of different types of efficiencies have been
losses, inverter self-consumption, and losses in the power
defined for inverters. These describe and quantify the
electronics. Conversion efficiency is defined as the ratio of
efficiency of different aspects of an inverters operation.
the fundamental component of the AC power output from
The search for an objective way of quantifying inverter
the inverter, divided by the DC power input:
performance is still ongoing. New ways of measuring
efficiency are frequently suggested in the literature. The PAC Fundamental component of AC power output
nCon = =
most commonly used methods are discussed below. PDC DC power input

The conversion efficiency is a measure of the losses

experienced during the conversion from DC to AC.

3: Solar PV Technology 37
The conversion efficiency is not constant, but depends averaged over a power distribution corresponding to
on the DC power input, the operating voltage, and the the operating climatic conditions of a central European
weather conditions, including ambient temperature and location. As a useful means of comparing inverter
irradiance. The variance in irradiance during a day causes efficiencies,28 the efficiency standard also attempts to
fluctuations in the power output and maximum power capture the fact that in central Europe, most energy is
point (MPP) of a PV array. As a result, the inverter is generated near the middle of a PV modules power range.
continuously subjected to different loads, leading to
varying efficiency. The voltage at which inverters reach Another method of comparing efficiencies is using the
their maximum efficiency is an important design variable, Californian Efficiency. While the standard is based on the
as it allows system planners to optimise system wiring. same reasoning as the European Efficiency, it is calibrated
for locations with higher average irradiance.
Due to the dynamic nature of inverter efficiency, diagrams
are also more suited to depiction than uniform numeric Inverters can have a typical European Efficiency of 95
values. An example depicting the dependency of the inverter percent and peak efficiencies of up to 98 percent. Most
efficiency on the inverter load is given in Figure 9. inverters employ MPPT algorithms to adjust the load

The European Efficiency is an accepted method of

28 If h50% denotes the efficiency at a load equal to 50% of the nominal power, the
measuring inverter efficiency. It is a calculated efficiency European Efficiency is defined as:
nEuro = 0.03n5% + 0.06n10% + 0.13n20% + 0.1n30% + 0.48n50% + 0.2n100%

Figure 9: Efficiency Curves of Low, Medium and High Efficiency Inverters as Functions of the Input Power to Inverter Rated
Capacity Ratios

100

90

80

70
Inverter Eciency (%)

High eciency
60 Medium eciency
Low eciency
50

40

30

20

10

0
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Ratio of Input Power to the Inverters Rated Capacity

Source: J.D. Mondol, Y. G. Yohanis, B. Norton, Optimal sizing of array and inverter for grid-connected photovoltaic systems, Solar Energy,
Vol.80, Issue 12, 2006, p.1517-1539, (accessed July 2014).

38 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

impedance and maximise the power from the PV array. The market share mainly due to reduced sales volumes in the
highest efficiencies are reached by transformerless inverters. Asia market.

3.5.4 CERTIFICATION A 2014 survey by Photon International (Apr. 2014)

indicated that there were over 60 inverter suppliers and
In order to ensure a high level of quality and performance,
over 1,757 products, 1,445 of which are in the 10kW to
and to minimise risk, inverters must be compliant with
500kW category.
a number of standards. The requirements, in terms of
compliance with standards, depend on the location of the
Market research organisations such as IHS, Solarbuzz and
project and the type of inverter.
Bloomberg New Energy Finance29 give annual lists of the
top ten inverter suppliers.
Important standards bodies for inverters are Deutsches
Institut fr Normung (DIN), Verband der Elektrotechnik,
It is recommended that an independent technical advisor
Elektronik und Informationstechnik (VDE), IEC, and
should review the technology and type of inverter with
European Norm (EN). Inverters must be Conformance
regards to technical specification, quality recognition,
European (CE)-compliant in order to be installed in
track record, and experience of the supplier, as well as
Europe. Table 3 is a non-exhaustive list of standards to
compliance with relevant international and national
which inverters should conform according to European
technical and safety standards. Warranties should also
practice.
be reviewed and assessed for compliance with industry
norms.
3.5.5 INVERTER MANUFACTURERS

Manufacturers of solar inverters are predominantly 3.6 QUANTIFYING PLANT PERFORMANCE

based in Europe and North America, however big players
The performance of a PV power plant is expected to fall
from China and Japan have entered the inverter market.
during its lifetime, especially in the second and third
Some of the leading suppliers, such as SMA, ABB (which
decade of its life as modules continue to degrade and
acquired Power One) and Kaco, have lost portions of their
plant components age. In addition to the quality of the

29 IHS Technology, https://technology.ihs.com; Solar Buzz, http://www.solarbuzz.

com; Bloomberg New Energy Finance, http://www.nef.com.

Table 3: Indicative List of Inverter-related Standards

EN 61000-6-1: 2007 Electromagnetic compatibility (EMC). Generic standards. Immunity for residential, commercial and light-industrial
environments.
EN 61000-6-2: 2005 EMC. Generic standards. Immunity for industrial environments.
EN 61000-6-3: 2007 EMC. Generic standards. Emission standard for residential, commercial and light-industrial environments.
EN 61000-6-4: 2007 EMC. Generic standards. Emission standard for industrial environments.

EN 55022: 2006 Information technology equipment. Radio disturbance characteristics. Limits and methods of measurement.
EN 50178: 1997 Electronic equipment for use in power installations.
IEC 61683: 1999 Photovoltaic systemsPower conditionersProcedure for measuring efficiency.
IEC 61721: 2004 Characteristics of the utility interface.
IEC 62109-1&2: 2011-2012 Safety of power converters for use in photovoltaic power systems.
IEC 62116 : 2008 Islanding prevention measures for utility-interconnected photovoltaic inverters.

3: Solar PV Technology 39
initial installation, a high degree of responsibility for the Some plants using a-Si modules show the opposite effect:
performance of a PV plant lies with the O&M contractor. in summer months, the PR increases, dropping again in
This section discusses how the operational performance of the colder winter months. This is due to the fact that
a PV plant may be quantified. Staebler-Wronski degradation is partially reversible at
high temperatures. It is common to observe seasonal
3.6.1 PERFORMANCE RATIO oscillations in the PR of a-Si plants due to this thermal
The Performance Ratio (PR) is a parameter commonly annealing process.
used to quantify PV plant performance. Usually expressed
Averaged across the year, a PR in the upper seventies or
as a percentage, the PR provides a benchmark to compare
lower eighties is typical for a well-designed plant. This
plants over a given time independent of plant capacity or
may be expected to reduce as the plant ages, depending on
solar resource. A plant with a high PR is more efficient at
the module degradation rates.
converting solar irradiation into useful energy.

3.6.2 SPECIFIC YIELD

The PR is defined as the ratio between the exported AC
yield and the theoretical yield that would be generated by The specific yield (kWh/kWp) is the total annual
the plant if the modules converted the irradiation received energy generated per kWp installed. It is often used to
into useful energy according to their rated capacity. The help determine the financial value of a plant and compare
full definition of PR is given in IEC 61724 Photovoltaic operating results from different technologies and systems.
system performance monitoringGuidelines for The specific yield of a plant depends on:
measurement data exchange and analysis. It may be
The total annual irradiation falling on the collector
expressed as:
plane. This can be increased by optimally tilting the
AC Yield (kWh) 1 (kW/m2 ) modules or employing tracking technology.
PR = 100%
DC Installed Capacity (kWp)Plane of Array Irradiation(kWh/m2)
The performance of the module, including sensitivity to
high temperatures and low light levels.
The PR quantifies the overall effect of system losses on
the rated capacity, including losses caused by modules, System losses including inverter downtime.
temperature, low light efficiency reduction, inverters,
Some module manufacturers claim much higher kWh/
cabling, shading and soiling.
kWp energy yields for their products than those of their
The PR of a plant may be predicted using simulations, or competitors. However the divergence between actual
alternatively may be calculated for an operational plant by peak power and nominal power and correction for other
measuring irradiation and the AC yield. technical distortions should also be taken into account.

As PV plant losses vary according to environmental 3.6.3 CAPACITY FACTOR

conditions through the year, the plant PR also varies. The capacity factor of a PV power plant (usually
For example, the more significant negative temperature expressed as a percentage) is the ratio of the actual output
coefficient of power for crystalline modules may lead over a period of a year and its output if it had operated
to increased losses at high ambient temperatures. A PR at nominal power the entire year, as described by the
varying from approximately 77 percent in summer up to formula:
86 percent in winter (with an annual average PR of 82
percent) would not be unusual for a well-designed solar Energy generated per annum (kWh)
CF =
8760 (hours annum) Installed Capacity (kWp)
PV power plant that is not operating in high ambient
temperature conditions.

40 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

The use of the term capacity factor is less common in
the solar industry than specific yield. Capacity factor
and specific yield are simply related by the factor 8760.
The capacity factor of a fixed tilt PV plant can vary from
12 percent to 24 percent depending on the solar resource
and the performance ratio of the plant. In Germany, a
capacity factor of 12 percent may be typical. Higher
capacity factors in the region of 16 percent may be
experienced in southern Spain, which has a higher solar
resource. For Thailand and Chile, capacity factors may be
in the region of 18 percent and 22 percent, respectively. A
5MWp plant in Chile will generate the equivalent energy
of a continuously operating 1.1MW plant.

3: Solar PV Technology 41
 4 The Solar Resource

4.1 SOLAR RESOURCE OVERVIEW

The solar resource expected over the lifetime of a solar PV As solar resource is inherently
plant is most accurately estimated by analysing historical solar intermittent, an understanding
resource data for the site. Obtaining a first approximation of
of inter-annual variability is
the power output of a PV plant depends on the plane of array
irradiance. The accuracy of any solar energy yield prediction important. At least ten years
is therefore heavily dependent on the accuracy of the historical of data are usually required to
solar resource dataset. Obtaining reliable historical resource calculate the variation with a
data is a crucial step in the development process and essential for reasonable degree of confidence.
project financing.

There are two main sources of solar resource data: satellite-

derived data and land-based measurement. Since both sources
have particular merits, the choice will depend on the specific site.
Land-based site measurement can be used to calibrate resource
data from satellites in order to improve accuracy and certainty.

As solar resource is inherently intermittent, an understanding

of inter-annual variability is important. Often ten years or
more of data are desirable to calculate the variation with a
reasonable degree of confidence, although many projects have
been completed with less detailed levels of historical data (see the
checklist at the end of Chapter 4).

The following sections describe how the solar resource may

be quantified and summarises the steps in the solar resource
assessment process.

4.2 QUANTIFYING SOLAR RESOURCE

The solar resource of a location is usually defined by the direct

normal irradiation,30 the diffuse horizontal irradiation and the

30 DNI is the amount of solar radiation received per unit area by a surface that is always
held perpendicular (or normal) to the rays that come in a straight line from the direction
of the sun at its current position in the sky.

42 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

global horizontal irradiation.31 These parameters are are able to make use of both the diffuse and beam
described below: components of solar irradiation.

Direct Normal Irradiation (DNI): The beam energy In the northern hemisphere, a surface tilted at an angle
component received on a unit area of surface directly towards the south receives a higher total annual global
facing the sun at all times. The DNI is of particular irradiation compared to a horizontal surface. This is
interest for solar installations that track the sun and because a surface tilted towards the south more directly
for concentrating solar technologies (concentrating faces the sun for a longer period of time. In the southern
technologies can only make use of the direct beam hemisphere a surface tilted towards the north receives a
component of irradiation). higher total annual global irradiation. Figure 10 illustrates
Diffuse Horizontal Irradiation (DHI): The energy why the tilt angle is important for maximising the energy
received on a unit area of horizontal surface from incident on the collector plane.
radiation that is scattered off the atmosphere or
surrounding area is known as DHI. The amount of irradiation received can be quantified
for any tilt angle by the global tilted irradiation (GTI).32
Global Horizontal Irradiation (GHI): The total solar
The optimal tilt angle varies primarily with latitude and
energy received on a unit area of a horizontal surface
may also depend on local weather patterns and plant
is the GHI. It includes energy from the sun that is
layout configurations. Simulation software may be used
received in a direct beam (the horizontal component
to calculate the irradiation on a tilted plane. Part of this
of the DNI) and the DHI. The yearly sum of the GHI
calculation will take into account the irradiance reflected
is of particular relevance for PV power plants, which
from the ground towards the modules. This is dependent

31 GHI is the total amount of shortwave radiation received from above by a

surface horizontal to the ground. 32 GTI is the total irradiation that falls on a tilted surface.

Figure 10: Effect of Tilt on Solar Energy Capture

4: The Solar Resource 43

on the ground reflectance, or albedo. These terms are of such data increases. The precise distance at which
defined below: satellite data become preferable over data interpolated
from ground sensors depends on the individual case.
Global Tilted Irradiation (GTI): The total solar energy
The relative merits of ground-based measurements and
received on a unit area of a tilted surface. It includes
satellite-derived data are discussed below.
direct beam and diffuse components. A high value of
long-term annual GTI average is the most important
4.3.1 GROUND BASED MEASUREMENTS
resource parameter for project developers.
The traditional approach to solar resource measurement is
Albedo: The ground reflectance or albedo is highly
to use ground-based solar sensors. A variety of sensors for
site-dependent. A higher albedo translates into greater
measurements of global and diffuse radiation is available
reflection. Fresh grass has an albedo factor of 0.26,
from a number of manufacturers with different accuracy
reducing down to a minimum of approximately 0.15
and cost implications. The two main technology classes
when dry. Asphalt has a value between 0.09 and
are:
0.15, or 0.18 if wet. Fresh snow has an albedo of
approximately 0.8, meaning that 80 percent of the Thermal Pyranometers: These typically consist of
irradiation is reflected. a black metal plate absorber surface below two
hemispherical glass domes in a white metal housing.
4.3 SOLAR RESOURCE ASSESSMENT Solar irradiance warms up the black metal plate in
Long-term annual average values of GHI and DNI can proportion to its intensity. The degree of warming,
be obtained for a site by interpolating measurements compared to the metal housing, can be measured
taken from nearby ground-based measurement stations with a thermocouple. High precision measurements
or by solar models that utilise satellite, atmospheric of global irradiance ion can be achieved with regular
and meteorological data. Ideally, historical time series cleaning and recalibration. Also, diffuse irradiance can
of hourly GHI and DHI values are used for PV project be measured if a sun-tracking shading disc is used to
development. Data representing a period of at least ten block out beam irradiance travelling directly from the
continuous years are desirable to account for climate sun. An example of a pyranometer is shown in Figure
variability. However, such extensive historical data is 11. The theoretical uncertainty of daily aggregated
not always available, particularly from ground-based values measured by pyranometers (depending on the
measurement stations. Satellite data sources are therefore
often acceptable.
Figure 11: Pyranometer Measuring GHI Image
Data in hourly or sub-hourly time steps are preferred.
Statistical techniques can be used to convert average
monthly values into simulated hourly values if these are
not immediately available.

Ground-based solar resource measurement stations are

very unevenly distributed throughout the world. Countries
have different standards of calibration, maintenance
procedures and historical measurement periods. In
addition, as the distance from a solar measuring station
increases, the uncertainty of interpolated irradiation values
increases. On the other hand, the development of solar
Image courtesy of NREL
models using satellite data has advanced as the accuracy

44 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 accuracy class) is in the range of 2 percent to 8 discontinuities. Radiometric and geometric variations in
percent. Thermal pyranometers have a relatively slow the satellite sensors can be controlled and corrected. The
response time and may not be able to capture rapidly same sensor is used to assess locations over a wide area for
varying irradiance levels due to clouds. many years. This can be particularly useful in comparing
Silicon Sensors: Typically, these are cheaper than and ranking sites because bias errors are consistent.
pyranometers and consist of a PV cell, often using Monthly GHI, DHI (or DNI) solar radiation maps at
crystalline silicon (c-Si). The current delivered a spatial resolution of approximately 4km are today a
is proportional to the irradiance. Temperature standard for the generation of long-term historical time
compensation can be used to increase accuracy, but series and spatially continuous solar atlases, such as those
its scope is limited by the spectral sensitivity of the shown in Figure 12 and Figure 13.
cell. Some wavelengths (i.e., long wavelength infrared)
Efforts are underway to improve the accuracy of satellite-
may not be accurately measured, resulting in a higher
derived data. One way is to use more advanced techniques
measurement uncertainty of daily aggregated values
for better mapping clouds, especially in high mountains,
of approximately 5 percent compared to thermal
coastal zones, and high reflectivity surfaces, such as salt
pyranometers.
plains and snow-covered regions. Substantial improvements
Each sensor type is subject to ageing, and accuracy reduces can also be seen in improved atmospheric models and input
with time. Therefore, it is important to re-calibrate at data, such as aerosols and water vapour. Higher spatial and
least every two years. It can be expected that annual GHI temporal resolution of the input atmospheric databases
solar irradiation from well-maintained ground-based helps to improve mapping of locally generated dust, smoke
sensors can be measured with a relative accuracy of 3 from biomass burning and anthropogenic pollution. Effects
percent to 5 percent, depending on the category of the of terrain features (elevation and shading effects) are also
sensor, position of the site, calibration and maintenance. better considered by new approaches.
Maintenance is very important since soiled or ill-calibrated
sensors can easily yield unreliable data. 4.3.3 SITE ADAPTION OF SATELLITE DERIVED
RESOURCE DATA
Section 7.7.2 gives quality benchmarks for the irradiation For locations that have a low density of meteorological
monitoring of mega-watt scale PV power plants to enable stations, and rely on satellite data, site-solar resource
developers to use equipment that will be acceptable for monitoring may be considered during the feasibility stage
investors and financial institutions. of the project. Short-term site resource measurements may
be used to adapt (calibrate) long-term satellite-derived time
4.3.2 SATELLITE-DERIVED DATA
series. This site adaption of the satellite data reduces bias
Satellite-derived data offer a wide geographical coverage (systematic deviation) and random deviation of hourly
and can be obtained retrospectively for historical periods or sub-hourly values. In general, measurement data for a
during which no ground-based measurements were minimum of nine months can be used to reduce existing bias,
taken. This is especially useful for assessing hourly or and improve the estimation of the long-term mean. The best
sub-hourly time series or aggregated long-term averages. results however are obtained by monitoring for a minimum
A combination of analytical, numerical and empirical of 12 months to better capture seasonal variations.
methods can offer 15-minute or 30-minute data with a
nominal spatial resolution down to 90m x 90m, depending 4.3.4 VARIABILITY IN SOLAR IRRADIATION
on the region and satellite. Solar resource is inherently intermittent: in any given
year, the total annual global irradiation on a horizontal
One advantage of a satellite resource assessment is that
plane varies from the long-term average due to weather
data are not susceptible to maintenance and calibration

4: The Solar Resource 45

 Figure 12: Annual Sum of GHI, average 1994-2010

Source: Image courtesy of Geomodel Solar http://geomodelsolar.eu/

Figure 13: Annual Share of DHI to GHI, average 1994-2010

Source: Image courtesy of Geomodel Solar http://geomodelsolar.eu/

46 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

fluctuations. Even though the owner of a PV power plant Table 4: Inter-annual Variation in Global Horizontal
may not know what energy yield to expect in any given Irradiation as Calculated from SolarGIS Database

year, one can have a good idea of the expected yield Number of Years of Coefficient of
Location Data Variation
averaged over the long term.
New Delhi 15 3.4%

To help lenders understand the risks and perform a Mumbai 15 2.5%

sensitivity analysis, it is important to quantify the limits of Chennai 15 2.2%

such year-by-year variability, or inter-annual variation.

Usually, 10 years of ground measurements or satellite data
are desirable, although an assessment of the inter-annual deviation divided by the mean34) is below 4 percent. In
variation can sometimes be obtained with reasonable Central Europe it can be above 12 percent.
confidence using a data set covering a shorter historical
period. Research papers33 show that for southern Europe Table 4 shows the coefficient of variation for three locations
(including Spain), the coefficient of variation (standard in India as derived from data provided by SolarGIS.

Figure 14 shows how the inter-annual variability varies

depending on the site location for Europe, North Africa
and the Middle East.

33 M. Suri, T. Huld, E.D. Dunlop, M. Albuisson, M. Lefevre & L. Wald, Uncertainties

in photovoltaic electricity yield prediction from fluctuation of solar radiation, 34 The coefficient of variation is a dimensionless, normalised measure of the
Proceedings of the 22nd European Photovoltaic Solar Energy Conference, dispersion of a probability distribution. It enables the comparison of different
Milan, Italy, 3-7 September 2007 (accessed July 2014). data streams with varying mean values.

Figure 14: Inter-annual Variability in GHI (relative standard deviation) 1994-2010

Source: Image courtesy of Geomodel Solar http://geomodelsolar.eu/

4: The Solar Resource 47

4.3.5 SOURCES OF SOLAR RESOURCE DATA In financing solar power projects, financial institutions
are becoming more sophisticated in their analysis of the
There are a variety of different solar resource datasets that
solar resource. Their requirements are moving towards the
are available with varying accuracy, resolution, historical
analysis of multiple datasets, cross referencing with values
time period and geographical coverage. The datasets either
obtained from high resolution satellite data and a robust
make use of ground-based measurements at well-controlled
uncertainty analysis.
meteorological stations or use processed satellite data.
Table 5 summarizes some of the more globally applicable
In a competitive market, financial institutions will tend to
datasets. Further information on which dataset is available
give better terms of financing to those projects that have the
for a specific country or region may be obtained online.35
lowest risk to the financial return. An important component
of the risk assessment is the confidence that can be placed
in the solar resource at the site location. Developers can
35 United Nations Environment Programme, Solar Dataset, http://www.unep.
org/climatechange/mitigation/RenewableEnergy/SolarDataset/tabid/52005/
reduce the perceived long-term solar resource risk by:
Default.aspx (accessed July 2014).

Table 5: Solar Resource Datasets

Data Source Type Description
SolarGIS [1] Commercial satellite Solar resource data are available for latitudes between 60 North and 50 South at a
derived spatial resolution of 250m. The solar resource parameters are calculated from satellite
data, atmospheric data and digital terrain models. Solar resource data are available from
years 1994, 1999, or 2006 (depending on the region) up to the present time and have time
resolution of up to 15 minutes. The database has been extensively validated at more than
180 locations globally.
3Tier [2] Commercial satellite The dataset has global coverage between 48 S to 60 N with spatial maps and hourly time
derived series of irradiance at a spatial resolution of approximately 3km (2 arc minutes). Depending
on the location, data is available beginning in 1997, 1998, or 1999 up to the present day. The
satellite algorithm error is based on validation against 120 reference stations across the
globe with a standard error for global horizontal irradiance of 5 percent.
HelioClim v4.0 [3] Commercial satellite Has a spatial resolution of approximately 4km. The region covered extends from -66 to
derived 66 both in latitude and longitude (mainly Europe, Africa and the Middle East). The data are
available from February 2004 and are updated daily.
Meteonorm v7.0 [4] Commercial Interpolated global solar resource database. It enables the production of typical meteorological
years for any place on earth. It includes a database for radiation for the period 1991-2010.
Where a site is over 10km from the nearest measurement station, a combination of ground and
satellite measurements are used. Additionally, uncertainty and P10/90 estimates are given.
NASA Surface Free Satellite-derived monthly data for a grid of 1x1 (equal to 100km x 100km at the equator)
Meteorology and Solar covering the globe for a 22 year period (1983-2005). The data may be considered reasonable
Energy data set [5] for preliminary feasibility studies of solar energy projects in some regions however these
data have a low spatial resolution.
PVGIS Classic [6] Free The original PVGIS database for Europe is based on an interpolation of ground station
measurements for the period 1981-1990 (10 years).
PVGIS ClimSAF [7] Free Data for a total of 14 years that is satellite-derived. From the first generation of Meteosat
satellites, there are data from 1998 to 2005, and from the second generation, there
are data from June 2006 to December 2011. The spatial resolution is 1.5 arc-minutes or
approximately 2.5km directly below the satellite at 0 N.
PVGIS HelioClim [8] Free Data are monthly values for any location in Africa and parts of the Middle East. Data are
derived from satellite-based calculations. The spatial resolution of the original calculation is
15 arc-minutes, or about 28km directly below the satellite (at the equator, 0 W). The data
cover the period 1985-2004.

48 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Comparing different data sources, assessing their This analysis requires a considerable degree of experience and
uncertainty and judiciously selecting the most technical understanding of the statistical properties of each
appropriate data for the site location. dataset. Technical advisors are available to perform this task.

Assessing the inter-annual variation in the solar

resource in order to quantify the uncertainty in the
revenue in any given year.

Box 2: Case Study of Solar Resource for a Location in India

There are a variety of possible solar irradiation data sources that may be accessed for the purpose of estimating the irradiation at potential
solar PV sites in India. The data sources for solar radiation in India are of varying quality. Comparison and judicious selection of data sources by
specialists in solar resource assessment is recommended when developing a project. Some of the more accessible data sources include:
India Meteorological Department data from 23 field stations of the radiation network, measured from 1986 to 2000.
SolMap project, data measured at approximately 115 Solar Measuring Stations over India.a
NASAs Surface Meteorology and Solar Energy data set. Due to large deviation from other databases, and course spatial resolution, it is not
advised to apply this database for solar energy projects in India. The data can provide some indication about the inter-annual variability.
The METEONORM global climatological database and synthetic weather generator. This database has limitations in regions with
sparse availability of historical ground Solar Measuring Stations, such as India.
Satellite-derived geospatial solar data products from the United States-based National Renewable Energy Laboratory (NREL). Annual average
DNI and GHI, latitude tilt, and diffuse data are available at 40km resolution for South and East Asia and at 10km resolution for India.
Commercial databases. SolarGIS has historical coverage of 15+ years at 3km spatial resolution and 30 minute time resolution. The
database is updated daily and has been validated over India.b
In order to support financing, the developer of the 5 MW plant in Tamil Nadu had a basic solar resource assessment carried out. However, only
one data source was used and there was no assessment made of the inter-annual variability of the resource. Nor was any analysis provided
of the historical period on which the data were based. The location of the 5 MW plant in Tamil Nadu was more than 200km from the nearest
meteorological station. Data interpolated from these distant meteorological stations had a high degree of uncertainty.

The image below compares the data obtained for the site location from three data sources. There is a significant discrepancy between
them. A robust solar resource assessment would compare the data sources, discuss their uncertainty and select the data most likely to
represent the long-term resource at the site location. An improved resource assessment could be carried out by purchasing commercially
available satellite-derived data for the site location.

Where there is significant uncertainty in the data sources (or in the case of large-capacity plants), a short-term data monitoring campaign
may be considered. Short-term monitoring (ideally up to one year in duration) may be used to calibrate long-term satellite-derived data
and increase the confidence in the long-term energy yield prediction.

a Responsible organisation being the Centre for Wind Energy Technology (CWET), Chennai, Tamil Nadu, India.

b SolarGIS is available for many countries globally and in some independent studies has been ranked as the most accurate database.

4: The Solar Resource 49

 Solar Resource Assessment Checklist

The checklist below provides the basic requirements for any

solar resource assessment. It is intended to assist solar PV plant
developers during the development phase of a PV project, and
to ensure that suitable analysis has been completed to facilitate
financing.

A variety of solar resource datasets consulted with at least

ten years of data.

Satellite-derived data or data interpolated from ground-

based measurements has been appropriately used.

Site adaption (calibration) of satellite data has been used,

where appropriate, to reduce the uncertainty in locations
remote from a meteorological station.

Algorithms have been used to convert global horizontal

irradiation to irradiation on the tilted plane of the modules.

A robust uncertainty analysis has been completed.

50 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Energy Yield Prediction 5
5.1 ENERGY YIELD PREDICTION OVERVIEW

To accurately estimate the An important step in assessing project feasibility and attracting
energy produced from a PV financing is to calculate the electrical energy expected from the
PV power plant. The energy yield prediction provides the basis
power plant, information is
for calculating project revenue. The aim is to predict the average
needed on the solar resource and annual energy output for the lifetime of the proposed power
temperature conditions of the plant, typically 25 to 30 years.
site in addition to the layout and
The accuracy needed for the energy yield prediction depends on
technical specifications of the
the stage of project development. For example, a preliminary
plant components. indication of the energy yield can be carried out using solar
resource data and an assumed performance ratio (PR) from
nominal values seen in existing projects. For a more accurate
energy yield prediction, software should be used with detailed
plant specifications as input, three-dimensional modelling of the
layout and detailed calculation of shading losses with time-step
simulation.

To accurately estimate the energy produced from a PV

power plant, information is needed on the solar resource and
temperature conditions of the site in addition to the layout and
technical specifications of the plant components. Sophisticated
software is often used to model the complex interplay of
temperature, irradiance, shading and wind-induced cooling on
the modules. While a number of software packages can predict
the energy yield of a PV power plant at a basic level, financiers
generally require an energy yield prediction carried out by a
suitable technical expert.

Typically, the procedure for predicting the energy yield of a PV

plant using time-step (hourly or sub-hourly) simulation software
will consist of the following steps:

1. Sourcing modelled or measured environmental data, such as

irradiance, wind speed and temperature from ground based
meteorological stations or satellite sources (or a combination
of both). This results in a time series of typical irradiation

5: Energy Yield Prediction 51

 on a horizontal plane at the site location along with detailed simulation of the efficiency with which the plant
typical environmental conditions. converts solar irradiance into AC power and the losses
associated with the conversion. While some of these losses
2. Calculating the irradiation incident on the tilted
may be calculated within the simulation software, others
collector plane for a given time step.
are based on extrapolations of data from similar PV plants
3. Modelling the performance of the plant with respect and analysis of the site conditions.
to varying irradiance and temperature to calculate the
energy yield prediction in each time step. There are several solar PV modelling software packages
available on the market, which are useful analytical tools
4. Applying losses using detailed knowledge of
for different phases of a projects life. These packages
the inverters, PV modules and transformers
include PVSyst, PV*SOL, RETScreen, HOMER, INSEL,
characteristics, the site layout and module
Archelios and Polysun, among others. For bank-grade
configuration, DC and AC wiring, downtime,
energy yield assessments, PVSyst has become one of the
auxiliary equipment and soiling characteristics.
most widely used in Europe and other parts of the world
5. Applying statistical analysis of resource data and due to its flexibility and ability to accurately model utility-
assessing the uncertainty in input values to derive scale PV plants.
appropriate levels of uncertainty in the final energy
yield prediction. Depending on specific site characteristics and plant design,
energy yield losses may be caused by any of the factors
A checklist covering the basic requirements of energy yield described in Table 6. Energy yield prediction reports
assessments has been included at the end of this chapter. should consider and (ideally) quantify each of these losses.

The following sections summarise the main steps required

5.4 ENERGY YIELD PREDICTION RESULTS
for calculating the electrical energy expected from a solar
PV plant. The predicted annual energy yield may be expressed
within a given confidence interval. A P90 value is the
5.2 IRRADIATION ON MODULE PLANE annual energy yield prediction that will be exceeded with
90 percent probability; P75 is the yield prediction that
In order to predict the solar resource over the lifetime
will be exceeded with 75 percent probability; and P50 is
of a project, it is necessary to analyse historical data for
the yield prediction that will be exceeded with 50 percent
the site. These data are typically given for a horizontal
probability. Good quality bank grade energy yield
plane. The assumption is that the future solar resource
reports will give the P50 and P90 energy yield prediction
will follow the same patterns as the historical values.
values as a minimum.
Historical data may be obtained from land-based
measurements or from data obtained from satellites as Projects typically have a financing structure that requires
described in Section 4.3. Data in hourly or sub-hourly them to service debt once or twice a year. The year-on-year
time steps are preferred. Statistical techniques can be used uncertainty in the resource is therefore taken into account
to convert average monthly values into simulated hourly by expressing a one year P90. A ten year P90 includes
values if these are not immediately available. the uncertainty in the resource as it varies over a ten-year
period. The exact requirement will depend on the financial
5.3 PERFORMANCE MODELLING structure of the specific plant and the requirements of the
Sophisticated simulation software is used to predict the financing institution.
performance of a PV power plant in time steps for a set
of conditions encountered in a typical year. This allows a

52 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Table 6: Losses in a PV Power Plant
Loss Description
Air pollution The solar resource can be reduced significantly in some locations due to air pollution from industry and agriculture.
Air pollution reduces solar irradiance incident on the module and thereby reduces power output. This is more
significant in urban and peri-urban locations, particularly in more recently industrialised nations.
Soiling Losses due to soiling (dust and bird droppings) depend on the environmental conditions, rainfall frequency, and cleaning
strategy as defined in the O&M contract. This loss can be relatively large compared to other loss factors. It has the
potential to reach up to 15 percenta annually and potentially higher in deserts, but is usually less than 4 percent unless
there is unusually high soiling or problems from snow settling on the modules for long periods of time. The soiling loss
may be expected to be lower for modules at a high tilt angle as inclined modules will benefit more from the natural
cleaning effect of rainwater. Tracking systems typically record similar soiling losses as fixed systems. As this loss can
have an important impact on the PR, it is recommended that an expert is consulted to quantify the soiling loss.
Shading Shading losses occur due to mountains or buildings on the far horizon, mutual shading between rows of modules
and near shading due to trees, buildings, pylons or overhead cabling. To model near-shading losses accurately, it
is recommended that a 3D representation of the plant and shading obstacles are generated within the modelling
software. This loss can potentially be quite large, thus it is important that the plant is modelled accurately.
Electrical shading The effect of partial shadings on electrical production of the PV plant is non-linear and is modelled through
partitioning of the strings of modules. Modules installed in landscape configuration for an orientation towards the
equator will typically experience less electrical shading losses than modules installed in portrait configuration due to
the connection of diodes. Similarly, some types of thin-film technology are less impacted than crystalline PV modules.
Electrical shading effects can typically be set within the modelling software. This will be quantified differently
depending on module configuration, chosen technology and the system type (i.e., tracking or fixed).
Incident angle The incidence angle loss accounts for radiation reflected from the front glass when the light striking it is not
perpendicular. For tilted PV modules, these losses may be expected to be larger than the losses experienced with dual
axis tracking systems, for example.
Low irradiance The conversion efficiency of a PV module generally reduces at low light intensities. This causes a loss in the output of
a module compared with the Standard Test Conditions (STC) (1,000W/m2). This low irradiance loss depends on the
characteristics of the module and the intensity of the incident radiation. Most module manufacturers will be able to
provide information on their module low irradiance losses. However, where possible, it is preferable to obtain such
data from independent testing institutes.
Module temperature The characteristics of a PV module are determined at standard temperature conditions of 25C. For every degree rise
in Celsius temperature above this standard, crystalline silicon modules reduce in efficiency, generally by around 0.5
percent. In high ambient temperatures under strong irradiance, module temperatures can rise appreciably. Wind can
provide some cooling effect, which can also be modelled.
Module quality Most PV modules do not exactly match the manufacturers nominal specifications. Modules are sold with a nominal
peak power and a guarantee of actual power within a given tolerance range. The module quality loss quantifies the
impact on the energy yield due to divergences in actual module characteristics from the specifications. Typically,
the module output power at STC is greater than the nominal power specified in the datasheets. As such, a positive
quality factor can be applied to the energy yield.
Module mismatch Losses due to "mismatch" are related to the fact that the real modules in a string do not all rigorously present the
same current/voltage profiles; there is a statistical variation between them which gives rise to a power loss. This loss
is directly related to the modules power tolerance.
Degradation The performance of a PV module decreases with time (see Section 3.3.5). If no independent testing has been
conducted on the modules being used, then a generic degradation rate depending on the module technology may
be assumed. Alternatively, a maximum degradation rate that conforms to the module performance warranty may be
considered as a conservative estimate.
Inverter performance Inverters convert current from DC into AC with an efficiency that varies with inverter load. Manufacturers are usually
able to provide an inverters efficiency profile for low, medium and high voltages; entering these into the modelling
software will provide more accurate inverter losses.
MPP tracking The inverters are constantly seeking the maximum power point (MPP) of the array by shifting inverter voltage to the
MPP voltage. Different inverters do this with varying efficiency.
(Continued)

a S. Canada, Impacts of Soiling on Utility-Scale PV System Performance, Issue 6.3, Apr/May 2013, http://solarprofessional.com/articles/operations-maintenance/
impacts-of-soiling-on-utility-scale-pv-system-performance (accessed April 2014).

5: Energy Yield Prediction 53

 Table 6: Losses in a PV Power Plant (Continued)
Loss Description
Curtailment of Yield losses can occur due to high winds enforcing the stow mode of tracking systems so that the PV modules are not
tracking optimally orientated.
Transformer Transformer losses are usually quantified in terms of iron and resistive/inductive losses, which can be calculated
performance based on the transformers no-load and full-load losses.
DC cable losses Electrical resistance in the cable between the modules and the input terminals of the inverter give rise to ohmic
losses (IR).b These losses increase with temperature. If the cable is correctly sized, this loss should be less than
3 percent annually.
AC cable losses AC cable losses are the ohmic losses in the AC cabling. This includes all cables post inverter up to the metering point.
These losses are typically smaller than DC cable losses and are usually smaller for systems that use central inverters.
Auxiliary power Power may be required for electrical equipment within the plant. This may include security systems, tracking
motors, monitoring equipment and lighting. Plants with string inverter configurations will typically experience
smaller auxiliary losses than central inverter configurations. It is usually recommended to meter this auxiliary power
requirement separately. Furthermore, care should be taken as to how to quantify both daytime and nighttime
auxiliary losses.
Downtime Downtime is a period when the plant does not generate due to failure. The downtime periods will depend on the
quality of the plant components, design, environmental conditions, diagnostic response time, and repair response
time.
Grid availability and The ability of a PV power plant to export power is dependent on the availability of the distribution or transmission
disruption network. The owner of the PV plant relies on the distribution network operator to maintain service at high levels of
availability. Unless detailed information is available, this loss is typically based on an assumption that the local grid
will not be operational for a given number of hours/days in any one year, and that it will occur during periods of
average production.
Grid compliance loss Excessive loading of local transmission or distribution network equipment such as overhead lines or power
transformers may lead to grid instability. In this case, the voltage and frequency of the grid may fall outside the
operational limits of the inverters and plant downtime may result. In less developed regional networks, the risk of
downtime caused by grid instability can have serious impacts on project economics.
b Ohmic Loss is the voltage drop across the cell during passage of current due to the internal resistance of the cell.

5.5 UNCERTAINTY IN THE ENERGY YIELD general, resource data uncertainty in the region of 5 percent
PREDICTION to 8 percent or higher may be expected, depending on the
The uncertainty of energy yield simulation software region.
depends on each modelling stage and on the uncertainty
Uncertainty in other modelling inputs include estimates
in the input variables. Modelling software itself can
in downtime, estimates in soiling, uncertainty in the
introduce uncertainty of 2 percent to 3 percent.
inter-annual variation in solar resource and errors due to
The uncertainty in the daily aggregated values of irradiation module specifications not accurately defining the actual
measured by ground based pyranometers (depending on the module characteristics.
accuracy class) is in the range of 2 percent to 8 percent.
The energy yield depends linearly, to a first approximation,
This represents the upper limit in accuracy of resource data
on plane of array irradiance. Therefore, uncertainty in the
obtained through meteorological stations. However, in
resource data has a strong bearing on the uncertainty in
many cases, the presence of a ground-based pyranometer
the yield prediction. Total uncertainty figures in the region
at the project location during preceding years is unlikely.
of 8 percent to 10 percent may be expected, depending on
If this is the case, solar resource data will likely have been
the region. A good energy yield report will quantify the
obtained using satellites or by interpolation as described
uncertainty for the specific site location.
in Section 4.3. This will increase the uncertainty in the
resource data, depending on the quality of the data used. In

54 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Figure 15: Uncertainty in Energy Yield Prediction

12.0

11.5
AC Energy Yield (GWh/annum)

11.0

10.5

10.0

9.5

9.0

8.5

8.0
1 2 3 4 5 6 7 8 9 10

Number of Years of Operation

P50
Uncertainty in energy yield due to inter-annual variation in site solar resource
Combined uncertainty due to inter-annual variation in site solar resource and energy yield prediction

Figure 15 represents the typical combined uncertainties in

the yield prediction for a PV power plant. The dashed blue
line shows the predicted P50 yield. The green lines represent
uncertainty in energy yield due to inter-annual variability
in solar resource. The solid red lines represent the total
uncertainty in energy yield when inter-annual variability is
combined with the uncertainty in the yield prediction. The
total uncertainty decreases over the lifetime of the PV plant.
The lower limit on the graph corresponds to the P90 and
the upper limit corresponds to the P10.

5: Energy Yield Prediction 55

 Box 3: Energy Yield Prediction Case Study in India

The developer of a 5MW plant in Tamil Nadu, India, required a solar energy yield prediction to confirm project feasibility and assess likely
revenues. In this instance, the developer was either not aware of or did not consider a number of additional losses and did not calculate
a long-term yield prediction over the life of the project with uncertainty analysis. Both of these would have been essential for potential
project financiers.

The developer sourced global horizontal irradiation data for the site location. Commercially available software was used to simulate the
complex interactions of temperature and irradiance impacting the energy yield. This software took the plant specifications as input and
modelled the output in hourly time steps for a typical year. Losses and gains were calculated within the software. These included:
Gain due to tilting the module at 10.
AC losses. Reflection losses (3.3 percent).
Losses due to a lower module efficiency at low irradiance levels (4.2 percent).
Losses due to temperatures above 25C (6 percent).
Soiling losses (1.1 percent).
Losses due to modules deviating from their nominal power (3.3 percent).
Mismatch losses (2.2 percent).
DC Ohmic losses (1.8 percent).
Inverter losses (3.6 percent).

The software gave an annual sum of electrical energy expected at the inverter output in the first year of operation. Although this is a useful
indicative figure, an improved energy yield prediction would also consider:
Inter-row shading losses (by setting up a 3D model).
Horizon shading, if any.
Near shading from nearby obstructions, including poles, control rooms and switch yard equipment.
Downtime and grid availability.
Degradation of the modules and plant components over the lifetime of the plant.

This analysis modelled energy yield for one year, however lifetime analysis is typically required. In order to clearly show the expected output
during the design life of the plant and assess the confidence in the energy yield predictions, it is necessary to analyse the level of certainty in
the data and processes used for this analysis, including:
Level of accuracy of solar resource data used.
Reliability/accuracy of modelling process.
Inter-annual variation of the solar resource.

The energy yield prediction for the 5MW plant was provided as a first-year P50 value (the yield that will be exceeded with 50 percent
probability in the first year), excluding degradation. An investor will usually look for a higher level of confidence in the energy yield
prediction, typically expressed as the P90 value, or the annual energy yield prediction that will be exceeded with 90 percent probability.

56 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Energy Yield Assessment Checklist

The following checklist covers the basic requirements and

procedures for energy yield assessments. It is intended to assist
solar PV power plant developers during the development phase
of a PV project.

A variety of judiciously-selected solar resource datasets

consulted.

Hourly generation profile obtained or synthetically

generated.

Plant design basic information detailed (plant capacity, tilt

and shading angles, orientation, number of modules per
string, total number of modules and inverters).

Module, inverter and transformer datasheets available.

3D shading model generated using modelling software.

Horizon and near-shading obstacles detailed and

implemented in 3D model.

DC and AC cable losses calculated.

Soiling losses assessed based on precipitation profile,

environmental conditions and cleaning schedule.

Auxiliary losses broken down and assessed.

Availability losses based on grid and plant availability

assessed.

Essential module characteristics available (degradation, low

light performance, tolerance, temperature coefficient).

Essential inverter characteristics available (including

Maximum Power Point Tracking capability, efficiency profile
for three voltages).

Overall energy yield loss calculated.

P50 calculated monthly and for project duration.

PR calculated monthly and for project duration.

Specific yield calculated for year 1 of operation.

Inter-annual variation obtained.

Solar resource measurement uncertainty obtained.

Overall uncertainty assessed.

P90 calculated for years 1, 10 and 20.

5: Energy Yield Prediction 57

 6 Site Selection

6.1 SITE SELECTION OVERVIEW

In general, the process of site selection must consider the Selecting a suitable site is a
constraints of each site and the impact it will have on the cost crucial component of developing
of the electricity generated. Showstoppers for developing a
a viable solar PV project.
utility-scale PV power plant in a specific location may include
constraints due to a low solar resource, low grid capacity
or insufficient area to install modules. However, a low solar
resource could be offset by high local financial incentives that
make a project viable. A similar balancing act applies to the other
constraints. A Geographical Information System (GIS) mapping
tool can be used to assist the site selection process by assessing
multiple constraints and determining the total area of suitable
land available for solar PV project development.

The checklist at the end of the chapter lists the basic requirements
and procedures necessary to assist developers with the site
selection process.

6.2 SITE SELECTION CRITERIA

Selecting a suitable site is a crucial component of developing

a viable solar PV project. There are no clear-cut rules for site
selection. Viable projects have been developed in locations that
may initially seem unlikely, such as steep mountain slopes, within
wind farms and on waste disposal sites. In general, the process
of site selection must consider the constraints and the impact the
site will have on the cost of the electricity generated. The main
constraints that need to be assessed include:

Solar resource.

Available area.

Local climate.

Topography.

Land use.

Local regulations/land use policy or zoning.

58 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Environmental designations. Avoiding shading is critical, as even small areas of
shade may significantly impair the output of a module
Geotechnical conditions.
or string of modules. The loss in output could be more
Geopolitical risks. than predicted by simply assessing the proportion of the
Accessibility. modules that are shaded.

Grid connection. When assessing shading, it must be remembered that

Module soiling. the path the sun takes through the sky changes with the
seasons. An obstacle that provides significant shading at
Water availability.
mid-day in December may not provide any shading at all
Financial incentives. at mid-day in June. The shading should be assessed using
the full sun path diagram for the location.
It can be useful to use GIS mapping tools to aid in the
process of site selection to visually display constraints, 6.3.2 AREA
enable consideration of multiple constraints to a particular
The area required per kWp of installed capacity varies
site, and determine the total land area available for
with the technology chosen. The distance between rows of
development.
modules (the pitch) required to avoid significant inter-row
shading varies with the site latitude. Sites should be chosen
As mentioned before, showstoppers for developing a
with sufficient area to allow the required capacity to be
utility-scale PV power plant in a specific location may
installed without having to reduce the pitch to levels that
include constraints due to a low solar resource, low grid
cause unacceptable yield loss.
capacity or insufficient area to install modules. However,
constraints can sometimes be offset; for example, high
For example, depending on the site location (latitude)
local financial incentives can offset a low solar resource
and the type of PV module selected (efficiency), a well-
and make a project viable. Similar considerations apply
designed PV power plant with a capacity of 1MWp
to other constraints, which are discussed in further detail
developed in India is estimated to require between one
below.
and two hectares (10,000 to 20,000 m2) of land. A plant
using lower efficiency CdTe thin-film modules may require
6.3 SITE SELECTION CONSTRAINTS
approximately 40 percent to 50 percent more space than
6.3.1 SOLAR RESOURCE a plant using multi-crystalline modules. Table 7 lists the
approximate area required for plants in five different
A high average annual GTI is the most basic consideration
countries.
for developing a solar PV project. The higher the resource,
the greater the energy yield per kWp installed. When
6.3.3 CLIMATE
assessing the GTI at a site, care must be taken to minimise
any shading that will reduce the irradiation received. In addition to a good solar resource, the climate should
Shading could be due to mountains or buildings on the not suffer from extremes of weather that will increase the
far horizon, mutual shading between rows of modules, risk of damage or downtime. Weather events that may
or shading near the location due to trees, buildings or need consideration include:
overhead cabling. Particular care should be taken to Flooding: May cause damage to electrical equipment
consider any shading that could occur due to future mounted on or close to ground level. Also increased
construction projects or by growth of vegetation. risk of erosion of the support structure and
foundations, depending on geotechnical conditions.

6: Site Selection 59
Table 7: Area Required for Megawatt-scale Solar Power technology selection. For instance, it would be better
Plant to choose modules with a low temperature coefficient
Approximate Area for power.
Country Technology (ha/MWp)a
South Africa c-Si 0.9 1.4 Air pollutants: The location of the site in relation
CdTe 1.5 2.0 to local air pollution sources must be considered.
Chile c-Si 1.0 1.5 Local industrial atmospheric pollution may reduce
CdTe 1.7 2.2 the irradiation received or contain significant levels
Thailand c-Si 0.8 1.2 of airborne sulphur or other potentially corrosive
CdTe 1.3 1.8 substances. Similarly, the distance to the sea (coastline)
India c-Si 1.0 1.5 should be considered as this may lead to elevated
CdTe 1.6 2.0 levels of salts in the atmosphere. All these conditions
Indonesia c-Si 0.8 1.2 could lead to accelerated corrosion of unprotected
CdTe 1.3 1.8
components. PV modules to be used in highly corrosive
a Exact area will vary according to the tilt angles and pitch.
atmospheres such as coastal areas must be certified for
salt mist corrosion as per standard IEC 61701. Further
information on the impact of air pollution can be
High wind speeds: The risk of a high wind event found in Section 5.3.
exceeding the plant specifications should be assessed.
Locations with a high risk of damaging wind speeds 6.3.4 TOPOGRAPHY
should be avoided. Fixed systems do not shut down at
Ideally, the site should be flat or on a slight south-facing
high wind speeds, but tracking systems must shut down
slope in the northern hemisphere or north-facing slope
when high wind speeds are experienced.
in the southern hemisphere. Such topography makes
Snow: Snow settling on modules can significantly installation simpler and reduces the cost of technical
reduce annual energy yield if mitigating measures are modifications required to adjust for undulations in
not incorporated. If the site is prone to snow, then one the ground. With additional cost and complexity of
has to consider factors such as the extra burden on the installation, mounting structures can be designed for most
mounting structures, the loss in energy production, locations. In general, the cost of land must be weighed
and the additional cost of higher specification modules against the cost of designing a mounting structure and
or support structures. The cost of removing the snow installation time.
needs to be weighed against the loss in production and
the likelihood of further snowfall. The effects of snow 6.3.5 LAND USE
can be mitigated by a design with a high tilt angle and Solar PV power plants will ideally be built on low value
frameless modules. The design should also ensure that land. If the land is not already owned by the developer,
the bottom edge of the module is fixed higher than the then the cost of purchase or lease needs to be considered.
average snow level for the area. Most importantly, a The developer must purchase the land or use rights
site that that has regular coverings of snow for a long for the duration of the project. Section 8 (Permits and
period of time may not be suitable for developing a Licensing) provides further details. Besides access to the
solar PV power plant. site, provision of water, electricity supplies and the rights
Temperature: The efficiency of a PV power plant to upgrade access roads must be considered along with
reduces with increasing temperature. If a high relevant land taxes.
temperature site is being considered, mitigating
measures should be included in the design and

60 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Since government permission will be required to build 6.3.7 ENVIRONMENTAL & SOCIAL CONSIDERATIONS
a solar power plant, it is necessary to assess the site in
Most regulatory regimes require some sort of
line with the local conditions imposed by the relevant
Environmental Impact Assessment (EIA) or Environmental
regulatory bodies. See Section 12 for further information
and Social Impact Assessment (ESIA), or an environmental
on regulations.
scoping document which screens for any significant issues
so that a decision can be made by the relevant authorities
If the land is currently used for agricultural purposes,
as to whether a full-blown assessment is required.
then it may need to be re-classified for industrial use,
However, there may be some countries where no such
with cost and time implications. The best locations for
regulatory requirements exist. In either case, the siting
solar plants are usually previously developed lands or
process should consider the following key environmental
brownfield sites because they often have existing energy
and social criteria:
use nearby. Use of high-quality agricultural land should be
avoided if possible. In some instances, due to the spacing Biodiversity: Avoiding sensitive or critical habitats
between modules and their elevation, some agricultural and species is crucial. Construction and operation of
activity such as sheep grazing can remain. solar PV power plant sites and ancillary infrastructure
(access roads, transmission lines) leads to clearing of
The future land use of the area must also be taken into existing habitats and disturbance to fauna and flora.
account. It is likely that the plant will be in operation for Facilities, including ancillary infrastructure, should
at least 25 years. Furthermore, external factors also need be sited away from ecologically sensitive areas, e.g.,
to be considered to assess the likelihood of their impact protected areas and those with high biodiversity
on energy yield. For example, the dust associated with value such as wetlands, undisturbed natural forests
building projects or vehicular traffic could have significant and important wildlife corridors. Ideally, solar
soiling effect and associated impact on the energy yield of PV power plants should be built on sites that are
the plant. Any trees on the project site and surrounding either open or barren (e.g., desert or semi-desert
land may need to be removed, with cost implications. locations) or that have previously been disturbed, e.g.,
farmland, industrial land, abandoned land or existing
Clearances from the military may be required if the site
transportation and transmission corridors. Impacts
is in or near a military-sensitive area. Glare from solar
on designated conservation or biodiversity protection
modules can affect some military activities.
sites should be avoided wherever possible, in particular
those with national or international significance.
6.3.6 LOCAL REGULATIONS / LAND USE POLICY
Land acquisition: Avoiding or minimizing involuntary
Any planning restrictions for the area of the development
resettlement is a key concern. Installation of solar
should be taken into consideration. These will differ
PV plants results in long-term land acquisition and
from country to country, but may include land use
conversion. If involuntary resettlement (i.e., physical or
zoning regulations or constraints to a particular type of
economic displacement of households) is necessary, this
development. These issues are discussed further in Section
may complicate and slow project development and give
8 (Permits and Licensing).
rise to possible project delays later in the development
It is advisable to contact the relevant government cycle, particularly where land tenure and ownership
department in the first instance to ascertain any specific laws are tenuous and/or customary land tenure
restrictions on the area in question. exists. Sites that would require physical displacement
(relocation of residences) should be avoided wherever

6: Site Selection 61
 possible; site selection should furthermore aim to The soil pH and chemical constituents in order to
avoid or minimize economic displacement (e.g. loss of assess the degree of corrosion protection required and
croplands, businesses or other livelihood sources). the adequate specification of cement properties to be
used in foundation concrete.
Other social impacts: Avoiding cultural heritage,
visual impacts and indigenous peoples (IPs) is another The degree of any ground contaminants present which
critical concern. Besides involuntary resettlement, solar may require special consideration during detailed
PV projects and their ancillary infrastructure may design or special measures to be undertaken during
adversely impact cultural heritage or IPs, may result in construction.
visual impacts to nearby communities and may require
establishment of worker accommodation camps Depending on the actual site location, the geotechnical
involving an influx of outsiders into a local community, study may also be expected to include an assessment of
with attendant social risks. Sites should be selected in the risk of seismic activity, land slip, ground subsidence,
such as manner as to avoid close proximity to settled historical mining or mineral extraction activity and the
areas, to avoid cultural heritage (e.g., graves, sacred susceptibility of the soil to frost or clay heave, erosion and
sites) and to avoid or minimize adverse impacts on IPs flooding.
lands or properties.
6.3.9 GRID CONNECTION
6.3.8 GEOTECHNICAL A grid connection of sufficient capacity is required to
A geotechnical survey of the site is recommended enable the export of power. The viability of the grid
prior to final selection. Its purpose is to assess the connection will depend on factors such as capacity,
ground conditions in order to inform the foundation proximity, ROW, grid stability and grid availability.
design approach and right of way (ROW) to ensure These factors should be considered at an early stage of
that the mounting structures will have adequately the project development process. If the grid connection
designed foundations. The level of detail required in study is neglected, unforeseen grid connection costs could
the geotechnical survey will depend on the proposed seriously impact the viability of the project.
foundation design. Proximity: A major influence on the cost of connecting
to the grid will be the distance from the site to the
Best practice dictates that either boreholes or trial pits are
grid connection point. In order to ensure the grid
made at regular intervals, along with soil sampling and
connection does not adversely affect project economics,
in-situ testing, at a depth appropriate for the foundation
it is necessary to carry out a feasibility study to assess
design. This is usually around 2.5m to 3m below ground
power evacuation and transmission line routes at the
level. The boreholes or trial pits would typically assess:
planning stage of the project.
The groundwater level.
Availability: The grid availability is the percentage of
The resistivity of the soil. time that the network is able to accept power from
the solar PV plant. The annual energy yield from
The load-bearing properties of the soil.
a plant may be significantly reduced if the grid has
The presence of rocks or other obstructions. significant downtime. This may have adverse effects
Suitability of chosen foundation types and drivability on the economics of the project. In developed areas,
of piled foundations. the availability of the grid is usually very high. In less
developed and rural areas, networks may suffer from

62 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 much more significant downtime. Availability statistics widened or upgraded. Safe packaging of the modules and
should be requested from the network operator to their susceptibility to damage in transport must also be
establish the expected downtime of the network. carefully considered.

Capacity: The capacity of the grid to accept exported

ROW is the agreement that allows the project developers
power from a solar plant will depend on the existing
transmission lines to cross property owned by another
network infrastructure and current loading of the
individual or entity. In order to avoid ROW risks, which
system. The substation and export line capacity needs
may impact on the project schedule, all land permits and
to be appropriate for the capacity of the plant being
agreements need to be planned well in advance (see Box 4
developed. Where the grid network does not have
in Chapter 7, Grid Connection Experience in India).
sufficient existing capacity to allow connection, there
are a number of solutions available: 6.3.11 MODULE SOILING
Curtail the maximum power exported to within The efficiency of the solar plant could be significantly
allowable limits of the network. reduced if the modules are soiled (covered) by particulates/
Upgrade the network to allow an increased export dust. It is important to take account of local weather,
capacity. environmental, human and wildlife factors while
determining the suitability of a site for a solar PV plant.
Reduce the capacity of the proposed plant.
The criteria should include:
Initial investigation into the network connection point Dust particles from traffic, building activity,
capacity can often be carried out by reviewing published agricultural activity or dust storms.
data. However, discussions with the network operator will
Module soiling from bird excreta. Areas close to nature
be required to fully establish the scope of work associated
reserves, bird breeding areas and lakes should be
with any capacity upgrades. The network operator will
particularly carefully assessed.
provide details of the work required, along with cost
implications. Certain aspects of a grid network upgrade
Soiling of modules will require an appropriate
can be carried out by third party contractors. Others must
maintenance and cleaning plan and potentially keeping
be conducted by the network operator alone. An early
equipment at or close to the site.
grid feasibility study is the starting point for assessing the
suitability of the power evacuation arrangement. Power 6.3.12 WATER AVAILABILITY
system studies can also be conducted to model the likely
Clean, low mineral content water is preferred for cleaning
grid capacity.
modules. A main water supply, ground water, stored
6.3.10 ACCESS AND RIGHT OF WAY (ROW) water or access to a mobile water tank may be required;
the cost of the various options will have an impact on the
The site should allow access for trucks to deliver plant and
project economics. The degree to which water availability
construction materials. This may require the upgrading of
is an issue will depend upon the expected level of module
existing roads or construction of new roads. The closer the
soiling, the extent of natural cleaning due to rainfall and
site is to a main access road, the lower the cost of adding
the cleaning frequency. The quantity of water required
this infrastructure. At a minimum, access roads should
varies according to available cleaning technologies and
be constructed with a closed-surface gravel chip finish or
the local climate, however approximately 1.6 litres per
similar. The site entrance may also need to be constructed,
m2 of PV modules may be required. In arid environments

6: Site Selection 63
with adjacent communities, attention needs to be paid to In countries where there are significant incentives (i.e.,
existing groundwater reliance by local populations and high FiTs) that override otherwise very unfavourable
the impact (if any) of proposed groundwater extraction economic conditions, developers should be cautious
on local water sources. This is especially important where and consider the sustainability of those incentives. The
there are multiple solar developments in close proximity, potential impacts on the project should be considered
i.e., where there may be cumulative impacts on water should these incentives be withdrawn at any stage. It
availability that could adversely impact local populations. should be noted that incentives are not site-specific, but
are typically dependant on the country or state in which
6.3.13 FINANCIAL INCENTIVES the project is located.
Financial incentives such as FiTs or tax breaks, which
vary by country and sometime regions within countries,
have a strong bearing on the financial viability of a project
(see also Section 14 on Financing Solar PV Projects). Such
incentives could outweigh the costs associated with one or
more of the site selection constraints.

64 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Site Selection Checklist

The checklist below details the basic requirements and

procedures to assist developers with the site selection process.

Suitable land area identified for the scale of development

proposed.

Ownership of land determined.

Current land use identified (e.g., industrial/agricultural/

brownfield).

Advice sought from regulatory authorities on land use

restrictions.

Solar resource assessed.

Topographic characteristics obtained.

Proximity to international, national and local environmental

designations determined.

Potential access routes to site assessed.

Geotechnical survey completed.

Grid connection assessed (capacity, proximity, right-of-way,

stability and availability).

Soiling risks assessed.

Availability of water supply/ground water determined.

GIS assessment of constraints (optional).

Financial incentives identified.

6: Site Selection 65
 7 Plant Design

7.1 PLANT DESIGN OVERVIEW

Designing a megawatt-scale solar PV power plant is an involved For plant design, there are some
process that requires considerable technical knowledge and
general rules of thumb. But
experience. There are many compromises that need to be made in
specifics of project locations
order to achieve the optimum balance between performance and
cost. This section highlights some of the key issues that need to such as irradiation conditions,
be considered when designing a solar PV power plant. temperature, sun angles and
shadingshould be taken into
For most large solar PV plants, reducing the levelised cost of
electricity (LCOE) is the most important design criteria. Every account in order to achieve
aspect of the electrical system (and of the project as a whole) the optimum balance between
should be scrutinised and optimised. The potential economic annual energy yield and cost.
gains from such an analysis are much larger than the cost of
carrying it out.

It is important to strike a balance between cost savings

and quality. Engineering decisions should be "careful" and
"informed" decisions. Otherwise, design made with a view to
reduce costs in the present could lead to increased future costs
and lost revenue due to high maintenance requirements and low
performance.

The performance of a solar PV power plant can be optimised

by reducing the system losses. Reducing the total loss increases
the annual energy yield and hence the revenue, though in some
cases it may increase the cost of the plant. In addition, efforts to
reduce one type of loss may conflict with efforts to reduce losses
of a different type. It is the skill of the plant designer to make
compromises that result in a plant with a high performance at a
reasonable cost.

For plant design, there are some general rules of thumb. But
specifics of project locationssuch as irradiation conditions,
temperature, sun angles and shadingshould be taken into
account in order to achieve the optimum balance between annual
energy yield and cost.

Checklists of basic requirements and procedures for plant

design considerations to assist solar PV plant developers during

66 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

the development phase of a PV project are at the end of In the northern hemisphere, this will be true south.36 In
Chapter 7. the southern hemisphere, it is true north.

It may be beneficial to use simulation software to compare Computer simulation software may be used to help design
the impact of different module or inverter technologies the plant layout. Such software includes algorithms which
and different plant layouts on the predicted energy yield describe the celestial motion of the sun throughout the
and plant revenue. year for any location on earth, plotting its altitude37 and
azimuth38 angle on a sun path diagram. This, along with
The solar PV modules are typically the most valuable information on the module row spacing, may be used to
and portable components of a PV power plant. Safety calculate the degree of shading and simulate the annual
precautions may include anti-theft bolts, anti-theft energy losses associated with various configurations of tilt
synthetic resins, CCTV cameras with alarms, and security angle, orientation, and row spacing.
fencing.
7.2.1 GENERAL LAYOUT
The risk of technical performance issues may be mitigated
Minimising cable runs and associated electrical losses may
by carrying out a thorough technical due diligence exercise
suggest positioning a low voltage (LV) or medium voltage
in which the final design documentation from the EPC
(MV) station centrally within the plant. If this option is
contractor is scrutinised by an independent technical
chosen, then adequate space should be allocated to avoid
advisor.
the risk of the station shading modules behind it.

7.2 LAYOUT AND SHADING

The layout should allow adequate distance from the
The general layout of the plant and the distance chosen perimeter fence to prevent shading. It should also
between rows of mounting structures will be selected incorporate access routes for maintenance staff and
according to the specific site conditions. The area available vehicles at appropriate intervals.
to develop the plant may be constrained by space and may
have unfavourable geological or topographical features. 7.2.2 TILT ANGLE
The aim of the layout design is to minimise cost while Every location will have an optimal tilt angle that
achieving the maximum possible revenue from the plant. maximises the total annual irradiation (averaged over the
In general this will mean: whole year) on the plane of the collector. For fixed tilt grid
Designing row spacing to reduce inter-row shading and connected power plants, the theoretical optimum tilt angle
associated shading losses. may be calculated from the latitude of the site. However,
adjustments may need to be made to account for:
Designing the layout to minimise cable runs and
associated electrical losses. Soiling: Higher tilt angles have lower soiling losses.
The natural flow of rainwater cleans modules more
Creating access routes and sufficient space between
effectively and snow slides off more easily at higher
rows to allow movement for maintenance purposes.
tiltangles.
Choosing a tilt angle and module configuration that
optimises the annual energy yield according to the
latitude of the site and the annual distribution of solar
36 True south differs from magnetic south, and an adjustment should be made
resource. from compass readings.
37 The elevation of the sun above the horizon (the plane tangent to the Earths
Orientating the modules to face a direction that yields surface at the point of measurement) is known as the angle of altitude.
38 The azimuth is the location of the sun in terms of north, south, east and west.
the maximum annual revenue from power production. Definitions may vary but 0 represents true south, -90 represents east, 180
represents north, and 90 represents west.

7: Plant Design 67
 Shading: More highly tilted modules provide more The modules configuration (i.e., landscape or portrait)
shading on modules behind them. As shading impacts and the ways strings are connected together will also
energy yield much more than may be expected simply impact how the system experiences electrical shading
by calculating the proportion of the module shaded, a effects. Modules installed in a landscape configuration
good option (other than spacing the rows more widely will typically have smaller electrical shading losses than
apart) is to reduce the tilt angle. It is usually better to a system using a portrait configuration, due to the fact
use a lower tilt angle as a trade-off for loss in energy that diodes are usually connected along a modules length.
yield due to inter-row shading. However, a portrait configuration may be considered if
east and west horizon shading is particularly prevalent.
Seasonal irradiation distribution: If a particular season
dominates the annual distribution of solar resource
7.2.4 INTER-ROW SPACING
(monsoon rains, for example), it may be beneficial
to adjust the tilt angle to compensate for the loss. The choice of row spacing is made by compromising
Simulation software is able to assess the benefit of this between reducing inter-row shading, keeping the area of
option. the PV plant within reasonable limits, reducing cable runs
and keeping ohmic losses within acceptable limits. Inter-
7.2.3 PV MODULE CONFIGURATION row shading can never be reduced to zero: at the beginning
and end of the day, the shadow lengths are extremely long.
The effect of partial shading of the PV modules on
Figure 16 illustrates the angles that must be considered in
electrical production of the PV plant is non-linear due
the design process.
to the way that diodes are interconnected within a PV
module and how modules are connected together in a
The shading limit angle39 a is the solar elevation angle
string. Different types of technology will react differently
beyond which there is no inter-row shading on the
to the electrical shading effect caused by near-shading
modules. If the elevation of the sun is lower than a, then a
obstacles and inter-row shading. For example, some
thin-film modules are less affected by partial shading than
crystalline technologies.

39 Also known as critical shading angle."

Figure 16: Shading Angle Diagram

68 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

proportion of the module will be shaded, and there will be may perform differently under the varying conditions
an associated loss in energy yield. of irradiance, temperature, shading and voltage that are
actually experienced in the field. This makes selecting
The shading limit angle may be reduced either by reducing modules a more complex process than it may first appear.
the tilt angle or increasing the row pitch d. Reducing the Many developers employ the services of an independent
tilt angle below the optimal is sometimes chosen because technical advisor familiar with the bill of materials from
this may give only a minimal reduction in annual yield. which the modules are made, and the specific factory
The ground cover ratio (GCR), given by l/d is a measure of manufacturing conditions. Table 8 gives some of the
the PV module area compared to the area of land required. selection criteria that should be considered.

For many locations, a design rule of thumb is to space 7.3.1.1 Quality Benchmarks
the modules in such a way that there is no shading at Product guarantee: A material and workmanship
solar noon on the winter solstice (December 21st in product guarantee of ten years has become common.
the northern hemisphere and June 21st in the southern Some manufacturers guarantee up to 12 years.
hemisphere). In general, if there is less than a 1 percent
Power guarantee: In addition to the product guarantee,
annual loss due to shading, then the row spacing may be
manufacturers grant nominal power guarantees.
deemed acceptable.
These vary between manufacturers. A two-step
power warranty (e.g., 90 percent until year 10 and 80
Detailed energy yield simulations can be carried out to
percent until year 25) has been the historical industry
assess losses due to shading, and to obtain an economic
standard. However, good module manufacturers are
optimisation that also takes into account the cost of land,
now differentiating themselves by providing a power
if required.
output warranty that is fixed for the first year and
7.2.5 ORIENTATION then reduces linearly each year by a proportion of the
nominal output power. This linear warranty provides
In the northern hemisphere, the orientation that optimises
additional protection to the plant owner compared
the total annual energy yield is true south. In the tropics,
to the two-step warranty which would provide no
the effect of deviating from true south may not be
recourse if, for example, the module degrades to 91
especially significant.
percent of its nominal power in the first year.

Some tariff structures encourage the production of

It is rare for module manufacturers to offer a power
energy during hours of peak demand. In such time of
output guarantee beyond 25 years. The conditions
day rate structures, there may be financial (rather than
of both the power guarantee and product guarantee
energy yield) benefits of orientating an array that deviates
vary between manufacturers and should be carefully
significantly from true south. For example, an array facing
checked.
in a westerly direction will be optimised to generate power
in the afternoon. The effect of tilt angle and orientation on Lifetime: Good quality modules with the appropriate
energy yield production can be effectively modelled using IEC certification have a design life in excess of 25
simulation software. years. Beyond 30 years, increased levels of degradation
may be expected. The lifetime of crystalline modules
7.3 TECHNOLOGY SELECTION has been proven in the field. Thin-film technology
lifetimes are currently unproven and rely on
7.3.1 MODULES
accelerated lifetime laboratory tests, but are expected
Certification of a module to IEC/CE/UL standards as to be in the order of 2530 years also.
described in Section 3.3.7 is essential. However, modules

7: Plant Design 69
Table 8: PV Module Selection Criteria
Criterion Description
Levelised cost of The aim is to keep the levelised cost of electricity (LCOE) at a minimum. When choosing between high-efficiency/
electricity (LCOE)a high-cost modules and low-efficiency/low-cost modules, the cost and availability of land and plant components
will have an impact. High-efficiency modules require significantly less land, cabling and support structures per MWp
installed than low-efficiency modules.
Quality When choosing between module technologies such as mono-crystalline silicon (mono-c-Si), multi-crystalline silicon
(multi-c-Si), and thin-film amorphous silicon (a-Si), it should be realised that each technology has examples of high
quality and low quality products from different manufacturers.
PV module Modules tested under a specific set of conditions of irradiance, temperature and voltage, with a specific inverter, may
performance perform very differently under alternative conditions with a different inverter. Independent laboratories such as PV
Evolution Labs b (PVEL) and TV Rheinland c can test PV modules according to a matrix of operational conditions under
a wide range of environmental conditions in line with IEC 61853-1.
Power tolerance The nominal power of a module is provided with a tolerance. Most crystalline modules are rated with a positive
tolerance (typically 0/+3 percent to 0/5 percent), while some crystalline, CdTe and CIGS modules may be given with
a 5 percent tolerance. Some manufacturers routinely provide modules at the lower end of the tolerance, while others
provide modules that achieve their nominal power or above (positive tolerance). For a large plant, the impact of the
module power tolerance on the overall energy yield can have a significant effect.
Flash tests When ordering a large number of modules, it may be recommended to have a sample of modules independently flash
tested from an accredited laboratory (such as Fraunhofer institute d or PI Berlin e) to confirm the tolerance. Additional
acceptance tests such as electroluminescence tests may also be performed.
Temperature The value of the power change with temperature will be an important consideration for modules installed in hot
coefficient for power climates. Cooling by wind can positively affect plant performance in this respect.
Degradation The degradation properties and long-term stability of modules should be ascertained. PV module manufacturers,
independent testing institutes and technical consultants are sources of good information with regards to the potential
induced degradation (PID), long-term degradation and, for crystalline modules, light-induced degradation (LID).
Bypass diodes The position and number of the bypass diodes affect how the module performs under partial shading. The orientation
of the PV modules on the support structure (portrait or landscape) can affect the inter-row shading losses (see also
Section 5.3).
Warranty terms The manufacturers warranty period is useful for distinguishing between modules, but care should be taken with the
power warranty. It is recommended that a detailed technical and legal review of warranty terms be conducted.
Suitability for unusual Frameless modules may be more suitable for locations that experience snow, as snow tends to slide off these modules
site conditions more easily. Modules located close to the coast should be certified for salt mist corrosion as described in Section 6.3.3.
Spectral response of Different technologies have a differing spectral response and so will be better suited for use in certain locations,
the semiconductor depending on the local light conditions. Some technologies show an improved response in low light levels compared to
other modules.
Maximum system When sizing strings with modules with a high Open Circuit Voltage (Voc), it should be verified that for extreme ambient
voltage temperature conditions (up to 60 and down to -10), the maximum system voltage (1,000V) will not be exceeded.
Other Other parameters important for selection of modules include cost ($/Wp) and the expected operational life.
a The cost per kWh of electricity generated that takes into account the time value of money.

b PV Evolution Labs, http://www.pvel.com

c TUV Rheinland, http://www.tuv.com/en/corporate/home.jsp

d Fraunhofer Institute, http://www.fraunhofer.de/en.html

e PI Berlin, http://www.pi-berlin.com

70 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

The module datasheet format and the information that varies according to a number of variables, including the
should be included has been standardised and is covered DC input voltage and load. Several other factors should
by EN 50380: Datasheet and nameplate information for inform inverter selection, including site temperature,
photovoltaic modules. An example of the information product reliability, maintainability, serviceability and total
expected in a datasheet is provided in Table 9. cost. Inverters also de-rate with altitude, which may be a
consideration in mountainous locations.
7.3.2 INVERTERS
7.3.2.1 Containerised Inverter Solutions
No single inverter is best for all situations. In practice,
the local conditions and the system components have to Where commercial scale PV systems export power to the
be taken into account to tailor the system for the specific grid at medium voltage, it is common that a containerised
application. Different solar PV module technologies and solution for inverter, transformer and switchgear is
layouts may suit different inverter types. Care needs to be provided. This solution enables offsite manufacturing,
taken in the integration of modules and inverters to ensure thus reducing installation time on site.
optimum performance and lifetime.
Containers are generally shipping-type and manufactured
The most cost-effective inverter option requires an from corrugated steel. However they can also be
analysis of both technical and financial factors. Many of manufactured in glass-reinforced plastic or concrete. The
the inverter selection criteria listed in Table 10 feed into architecture of containers should ensure there is sufficient
this analysis. The DC-AC conversion efficiency directly space for equipment, including access for maintenance.
affects the annual revenue of the solar PV plant and Cabling between equipment should be neatly installed,
and often is provided in a compartment below the floor of
Table 9: Comparison of Module Technical Specifications the container. Having separate compartments for HV/LV
atSTC equipment and for transformers is good practice. Provision
Manufacturer Xxxx of suitable heating, ventilation or air conditioning is
Module Model Xxxx necessary to maintain stable environmental conditions.
Type Multi-crystalline
Nominal power (PMPP) 245Wp 7.3.2.2 Quality Benchmarks
Power tolerance 0/+3% The warranty offered for inverters varies among
Voltage at PMAX (VMPP) 30.2V manufacturers. A minimum warranty of five years is
Current at PMAX (IMPP) 8.13A typical, with optional extensions of up to twenty years
Open circuit voltage (VOP) 37.5V or more available from many manufacturers. Some string
Short circuit current (ISC) 8.68A inverters offer a 7- or 10-year warranty as standard.
Maximum system voltage 1000VDC
Module efficiency 15.00% Many manufacturers quote inverter lifetimes in excess
Operating temperature -40C to +85C of 20 years based on replacing and servicing certain
Temperature coefficient of PMPP -0.43%/C components according to specific maintenance regimes.
Dimensions 165099240mm However, real world experience points to an expected
Module area 1.64m2 lifetime of a central inverter of between 10 and 20 years.
Weight 19.5kg This implies that the inverters may need to be replaced
Maximum load 5400Pa or refurbished once or twice during a 25-year plant
Product warranty 10 years
operational life.
92%: after 10 years; 80%:
Performance guarantee
after25 years

7: Plant Design 71
 Table 10: Inverter Selection Criteria
Criterion Description
Project capacity The plant capacity influences the inverter connection concept. Central inverters are commonly used in
megawatt-scale solar PV plants. Inverters are discussed more fully in Section 3.5.
Performance High efficiency inverters should be sought. The additional yield often more than compensates for the higher
initial cost. Consideration must also be given to the fact that efficiency changes according to design parameters,
including DC input voltage and load.
Maximum Power Point A wide inverter MPP range facilitates design flexibility.
(MPP) voltage range
3-phase or single phase The choice will be subject to project size. Large capacity projects will require 3-phase inverters. National electrical
output regulations may set limits on the maximum power difference between the phases.
Incentive scheme Banding of financial incentive mechanisms may have an influence on the choice of inverter. For example, FiT
schemes might be tiered for different plant sizes, which may, in turn, influence the optimum inverter capacity.
Module technology The compatibility of thin-film modules with transformerless inverters should be confirmed with manufacturers.
National and international A transformer inverter must be used if galvanic isolation is required between the DC and AC sides of the inverter.
regulations
Power quality/grid code Power quality and grid code requirements are country-dependent. It is not possible to provide universally
compliance applicable guidelines. The national regulations and standards should be consulted when selecting an inverter and
designing a solar PV power plant.

National grid codes may specify requirements for:

Frequency limitation.
Voltage limitation.
Reactive power control capabilityover-sizing inverters slightly may be required.
Harmonic distortion limitationto reduce the harmonic content of the inverters AC power output.
Fault ride through capability.
Product reliability High inverter reliability ensures low downtime and maintenance and repair costs. If available, inverter mean time
between failures, figures and track record should be assessed.
Mismatch If modules of different specifications or different orientation and tilt angles are to be used, then string or multi-
string inverters with multiple MPP trackers may be recommended in order to minimise mismatch losses.a This
may be especially relevant for rooftop applications where the orientation and tilt angle is often dictated by the
properties of the roof space.
Maintainability and Access constraints for PV plants in remote locations may influence the choice of inverter manufacturer: a
serviceability manufacturer with a strong in-country presence may be able to provide better technical support. For PV plants in
remote areas, string inverters offer ease of maintenance benefits.
System availability If a fault arises with a string inverter, only a small proportion of the plant output is lost (i.e., 25kW). Spare inverters
can be kept locally and replaced by a suitably-trained electrician. With central inverters, a larger proportion of the
plant output will be lost until a replacement is obtained (e.g., 750kW).
Modularity Ease of expanding the system capacity and flexibility of design should be considered when selecting inverters.
Shading conditions String or multi-string inverters with multiple MPP trackers may be the preferred choice for sites that suffer from
partial shading.
Installation location Outdoor/indoor placement and site ambient conditions influence the IP rating and cooling requirements. Either
forced ventilation or air-conditioning will usually be required for indoor inverters.
Monitoring / recording / Plant monitoring, data logging and control requirements define a set of criteria that must be taken into account
telemetry when choosing an inverter.
a Each PV string with a given tilt and orientation will have its own unique output characteristics and therefore needs to be "tracked" separately to maximize yield. An
efficient design requires that only identically oriented sub-arrays are allocated to a single maximum power point tracker.

72 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Inverter protection should include: Table 11: Datasheet Information

Protection against incorrect polarity for the DC cable. Inverter Model xxxxxxxxx
Inputs
Over-voltage and overload protection.
Maximum DC Power 954kW
Islanding detection for grid connected systems MPP Voltage Range 681-850V
(depends on grid code requirements). Maximum Input Voltage 1,000V
Maximum Input Current / MPPT 1,400A
Insulation monitoring.
Number of MPP Trackers 1
Total harmonic distortion (THD)40 is a measure of the Outputs
harmonic content of the inverter output and is limited Rated AC Power at 25C 935kVA
by most grid codes. For high quality inverters, THD Maximum AC Output Current 1,411A
is normally less than 5 percent. Inverters should be Rated AC Voltage 386V
accompanied by the appropriate type of test certificates, AC Grid Frequency 50Hz
which are defined by the national and international Efficiency
standards applicable for each project and country. Maximum Efficiency 98.6%
Euro Efficiency 98.4%
The inverter datasheet format and the information that Standby Consumption < 100W
should be included is standardised as covered by EN Operation Consumption 1,900W
50524:2009: Data sheet and name plate for photovoltaic General Data
inverters." An example of the information expected in a IP Rating IP54, IP43
datasheet is provided in Table 11.
Operating Temperature Range -25C to +62C
Relative Humidity 15-95 %
7.3.3 TRANSFORMERS
Dimensions (H x W x D) 2,272 x 2,562 x 956mm
Distribution and grid transformers are the two main Weight (kg) 1,900kg
types found on solar PV plants. Distribution transformers
are used to step up the inverter output voltage for the
plant collection system, which is normally at distribution product reliability, maintainability, serviceability and
voltage. If the plant is connected to the distribution sound power. A cost-benefit analysis is required to
network, power can then be exported to the grid directly. determine the optimal transformer option.
If the plant is connected to the transmission grid, grid
transformers are used to step up the voltage even further. Amorphous core transformers have low losses under no-
Further description of grid connection considerations is load conditions and as such can provide cost savings in
provided in Section 7.4.3. solar applications where there are significant periods of
time when the transformers are not loaded.
The total cost of ownership (TCO), and the efficiency
(directly related to the load and no-load losses) are Selection criteria (technical and economic factors) include:
major transformer selection criteria, directly affecting the Efficiency, load/no-loadlosses.
annual revenue of the solar PV plant. As with inverters,
Guarantee.
several other factors should inform transformer selection,
including power rating, construction, site conditions, Vector group.

System voltage.

40 Total Harmonic Distortion is a measure of the harmonic content of the inverter Power rating.
output and is limited by most grid codes.

7: Plant Design 73
 Site conditions. the latitude, the optimum tilt angle can vary between 10
and 45. This is covered more fully in Section 7.2. The
Sound power.
modules should face due south for the north hemisphere
Voltage control capability. and due north for the south hemisphere. There are several
Duty cycle. off-the-shelf software packages (such as PVsyst42 and
PV*SOL43) that may be used to optimise the tilt angle
7.3.3.1 Quality Benchmarks and orientation according to specifics of the site location
The guarantee offered for transformers varies among (latitude, longitude) and solar resource.
manufacturers. A minimum guarantee of 18 months is
7.3.4.1 Quality Benchmarks
typical, with optional extensions of up to 10 years or
more. The warranty supplied with support structures varies,
but may include a limited product warranty of 10-25
Based on manufacturer data and academic studies years. Warranties could include conditions that all parts
looking at large populations of transformers, distribution are handled, installed, cleaned and maintained in the
transformers have mean time to failure (MTTF) of 30 appropriate way, that the dimensioning is made according
years or more. This is dependent on the transformer load to the static loads and that the environmental conditions
profile and duty cycle. are not unusual.

Protection for typical, oil-immersed transformers used on The useful life of fixed support structures, though
solar PV plants should include: dependent on adequate maintenance and corrosion
protection, could be expected to be beyond 25 years.
Buchholz relay.

Pressure relief device. In marine environments or within 3km of the sea,

additional corrosion protection or coatings on the
Over temperature protection.
structures may be required.
Oil level monitoring.
Tracker warranties vary between technologies and
At a minimum, transformers should be built according to manufacturers, but a 5- to 10-year guarantee on parts and
the following standards: workmanship may be typical.
BS EN 50464-1:2007+A1:2012
Tracking system life expectancy depends on appropriate
IEC 60076 maintenance. Key components of the actuation system
such as bearings and motors may need to be serviced or
An example of the information expected in a transformer
replaced within the planned project life.
datasheet is provided in Table 12.
Steel driven piles should be hot-dip galvanised to reduce
7.3.4 MOUNTING STRUCTURES
corrosion. In highly corrosive soil, a suitable proposed
The tilt angle and orientation and row spacing are thickness of coating should be derived by means of
generally optimised for each PV power plant according to calculation. Additional protection such as epoxy coating
location. This helps to maximise the total annual incident may sometimes be necessary in order for components to
irradiation41 and total annual energy yield. Depending on last for the 25- to 35-year system-design life.

41 Irradiation is the solar energy received on a unit area of surface. It is defined 42 PVsyst, http://www.pvsyst.com
more fully in section 4.2. 43 http://www.valentin-software.com/

74 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Table 12: Transformer Specification
Electrical Characteristics
Rated power [kVA] 1250 Rated LV insulation level [kV] 1.1
Insulation liquid Mineral oil (IEC60296 Applied voltage to industrial frequency [kV] 3
class IA)
Operation Reversible B.I.L. (1.2 / 50 s) N/A
Windings HV/LV Aluminium/Aluminium Frequency [Hz] 50
Primary voltage at no load [V] 33000 Number of phases 3
Primary taps type / tappings Off load / 2x2.5% Vector group Dyn05yn5
Rated HV insulation level [kV] 36 No-load losses [W] 1890
Applied voltage to industrial [kV] 70 Load losses (ONAN) at 75C [W] 14850
frequency
B.I.L. (1.2 / 50 s) [kV] 170 Impedance voltage (ONAN) at 75C 6%
Secondary voltage at no load [V] 380 / 380 Tolerances IFC 60076-1 Tolerances
Thermal Characteristics
Thermal insulation class Class A Surface treatment Powder coating
Max. average temperature rise [K/K] 60/65 Surface colour RAL7035
(Oil/Winding)
Mechanical Characteristics
Technology Hermetically sealed Corrosivity category C3 (medium corrosivity)
Tank type With fins or with Durability (ISO 12944-6) Medium (5-15 years)
radiators
Cover Bolted Bolts Standard
Frame type Standard Final colour RAL 7033 greenish-grey
Accessories/Qty
Off-load tap changer 1 Pressure release valve 1

Oil filling tube 1 Gas relay 1

Oil drain valve 1 Oil temperature indicator 1

Thermometer pocket 1 Terminal box 1

Outline and Weight

Overall dimension (L x W x D) [mm] 2150 x 1350 x 2380 Total weight [kg] 4900

Site Conditions

Altitude [m] 1000 Minimum standby temperature [C] -25

Maximum ambient [C] 40 Electrostatic screen No

temperature
Daily average temperature [C] 30 Rectifier supply No

Yearly average temperature [C] 20

7: Plant Design 75
7.4 ELECTRICAL DESIGN apply for specific locations. National standards and codes
should be consulted.
The electrical design of each plant should be considered on
a case-by-case basis, as each site poses unique challenges
For non-crystalline silicon modules, DC component
and constraints. While general guidelines and best
ratings should be calculated from manufacturers data,
practices can be formulated, there are no one-size-fits
taking into account the temperature and irradiance
all solutions. International standards and country-specific
coefficients. In addition, certain module technologies have
electrical codes should be followed in order to ensure that
an initial settling-in period during which the VOC and
the installation is safe and compliant.
ISC is much higher. This effect should also be taken into
consideration. If in doubt, a suitably qualified technical
While the recommendations in the following sections are
advisor should be consulted.
based on solar PV power plants with centralised inverter
architectures, many of the concepts discussed also apply to 7.4.1.1 PV Array Design
plants with string inverters.
The design of a PV array will depend on the inverter
7.4.1 DC SYSTEM specifications and the chosen system architecture. Using
many modules in series in high voltage (HV) arrays
The DC system comprises the following constituents:
minimises ohmic losses. However, safety requirements,
Arrays of PV modules. inverter voltage limits and national regulations also need
to be considered.
DC cabling (module, string and main cable).
Maximum number of modules in a string: The
DC connectors (plugs and sockets).
maximum number of modules in a string is defined
Junction boxes/combiner boxes. by the maximum DC input voltage of the inverter to
Disconnects/switches. which the string will be connected (VMAX (INV, DC)). Under
no circumstances should this voltage be exceeded.
Protection devices.
Crossing the limit can decrease the inverters
Earthing. operational lifetime or render the device inoperable.
The highest module voltage that can occur in
When sizing the DC component of the plant, the operation is the open-circuit voltage in the coldest
maximum voltage and current of the individual strings and daytime temperatures at the site location. Design
PV arrays should be calculated using the maximum output rules of thumb for Europe use -10C as the minimum
of the individual modules. Simulation programs can be design temperature, but this will vary according to
used for sizing but their results should be cross checked location. The maximum number of modules in a
manually. string (n max) may therefore be calculated using the
formula:
DC components should be rated to allow for thermal
VOC(MODULE)@coldest module operating temperature nmax
and voltage limits. As a guide, for mono-crystalline and < VMAX(INV, DC)
multi-crystalline silicon (multi-c-Si) modules, the following
minimum ratings apply: Minimum number of modules in a string: The
minimum number of modules is governed by the
Minimum Voltage Rating: VOC(STC) 1.15
VOC(STC) 1.15 requirement to keep the system voltage within the
ISC(STC) 1.25
Minimum Current Rating: ISC(STC) 1.25 maximum power point (MPP) range of the inverter.
If the string voltage drops below the minimum MPP
The multiplication factors used above (1.15 and 1.25) are
inverter voltage, then the system will underperform.
location-dependent. Different multiplication factors may

76 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 In the worst case, the inverter may shut down. The
lowest expected module voltage occurs during the Figure 17: Voltage and Power Dependency Graphs of
highest operating module temperature conditions. Inverter Efficiencya

Design rules of thumb for Europe use 70C as the 110%

Sunways NT6000
design benchmark, but this will vary according to Prototype
measured at 100%
site conditions. The minimum number of modules in ISE 10.7.2007 95.5%
a string (nmin) may therefore be calculated using the 90%
formula:
80%
VMPP(MODULE)@highest module operating temperature nmin
97.0%
> VMPP(INV min) 70%

60% P/PN AC
Voltage optimisation: As the inverter efficiency is
dependent on the operating voltage, it is preferable 50%
eciency
range [%]
to optimise the design by matching the array 97.5% 40%
operating voltage and inverter optimum voltage
30%
as closely as possible. This will require voltage
97.0%
dependency graphs of inverter efficiency (see 96.5% 20%

examples in Figure 17). If such graphs are not 10%

350 400 450 500 550 600
provided by inverter manufacturers, they may be DC voltage [V]
obtained from independent sources. Substantial
increases in the plant yield can be achieved by a F.P. Baumgartner, et al., "Status and Relevance of the DC Voltage
Dependency of the Inverter Efficiency," 22nd European Photovoltaic
successfully matching the operating voltages of the Solar Energy Conference and Exhibition, 3-7 September 2007, Fiera
Milano, Session 4DO.4.6, https://home.zhaw.ch/~bauf/pv/papers/
PV array with the inverter. baumgartner_2007_09_inverter_EUPVSEC_MILANO.pdf (accessed June
2014).
Number of strings: The maximum number of
strings permitted in a PV array is a function of
the maximum allowable PV array current and the The optimal sizing is, therefore, dependent on the specifics
maximum inverter current. In general, this limit of the plant design. Most plants will have an inverter
should not be exceeded as it leads to premature sizing range within the limits defined by:
inverter ageing and yield loss. 0.8 < Power Ratio < 1.2

7.4.1.2 Inverter Sizing Where:

It is not possible to formulate an optimal inverter sizing P(Inverter DC rated)

Power Ratio =
strategy that applies in all cases. Project specifics such P(PV Peak)

as the solar resource and module tilt angle play a very

P(Inverter AC rated)
important role when choosing a design. While the rule P(Inverter DC rated) =
n(100%)
of thumb has been to use an inverter-to-array power
ratio less than unity, this is not always the best design
Guidance on inverter and PV array sizing can be obtained
approach. For example, this option might lead to a
from the inverter manufacturers, who offer system-sizing
situation where the inverter manages to curtail power
software. Such tools also provide an indication of the
spikes not anticipated by irradiance profiles (based on
total number of inverters required. If in doubt, a suitably
one-hour data). Or, it could fail to achieve grid code
qualified technical advisor should be consulted.
compliance in cases where reactive power injection to
the grid is required.

7: Plant Design 77
A number of factors and guidelines must be assessed when designed for solar PV installations (solar cables) are
sizing an inverter: readily available and should be used. In general, three
criteria must be observed when sizing cables:
The maximum VOC in the coldest daytime temperature
must be less than the inverter maximum DC input 1. The cable voltage rating: The voltage limits of the
voltage (VINV, DC MAX). cable to which the PV string or array cable will be
connected must be taken into account. Calculations of
The inverter must be able to safely withstand the
the maximum VOC voltage of the modules, adjusted for
maximum array current.
the site minimum design temperature, are used for this
The minimum VOC in the hottest daytime temperature calculation.
must be greater than the inverter DC turn-off voltage
2. The current carrying capacity of the cable: The cable
(VINV, DC TURN-OFF).
must be sized in accordance with the maximum
The maximum inverter DC current must be greater current. It is important to remember to de-rate
than the PV array(s) current. appropriately, taking into account the location of
The inverter MPP range must include PV array MPP the cable, the method of laying, number of cores and
points at different temperatures. temperature. Care must be taken to size the cable for
the worst case of reverse current in an array.
When first installed, some thin-film modules produce a
voltage greater than the nominal voltage. This happens 3. The minimisation of cable losses: The cable voltage
for a period of time until initial degradation has drop and the associated power losses must be as low
occurred, and must be taken into account. possible. Normally, the voltage drop must be less
than 3 percent. Cable losses of less than 1 percent are
Grid code requirements, including reactive power
achievable.
injection specifications.

The operating voltage should be optimised for In practice, the minimisation of voltage drop and
maximum inverter efficiency. associated losses will be the limiting factor in most cases.

Site conditions of temperature and irradiation profiles. 7.4.1.4 Cable Management

Economics and cost-effectiveness. Over-ground cables such as module cables and string
cables need to be properly routed and secured to the
Inverters with reactive power control are recommended. mounting structure, either using dedicated cable trays
Inverters can control reactive power by controlling the or cable ties. Cables should be protected from direct
phase angle of the current injection. Moreover, aspects sunshine, standing water and abrasion by the sharp edges
such as inverter ventilation, air conditioning, lighting and of support structures. They should be kept as short as
cabinet heating must be considered. possible.

When optimising the voltage, it should be considered Plug cable connectors are standard in grid-connected solar
that the inverter efficiency is dependent on voltage. PV power plants, due to the benefits they offer in terms of
Specification sheets and voltage-dependency graphs are installation ease and speed. These connectors are normally
required for efficient voltage matching. touch-proof, which means they can be touched without
risk of shock.
7.4.1.3 Cable Selection and Sizing
The selection and sizing of DC cables for solar PV power The laying of main DC cables in trenches must follow
plants should take into account national codes and national codes and take into account specific ground
regulations applicable to each country. Cables specifically conditions.

78 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

7.4.1.5 Module and String Cables made with screw terminals and must be of high quality to
ensure lower losses and prevent overheating.
Single-conductor, double-insulation cables are preferable
for module connections. Using such cables helps protect
Combiner boxes have protective and isolation equipment,
against short circuits. When sizing string cables, the
such as string fuses and disconnects44 (also known as load
number of modules and the number of strings per array
break switches), and must be rated for outdoor placement
need to be considered. The number of modules defines the
using, for example, ingress protection (IP). An explanation
voltage at which the cable should be rated. The number of
of the IP bands is provided in Table 13. Depending on
strings is used to calculate the maximum reverse current
the solar PV plant architecture and size, multiple levels of
that can flow through a string.
junction boxes can be used.

The cables should be rated to the highest temperature

It is important to remember that the module side of the
they may experience (for instance, 80C). Appropriate
terminals of a DC PV system remain live during the day.
de-rating factors for temperature, installation method and
Therefore, clear and visible warning signs should be
cable configuration should also be applied.
provided to inform anyone working on the junction box.
7.4.1.6 Main DC Cable For safety reasons all junction boxes should be correctly
labelled.
In order to reduce losses, the overall voltage drop between
the PV array and the inverter should be minimised. A Disconnects and string fuses should be provided.
benchmark voltage drop of less than 3 percent (at STC) is Disconnects permit the isolation of individual strings,
suitable, and cables should be sized using this benchmark while string fuses protect against faults, as discussed in
as a guide. In most cases, over-sizing cables to achieve Section 7.4.1.9. Disconnects should be capable of breaking
lower losses is a worthwhile investment. normal load and should be segregated on both the positive
and negative string cables.
7.4.1.7 Combiner Boxes
Combiner boxes are needed at the point where the
individual strings forming an array are marshalled and
connected together in parallel before leaving for the
inverter through the main DC cable. Junctions are usually 44 Disconnects should be not confused with disconnectors/isolators that are
dead circuit devices (or devices that operate when there is no current flowing
through the circuit).

Table 13: Definition of Ingress Protection (IP) Ratings

Example: IP65 1st digit 6 (Dust tight) 2nd digit 5 (Protected against water jets)
1st digit Protection from solid objects 2nd digit Protection from moisture
0 Non-protected 0 Non-protected
1 Protection against solid objects greater than 50mm 1 Protected against dripping water
2 Protection against solid objects greater than 12mm 2 Protected against dripping water when tilted
3 Protection against solid objects greater than 2.5mm 3 Protected against spraying water
4 Protection against solid objects greater than 1.0mm 4 Protected against splashing water
5 Dust protected 5 Protected against water jets
6 Dust tight 6 Protected against heavy seas
7 Protected against immersion
8 Protected against submersion

7: Plant Design 79
7.4.1.8 Connectors the string cable current carrying capability, whichever
is the lower value.
Specialised plug and socket connections are normally
pre-installed on module cables to facilitate assembly. The trigger current of fuse/MCB should be taken into
These plug connectors provide secure and touch-proof account when sizing string cables. It should not be
connections. larger than the current at which the string cable is
rated.
Connectors should be correctly rated and used for DC
The string fuse/MCB should be rated for operation at
applications. As a rule, the connector current and voltage
the string voltage. The following formula is typically
ratings should be at least equal to those of the circuit they
used to guide string fuse rating, although national
are installed on.
codes of practice should be consulted:
Connectors should carry appropriate safety signs that String Fuse Voltage Rating = VOC(STC) M 1.15
warn against disconnection under load. Such an event can where M is the number of modules in each string.
lead to arcing (producing a luminous discharge across
a gap in an electrical circuit), and put personnel and 7.4.1.10 DC Switching
equipment in danger. Any disconnection should take place Switches are installed in the DC section of a solar PV
only after the circuit has been properly isolated. plant to provide protection and isolation capabilities. DC
switches/disconnects and DC circuit breakers (CBs) are
7.4.1.9 String Fuses/Miniature Circuit Breakers
(MCBs) discussed below.

String fuses or miniature circuit breakers (MCBs) are DC Switches/Disconnects: Judicious design practice
required for over-current protection. They must be rated calls for the installation of switching devices in PV
for DC operation. National codes and regulations may array junction boxes. DC switches provide a manual
need to be consulted when selecting and sizing fuses and means of electrically isolating entire PV arrays, which
MCBs. is required during installation and maintenance. DC
switches must be:
The following guidelines apply to string fuses/MCBs:
Double-pole to isolate both the positive and negative
All arrays formed of four or more strings should be PV array cables.
equipped with breakers. Alternatively, breakers should
Rated for DC operation.
be used where fault conditions could lead to significant
reverse currents. Capable of breaking under full load.

Since faults can occur on both the positive and negative Rated for the system voltage and maximum current
sides, breakers must be installed on all unearthed expected.
cables. Equipped with safety signs.
To avoid nuisance tripping, the nominal current of DC Circuit Breaker (CB): String fuses/MCBs cannot be
the breaker should be at least 1.25 times greater than relied upon for disconnection of supply in case of fault
the nominal string current. National electrical codes conditions. This is due to the fact that PV modules are
should be consulted for recommendations. Overheating current-limiting devices, with an ISC only a little higher
of breakers can cause nuisance tripping. For this than the nominal current. In other words, the fuse
reason, junction boxes should be kept in the shade. would not blow, or the MCB would not trip since the
The string fuse/MCB must trip at less than twice the fault current would be less than the trigger current. For
string short-circuit current (ISC) at STC or at less than this reason, most PV codes and regulations recommend

80 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 that main DC CBs should be installed between the PV 7.4.2 AC SYSTEM
array fields and the grid-connected inverters. 7.4.2.1 AC Cabling
Cabling for AC systems should be designed to provide
Certain inverter models are equipped with DC CBs.
a safe and cost effective means of transmitting power
As such, installation of additional CBs may become
from the inverters to the transformers and beyond.
redundant. However, national regulations must be
Cables should be rated for the correct voltage and have
consulted to confirm the standards.
conductors sized, taking into account the operating
7.4.1.11 Quality Benchmarks currents and short-circuit currents (ISC).

Module cables must:

When specifying cabling the following design
Adhere to local and international standards including considerations should be taken into account:
IEC 60502, IEC 60228, 60364-1, 60332-1-2, 60754-1
Cable must be rated for the maximum expected
and -2, 61034.
voltage.
Be specified for a wide temperature range (e.g., -55 to
Conductor should be able to pass the operating and
125C).
ISCsafely.
Be resistant to ultraviolet (UV) radiation and weather
Conductor should be sized appropriately to ensure
if laid outdoors without protection.
that losses produced by the cable are within acceptable
Be single core and double insulated. limits, and that the most economic balance is
maintained between capital cost and operational cost
Have mechanical resistance to animals, compression,
(losses).
tension and bending.
Conductors should be sized to avoid voltage drop
Be attached to cable trays with cable ties to support
outside statutory limits and equipment performance.
their weight and prevent them from moving in the
wind. Insulation should be adequate for the environment of
installation.
Be protected from sharp support stricture edges with
anti-abrasion pads. A suitable number of cores should be chosen (either
single or multi-core).
Use cable connectors that adhere to international
protection rating IP67. Earthing and bonding should be suitably designed for
the project application.
Sometimes specific cable options are preferable because
Installation methods and mechanical protection of the
they offer increased protection:
cable should be suitably designed for the project.
Single conductor cable-insulated and sheathed. For
example, properly rated HO7RNF cables. Cables should comply with relevant IEC standards and
appropriate national standards. Examples of these include:
Single conductor cable in suitable conduit/trunking.
IEC 60502 for cables between 1kV and 36kV.
Multi-core, steel wire armouredonly suitable
for main DC cables and normally used where an IEC 60364 for LV cabling.
underground or exposed run is required.
IEC 60840 for cables rated for voltages above 30kV
and up to 150kV.

7: Plant Design 81
7.4.2.2 AC Switchgear
Appropriately rated switchgear and protection Figure 18: Typical Transformer Locations and Voltage
Levels in a Solar Plant where Export to Grid is at HV
systems should be included to provide disconnection,
isolation, earthing and protection. On the output side

PV Array

PV Array

PV Array

PV Array
of the inverters, provision of a switch disconnector is
recommended as a means to isolate the PV array.

HV > 33000V MV 33000-1000V LV < 1000

Inverters outputing at LV
The appropriate type of switchgear will be dependent on
the voltage of operation. Switchgear up to 33kV is likely
to be an internal metal-clad, cubicle-type with gas- or air- LV/MV transformers
insulated busbars and vacuum or SF6 breakers. For higher
voltages, the preferred choice may be air-insulated outdoor MV collection switchgear
switchgear or, if space is constrained, gas-insulated indoor
switchgear. MV/HV transformers

All switchgear should:

GRID
Be compliant with relevant IEC standards and national
codes.

Clearly show the ON and OFF positions with the grid back to the plant, an auxiliary transformer is
appropriate labels. required.

Have the option to be secured by locks in off/earth The selection of an appropriate transformer should
positions. consider several basic issues. These include the required
Be rated for operational and short-circuit currents. capacity, position within the electrical system, physical
location and environmental conditions under which the
Be rated for the correct operational voltage.
transformer will operate. The capacity of the transformer
Be provided with suitable earthing. (specified in MVA) will depend on the projected maximum
power exported from the solar array.
7.4.2.3 Sizing and Selecting Transformers
In general, the inverters supply power at low voltage The main export transformers will form a major element
(typically 300-450V). But for a commercial solar power of the main substation design and, as such, their selection
plant, grid connection is typically made at 11kV and should also consider the technical requirements of the grid
above (HV levels). It is therefore necessary to step up company. Such transformers should conform to local and/
the voltage using one or more transformers between the or international specifications, as required.
inverter and the grid connection point.
Output power from PV arrays follows a well-understood
The position of the transformer in the electrical system cyclic duty corresponding to the path of the sun through
will define the required voltage on the primary and the day. This allows consideration of a dynamic rating to
secondary sides of the transformer. be applied to the transformer selection.

Figure 18 shows a high-level, single line diagram showing The transformer solution should comply with national and
typical voltages of operation for the AC system of a solar international standards including IEC 60076. The design
power plant. Where there is a need to supply power from should consider the following points:

82 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Losses: Transformers can lose energy through The layout of the substation should optimise the use of
magnetising current in the core, a phenomenon known space while still complying with all relevant building codes
as iron losses, and also copper losses in the windings. and standards. A safe working space should be provided
Minimising the losses in a transformer is a key around the plant for the operation and maintenance
requirement, as this will increase the energy supplied to staff. Air conditioning should be considered due to the
the grid and thereby enhance the revenue of a solar PV heat generated by the electronic equipment. In some
power plant. cases, large substation facilities need to be designed and
constructed according to the grid companys requirements
Test Requirements: Transformers should be subjected
and interconnect agreement specifications.
to a number of routine and type tests performed on
each model manufactured; these tests are set out in
Separation between MV switch rooms, converter
IEC 60076. The manufacturer also can be requested to
rooms, control rooms, storerooms and offices is a key
undertake special tests mentioned in IEC 60076.
requirement, in addition to providing safe access, lighting
Delivery and Commission: Consideration should be and welfare facilities.
given to the period of time required for manufacture
and delivery of transformers. Most large transformers Lightning protection should be considered to alleviate the
(above 5MVA) will be designed and built on order, and effect of lightning strikes on equipment and buildings.
will therefore have a lengthy lead-time, which can be in
Metering: Tariff metering will be required to measure
the order of years.
the export of power. This may be provided at the plant
The delivery of large transformers (above 30MVA) to the substation in addition to the point of connection to the
site also needs to be planned. Large transformers can be grid.
dis-assembled to some extent, but the tank containing the
Data monitoring/SCADA: SCADA systems provide
core and winding will always need to be moved in one
control and status indication for the items included in
piece. In the case of transformers of 100MVA capacity,
the substation and across the solar PV power plant. The
the burden of transportation will still be significant and
key equipment may be situated in the substation or in a
road delivery may require special measures, such as police
dedicated control and protection room.
escort.
7.4.2.5 Earthing and Surge Protection
The positioning of the transformer in the power plant
should also be decided at the planning stage. By doing Earthing should be provided as a means to protect against
this, a transformer can be easily and safely installed, electric shock, fire hazard and lightning. By connecting to
maintained, and in the event of a failure, replaced. Liquid- the earth, charge accumulation in the system during an
filled transformers should be provided with a bund to electrical storm is prevented. The earthing of a solar PV
catch any leakage. Oil-filled transformers, if sited indoors, power plant encompasses the following:
are generally considered a special fire risk. As such, Array frame earthing.
measures to reduce the risk to property and life should be
System earthing (DC conductor earthing).
considered.
Inverter earthing.
7.4.2.4 Plant Substation
Lightning and surge protection.
Equipment such as LV/MV transformers, MV switchgear,
Supervisory Control and Data Acquisition (SCADA) National codes and regulations and the specific
systems, protection and metering systems can be placed characteristics of each site location should be taken
within the plant substation. into account when designing the earthing solution. The

7: Plant Design 83
solution should be designed to reduce the electric shock 7.4.3 GRID CONNECTION
risk to people on site and the risk of damage and fire
Solar plants need to meet the requirements of the grid
during a fault or lightning strike.
company of the network onto which they will export
power. Technical requirements for connection are typically
The entire solar PV power plant and the electrical room
set out in grid codes, which are published by the grid
should be protected from lightning. Protection systems
company and cover topics including planning, connection
are usually based on early streamer emission and lightning
and operation of the plant. Grid codes will vary by
conductor air terminals. The air terminal will be capable
country and may include:
of handling multiple strikes of lightning current and
should be maintenance-free after installation. Limits on harmonic emission.

Limits on voltage flicker.

These air terminals will be connected to respective
earthing stations. Subsequently, an earthing grid will be Limits on frequency variation.
formed, connecting all the earthing stations through the
Reactive power export requirements.
required galvanised iron tapes.
Voltage regulation.
The earthing arrangements on each site will vary,
Fault level requirements.
depending on a number of factors:
System protection.
National electricity requirements.

Installation guidelines for module manufacturers. In addition to meeting the country grid code requirements,
site-specific requirements may be requested by the grid
Mounting system requirements.
company should there be any unusual network conditions
Inverter requirements. at the precise site location.

Lightning risk.
When designing the grid connection solution, careful
consideration should be given to the following constraints:
While the system designer must decide the most
appropriate earthing arrangement for the solar PV plant Scheduling: The grid connection schedule will impact
according to location specific requirements, one can follow the planned energisation date and generation targets.
the general guidelines given below: Key electrical components such as transformers can
have long lead and delivery times. Supplier locations
Ground rods should be placed close to junction boxes.
and likely lead times should be investigated at the
Ground electrodes should be connected between the
planning stage and carefully considered in the project
ground rod and the ground lug in the junction box.
plan (see Box 4 Grid Connection - Experience in
A continuous earth path is to be maintained India).
throughout the PV array.
In addition to local connection works, wider network
Cable runs should be kept as short as possible. upgrades and modifications beyond the point of
Surge suppression devices can be installed at the connection can have significant influence on the date
inverter end of the DC cable and at the array junction of energisation and commercial operation. Connection
boxes. issues are case-dependent and usually outside
the developers sphere of influence. It is therefore
Many inverter models include internal surge arrestors.
important that communication is established with
Separate additional surge protection devices may also
the relevant grid companies and that discussions are
be required.
undertaken to fully understand the implications and

84 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Box 4: Grid Connection Experience in India

Export Cable

In India, projects are typically required to be commissioned within 12 months from the date of execution of the PPA. This is intended to
allow ample time for planning and executing the export cable works. However, there have been a number of projects in India where
commissioning has been delayed because power evacuation could not commence due to unavailability of the export line. This can be
avoided by planning the export line routes and signing right-of-way agreements with the property owners at an early stage of project
development.

Grid Stability

The smooth operation of a grid-connected solar PV power plant is dependent on the voltage and frequency of the grid staying within
certain limits that are acceptable for the inverter. Grid instability may result from varying loads applied on the utility substation. With no
historical load data available at the local substation level for the majority of Indian utilities, grid availability can become a significant risk to
project development. In order to understand the risk, it is recommended that the developer conduct a thorough grid quality evaluation by
physically verifying the voltage and frequency variations for a minimum period of two weeks during the project planning phase.

In addition to monitoring, measures during the component selection phase can also mitigate the risk of grid instability causing downtime.
These measures include:

1) Selecting inverters that have a dynamic grid support function with low voltage, high voltage and frequency ride-through features.

2) Using plant transformers equipped with on-load tap changers.

Reactive Power Compensation

While few of the Indian states force project developers to maintain a power factor close to unity, there are other states that charge for
the reactive power consumed by the PV plant. Although most modern central inverters can be made to operate at leading power factor,
supplying the reactive power during hours of high irradiance, there may be a need to include a capacitor bank to compensate reactive
power during periods of low irradiance. It is advisable to select inverters that can compensate the reactive power.

the timescales involved in both local and regional in downtime exceeding the assumptions that were used
connection timescales. in the projects financial model.

Connection Voltage: The connection voltage must be

7.4.4 QUALITY BENCHMARKS
suitable for the plant capacity. Different connection
voltages will entail differing costs of electrical The AC cable should be supplied by a reputable
equipment, such as switchgear and transformers, as manufacturer accredited to ISO 9001. The cable should
well as conductor specifications. Differing connection have:
voltages may also impact on the time required to Certification to current IEC and national standards
provide the connection. such as IEC 60502 for cables between 1kV and 36kV,
Excessive loading of local transmission or distribution IEC 60364 for LV cabling and IEC 60840 for cables
network equipment, such as overhead lines or power rated for voltages above 30kV and up to 150kV.
transformers, may lead to grid instability. In this Type testing completed to appropriate standards.
case, the voltage and frequency of the grid may fall
A minimum warranty period of two years.
outside the operational limits of the inverters and
plant downtime may result. In less developed regional A design life equivalent to the design life of the project.
networks, the risk of downtime caused by grid
Ultraviolet (UV) radiation and weather resistance (if
instability should be assessed by developers with a grid
laid outdoors without protection).
quality evaluation. Lack of such an evaluation can
have serious impacts on project economics and result

7: Plant Design 85
 Mechanical resistance (for example, compression, LV/MV station: Inverters may either be placed among
tension, bending and resistance to animals). the module support structures (if string inverters are
chosen) in specially designed cabinets or in an inverter
AC switchgear should be supplied by a reputable house along with the medium voltage transformers,
manufacturer accredited to ISO 9001 and should have: switchgear and metering system.45 This LV/MV station
Certification to current IEC and appropriate national may be equipped with an air conditioning system if it
standards such as IEC 62271 for HV switchgear and is required to keep the electrical devices within their
IEC 61439 for LV switchgear. design temperature envelopes.

Type testing to appropriate standards. MV/HV station: An MV/HV station may be used
to collect the AC power from the medium voltage
A minimum warranty period of two years.
transformers and interface to the high voltage power
An expected lifetime at least equivalent to the design grid.
life of the project.
Communications: The plant monitoring system and the
security system will require a communications medium
Transformers should be supplied by reputable
with remote access. There can also be a requirement
manufacturers accredited to ISO 9001 and should have:
from the grid network operator for specific telephone
Certification to IEC and appropriate national standards landlines for the grid connection. Often, an internet
such as IEC 60076 for the power transformer, IEC broadband (DSL) or satellite communications system
60085 for electrical insulation and IEC 60214 for tap is used for remote access. A GSM (Global System for
changers. Mobile Communications) connection or standard
Type testing to appropriate standards. telephone line with modems are alternatives, although
they have lower data transfer rates.
A minimum warranty period of two years.

An expected lifetime at least equivalent to the design 7.5.1 QUALITY BENCHMARKS

life of the project. Some benchmark features of PV plant infrastructure
Efficiency of at least 96 percent. include:

Watertight, reinforced concrete stations or pre-

7.5 SITE BUILDINGS fabricated steel containers. All buildings and
A utility-scale solar PV power plant requires infrastructure foundations should be designed and constructed in
appropriate to the specifics of the design chosen. Locations accordance with the Structural Eurocodes (in Europe)
should be selected in places where buildings will not cast or the appropriate country building codes, standards
shading on the PV modules. It may be possible to locate and local authority regulations.
buildings on the perimeter of the plant. If they are located Sufficient space to house the equipment and facilitate
centrally, appropriate buffer zones should be allowed its operation and maintenance.
for. Depending on the size of the plant, infrastructure
Inclusion of:
requirements may include:
Ventilation grilles, secure doors and concrete
Office: A portable office and sanitary room with
foundations that allow cable access.
communication devices. This must be watertight and
prevent entry of insects. It should be located near the
site entrance so that vehicular traffic does not increase
the risk of dust settling on the modules.
45 For string inverters, the LV/MV station may be used to collect the AC power.

86 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Interior lighting and electrical sockets that follow security areas and distinguish potential intruders from
country-specific regulations. other alerts caused by weather, lighting conditions or
motion associated with vegetation, traffic or animals.
Either adequate forced ventilation or air
This system allows grazing livestock to remain within
conditioning with control thermostats, depending on
the plant boundary without alarms being raised. Video
environmental conditions.
analytics software can considerably reduce the rate of
Weather bars or upstands to prevent flooding of security system false alarms.
electrical equipment buildings.
Sensors: There are a variety of detectors available on
7.6 SITE SECURITY the market. These include photoelectric beams, trip
wires, passive infrared (PIR), microwave, magnetic and
Solar PV power plants represent a large financial motion sensors, among others. Although having many
investment. The PV modules are not only valuable, but sensors independently controlled can be the cause of
also portable. There have been many instances of module a higher false alarm rate, interlinking them and using
theft and also theft of copper cabling. Security solutions digital signal processing (DSP) techniques can reduce
are required to reduce the risk of theft and tampering. this risk and provide a more robust security system.
These security systems will need to satisfy the insurance Care should be taken that the chosen system is not
provider requirements and would typically include several triggered by grazing animals.
of the following:
Warning devices: Simple devices warning of the use of
Security fence: A galvanised steel wire mesh fence with CCTV cameras or monitoring of the site will dissuade
anti-climb protection is typically recommended. A most intruders. These can include warning signs, horns
fence may also be part of the grid code requirements installed around the site and pre-recorded warning
for public safety. Measures should be taken to allow messages.
small animals to pass underneath the fence at regular
intervals. Security staff: A permanent guarding station with
a security guard often provides the level of security
CCTV cameras: Security cameras are increasingly required in an insurance policy. This option is mostly
becoming a minimum requirement for any PV plants used in particularly remote locations or areas of
security system. Several types of cameras are available, high crime or vandalism rates. Where armed guards
the most common being thermal and day/night are present and/or where public security forces are
cameras. Cameras should ideally have strong zooming assigned to provide asset protection (typically in post-
capabilities and should be easy to manipulate remotely conflict contexts), screening and training of security
(e.g., with the help of pan-tilt-zoom support) for staff members backed up by operational policies is
external users to be able to identify sources of intrusion recommended regarding the appropriate use of force/
with more ease. Day/night cameras typically have firearms and appropriate conduct towards workers and
ranges of 50m to 100m and are coupled with infrared community members.
illuminators. Thermal cameras are more expensive,
however, they have lower internal power consumption Remote alarm centre: PV plants will transmit data
and a longer range (typically above 150m), which via communication means such as satellite or landline
means that fewer cameras are needed to cover the to an alarm centre, usually located in a large town
entire perimeter fence. or city and potentially far away from the site. The
security system should be monitored 24 hours a day.
Video analytics software: Some security systems use Any detection that is verified as an intrusion should
video analytics software in conjunction with the CCTV raise alerts at the local police or security company for
cameras. This software can enable the user to define further action.

7: Plant Design 87
 Other security measures: Additional security measures A monitoring system allows the yield of the plant to be
may include: monitored and compared with theoretical calculations and
raise warnings on a daily basis if there is a performance
Reducing the visibility of the power plant by
shortfall. Faults can therefore be detected and rectified
planting shrubs or trees at appropriate locations.
before they have an appreciable effect on production.
Care should be taken that these do not shade the PV
Without a reliable monitoring system it can take many
modules.
months for a poorly performing plant to be identified. This
Anti-theft module mounting bolts may be used and can lead to unnecessary revenue loss.
synthetic resin can be applied once tightened. The
bolts can then only be released after heating the The key to a reliable monitoring and fault detection
resin up to 300C. methodology is to have good simultaneous measurements
of the solar irradiance, environmental conditions and
Anti-theft module fibre systems may be used. These
plant power output. This is achieved by incorporating
systems work by looping a plastic fibre through all
a weather station on site to measure the plane of array
the modules in a string. If a module is removed, the
irradiance, module and ambient temperature, and
fibre is broken, which triggers an alarm.
preferably global horizontal irradiance, humidity and
7.6.1 QUALITY BENCHMARKS wind speed.

Some benchmark security features include: In large-scale solar PV power plants, voltage and current
Metallic fence at least 2m high. will typically be monitored at the inverter, combiner box
or string level, each offering more granularity than the
Video surveillance system, which includes cameras with previous. Monitoring at the inverter level is the least
zooming and remote manipulating capabilities. complex system to install. However it only offers an
Sensors and/or video analytics software. overview of the plants performance, while the other two
options, although more expensive, provide more detailed
Warning signs.
information on the system components performance and
Digital video recorder, which records data for a improved fault detection and identification.
minimum of 12 months.
Data from the weather station, inverters, combiner boxes,
Alarm system fitted to the power plant gate, the
meters and transformers will be collected in data loggers
medium voltage station, metering station and any
and passed to a monitoring station, typically via Ethernet,
portable cabins.
CAT5/6, RS485 or RS232 cables. Communication
protocols are varied, although the most commonly used
7.7 PLANT MONITORING
worldwide are Modbus, TCP/IP and DNP3. If more
7.7.1 MONITORING TECHNOLOGY than one communications protocol is considered for a
A monitoring system is an essential part of a PV plant. monitoring system, protocol converters can be used.
Monitoring devices are crucial for the calculation of
Figure 19 illustrates the architecture of an internet portal-
liquidated damages (LDs) and confirmation that the EPC
based monitoring system, which may include functionality
contractor has fulfilled its obligations. Automatic data
for:
acquisition and monitoring technology is also essential
during the operational phase in order to maintain a high Operations management: The performance
level of performance, reduce downtime and ensure rapid management (either onsite or remote) of the solar PV
fault detection. power plant to enable the monitoring of inverters or
strings at the combiner box level.

88 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Figure 19: PV System Monitoring Schematic

SOLAR PV PLANT MOITORING CENTRE

Main servers

Wind speed /

Temerature

Irradiance
direction
Meteorological
Sensors

DSL / GPRS / GSM / TL

Internet
Inverter(s) SCADA
- Real time data
- Historical data
Meter(s) - Alarms (SMS, Email, FAX)
- Events Web interface
Power - Reporting
Transformer - Monitoring
- Visualisation
- Forecasting
Grid

Operator

Key REMOTE OFFICE

SCADA Systems Control and Data Acquisition
DSL Digital Subscriber Line
GPRS General Packet Radio Service
GSM Global System for Mobile Communications
TL Telephone Line

Alarm management: Flagging any element of the power 2 percent.46 Plane of array pyranometers are essential
plant that falls outside pre-determined performance for contractually-binding performance ratio (PR)
bands. Failure or error messages can be automatically calculations, while horizontal plane pyranometers are
generated and sent to the power plant service team via useful in order to compare measured irradiation with
fax, email or text message. global horizontal irradiation resource predictions.
It is considered best practice to install irradiation
Reporting: The generation of yield reports detailing
sensors at a variety of locations within multi-megawatt
individual component performance, and benchmarking
plants, while avoiding locations that are susceptible to
the reports against those of other components or
shading. Table 14 gives a rule of thumb for the number
locations.
of pyranometers recommended according to the plant
7.7.2 QUALITY BENCHMARKS capacity.

Monitoring systems should be based on commercially Ambient temperature: Measured in a location

available software/hardware that is supplied with user representative of site conditions with accuracy better
manuals and appropriate technical support. than 1C. Ideally, temperature sensors should be
placed next to the irradiation sensors, particularly if
Depending on the size and type of the plant, minimum the PR at provisional acceptance is calculated using a
parameters to be measured include: temperature compensation factor (see Section 9: EPC
Contracts).
Plane of array irradiance and horizontal plane
irradiance: Measured using secondary standard Module temperature: Measured with accuracy better
pyranometers with a measurement tolerance within than 1C, PT1000 sensors should be thermally

46 For example, Kipp & Zonen CMP 11, http://www.kippzonen.com/Product/13/

CMP-11-Pyranometer#.VBmlTGMgsuc

7: Plant Design 89
 Table 14: Recommended Number of Pyranometers Table 15: Performance Optimisation Strategies
Depending on Plant Capacity
Loss Mitigating Measure to Optimise Performance
5 10
Plant DC Capacity (MWp) <1 15 10 20 > 20 Shading Choose a location without shading obstacles.
Ensure that the plant has sufficient space to
Number of Plane of Array reduce shading between modules.
0 2 2 3 4
Pyranometers Have a robust O&M strategy that removes the
Number of Horizontal risk of shading due to vegetation growth.
0 0 1 1 1
Pyranometers Incident angle Use anti-reflection coatings, textured glass, or
tracking.
bonded to the back of the module in a location Low irradiance Use modules with good performance at low
positioned at the centre of a cell. light levels.
Module Choose modules with an improved temperature
Array DC voltage: Measured to an accuracy of temperature coefficient for power at high ambient
within1 percent. temperature locations.
Soiling Choose modules less sensitive to shading.
Array DC current: Measured to an accuracy of Ensure a suitable O&M contract that includes
within1 percent. an appropriate cleaning regiment for the site
conditions.
Inverter AC power: Measured as close as possible Module quality Choose modules with a low tolerance or
to the inverter output terminals with an accuracy of positive tolerance.
within 1 percent. Module Sort modules with similar characteristics into
mismatch series strings where possible.
Power to the utility grid. Avoid partial shading of a string.
Avoid variations in module tilt angle and
Power from the utility grid. orientation within the same string.
DC wiring Use appropriately dimensioned cable.
Measurement of key parameters should be done at one- resistance Reduce the length of DC cabling.
minute intervals. Inverter Choose correctly sized, highly efficient inverters.
performance

7.8 OPTIMISING SYSTEM DESIGN AC losses Use correctly dimensioned cable.

Reduce the length of AC cabling.
The performance of a PV power plant may be optimised Use high-efficiency transformers.
by a combination of several enabling factors: premium Plant Use a robust monitoring system that can
downtime identify faults quickly.
modules and inverters, a good system design with high-
Choose an O&M contractor with good repair
quality and correctly-installed components and a good response time.
preventative maintenance and monitoring regime leading Keep spares holdings.

to low operational faults. Grid availability Install PV plant capacity in areas where the grid
is strong and has the potential to absorb PV
power.
The aim is to minimise losses. Measures to achieve this are
Degradation Choose modules with a low degradation rate
described in Table 15. Reducing the total loss increases the
and a linear power guarantee.
annual energy yield and hence the revenue, though in some
MPP tracking Choose high-efficiency inverters with
cases it may increase the cost of the plant. Interestingly, maximum power point tracking technology on
efforts to reduce one type of loss may be antagonistic to multiple inputs.
Avoid module mismatch.
efforts to reduce losses of a different type. It is the skill
Curtailment of Ensure that tracking systems are suitable for
of the plant designer to make suitable compromises that tracking the wind loads to which they will be subjected.
result in a plant with a high performance at a reasonable
cost according to the local conditions. The ultimate aim of
the designer is to create a plant that maximises financial

90 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

returns by minimising the levelised cost of electricity Table 16: Annotated Wiring Diagram Requirements
(LCOE). Section Required Details
Array Module type(s).
7.9 DESIGN DOCUMENTATION REQUIREMENTS Total number of modules.
Number of strings.
There are a number of minimum requirements that should Modules per string.
be included as part of design documentation. These PV String String cable specificationssize and type.
include: Information String over-current protective device
specifications (where fitted)type and voltage/
Datasheets of modules, inverters, array mounting current ratings.
Blocking diode type (if relevant).
system and other system components.
Array electrical Array main cable specificationssize and type.
Wiring diagrams including, as a minimum, the details Array junction box locations (where applicable).
DC isolator type, location and rating (voltage/
information laid out in Table 16.
current).
Layout drawings showing the row spacing and location Array over-current protective devices (where
applicable)type, location and rating (voltage/
of site infrastructure. current).

Mounting structure drawings with structural Earthing and Details of all earth/bonding conductorssize
protection and connection points. This includes details of
calculations reviewed and certified by a licensed devices array frame equipotential bonding cable (where
engineer. fitted).
Details of any connections to an existing
A detailed resource assessment and energy yield Lightning Protection System (LPS).
prediction. Details of any surge protection device installed
(both on AC and DC lines), to include location,
A design report that will include information on the type and rating.

site location, site characteristics, solar resource, design AC system AC isolator location, type and rating.
AC overcurrent protective device location, type
work, energy yield prediction, and a summary of the
and rating.
results of the geotechnical survey. Residual current device location, type and
rating (where fitted).
Grid connection details and grid code
requirements.
Data Details of the communication protocol.
acquisition and Wiring requirements.
communication Sensors and data logging.
system

7: Plant Design 91
 Box 5: Example of Poor Design

It is far cheaper and quicker to rectify design faults prior to construction than during or after construction. Therefore, it is vital to apply
suitable technical expertise to every aspect of plant design. Should the developer not have all the required expertise in-house, then a
suitably experienced technical advisor should be engaged. Regardless of the level of expertise in-house, it is good practice to carry out a
full, independent technical due diligence of the design before construction commences. This will be an essential requirement if financing is
being sought.

As an example, consider the faults that independent technical consultants identified with a 5MWp project that had been constructed in
India in 2010:

Foundations:
The foundations for the supporting structures consisted of concrete pillars, cast in situ, with steel reinforcing bars and threaded
steel rods for fixing the support structure base plates. This type of foundation is not recommended due to the inherent difficulty in
accurately aligning numerous small foundations.
Mild steel was specified for the fixing rods. As mild steel is prone to corrosion, stainless steel rods would have been preferable.

Support structures:
The support structures were under-engineered for the loads they were intended to carry. In particular, the purlins sagged
significantly under the load of the modules. Support structures should be designed to withstand wind loading and other dynamic
loads over the life of the project. Extensive remedial work was required to retrofit additional supporting struts.
The supporting structure was not adjustable because no mechanism was included to allow adjustment in the positioning of modules.
The combination of the choice of foundation type and choice of support structure led to extensive problems when it came to aligning
the solar modules to the required tilt angle.

Electrical:
String diodes were used for circuit protection instead of string fuses/MCBs. Current best practice is to use string fuses/MCBs, as
diodes cause a voltage drop and power loss, as well as a higher failure rate.
No protection was provided at the combiner boxes. This meant that for any fault occurring between the array and the DC
distribution boards (DBs), the DBs would trip, taking far more of the plant offline than necessary.
No-load break switches were included on the combiner boxes before the DBs. This meant it was not possible to isolate individual
strings for installation or maintenance.

The design faults listed above cover a wide range of issues. However, the underlying lesson is that it is vital to apply suitable technical
expertise on every aspect of the plant design through in-house or acquired technical expertise. Independent technical due diligence should
be carried out on the design prior to construction.

92 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Detailed below are checklists of basic requirements and procedures for plant design considerations. They are intended to assist solar PV plant
developers during the development phase of a PV project.

PV Module Selection Checklist Inverter Selection Checklist

Supplier identification and track record checked. Suitable capacity for project size.

Minimum certification obtained. Compatible with national grid code.

Product and power warranty terms and conditions in line Supplier identification and track record checked.
with the market standards.

Third-party warranty insurance provided (if available). Minimum certification obtained.

Technology suitable for the environmental conditions (e.g., Product supply terms and conditions in line with the market
standards.
high temperatures, diffuse irradiation, humidity).

Technology suitable for shading conditions (number of Technology and model suitable for the environmental
conditions (e.g., outdoor/indoor, derate at high
bypass diodes).
temperatures, MPP range).
Power tolerance in line with the market standards.
Compatible with thin-film modules (transformer or
transformerless inverter).

Efficiency in line with the market standards.

Transformer Selection Checklist General Design Checklist

Suitable capacity for project size. Tilt angle and orientation of the PV array suitable for the
geographical location.
Compatibility with the national grid regulations.
Inter-row distance suitable for the site.
Supplier identification and track record checked.
Shading from nearby objects considered and suitable buffer
zone included.
Minimum certification obtained.

Product warranty terms and conditions in line with the

PV string size suitable for the inverter under the site
environmental conditions.
market standards.

Suitable for the environmental conditions (e.g., outdoor/

Inverter size suitable for the PV array size (power ratio and
inverter MPP range).
indoor, ambient temperature and altitude).

Efficiency in line with the market standards.

Transformer correctly sized.

Load/no-load losses in line with market standards.

Combiner boxes (IP rating) suitable for the environmental
conditions.

DC and AC cables sized correctly.

LV and HV protection equipment (fuses, switchgears, and

Mounting Structure Selection Checklist circuit breakers) correctly sized.

Supplier identification and track record checked. Suitable earthing and lightening protection designed for site
specific conditions.

Minimum certification obtained. Civil works (foundations, drainage) suitable for

environmental risks.
Product warranty terms and conditions in line with market
Monitoring system in line with market standards.
standards.

Suitable for the environmental and ground conditions Security system in line with market standards and accepted
(thermal expansion, marine atmosphere, soil acidity). by insurance provider.

7: Plant Design 93
 8 Permits, Licensing and Environmental
Considerations

8.1 PERMITS, LICENSING AND ENVIRONMENT

OVERVIEW
Permitting and licensing
Permitting and licensing requirements for solar PV power
procedures vary depending
plants vary greatly from country to country and within different
country regions. It is important therefore to establish with the on plant location and size.
appropriate planning/government authority the relevant laws/ For small PV installations,
regulations and associated permits that will be required for the permitting regimes are often
project. simplified and obtained at a

In order to deliver a project which will be acceptable to local authority level. However
international lending institutions (e.g., to enable finance to large-scale plants can have more
be provided), environmental and social assessments should extensive requirements that
be carried out in accordance with the requirements of the key are determined at a national or
international standards and principles, namely the Equator
regional level.
Principles and IFCs Performance Standards (IFC PS). National
standards should also be observed which may be more stringent
than lender requirements.

A checklist of the basic requirements and procedures for

permitting and licensing is at the end of Chapter 8.

The following sections describe permitting and licensing

requirements.

8.2 PERMITTING AND LICENSING REQUIREMENTS

Permitting and licensing procedures vary depending on plant

location and size. For small PV installations, permitting regimes
are often simplified and obtained at a local authority level.
However large-scale plants can have more extensive requirements
that are determined at a national or regional level. The key
permits, licences and agreements typically required for renewable
energy projects include:

Land lease agreement.

Planning/land use consents.

Building permits.

94 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Environmental permits. area can be obtained from the local planning department,
relevant government department or from an experienced
Grid connection application.
consultant. The type of information that needs to be
Operator/generation licences. considered includes:

In addition to the key permits, licences and agreements Planning consents/permits and land-use authorisations
listed above, under the FiT requirements or other support, required to construct and operate a solar renewable
it may be necessary for a developer to register as a energy development.
qualified/privileged/special renewable energy generator Any standard planning restrictions for the area
to obtain support. Depending on the country in question, of the development (for example, land-use zoning
there may also be a requirement for the developer to regulations).
demonstrate compliance with these requirements.
Supporting information required to be submitted with
The sequence of requirements can vary from country to planning application (location/layout/elevation plans,
country and it is recommended that an early meeting is description of project, access details, environmental
held with the relevant planning/government authority to assessments, etc.as required by the relevant
establish and confirm relevant laws and associated permits authority).
that will be necessary for the project. The timescales for Method of submission (online or via the planning
obtaining relevant permissions should also be ascertained department office).
at an early date, as many permissions will be required to
Timescales for submission and determination.
be in place prior to construction of the plant.
Process for making amendments to consent at a
8.2.1 LAND LEASE AGREEMENT laterdate.
If the land is not privately owned, an agreement to procure
A permit from the roads authority may also be necessary,
or lease the necessary land from the land owner is a key
depending on the works required.
requirement. The land lease agreement must be secured
as a first step to enable the project to be developed on the
8.2.3 BUILDING PERMITS
required land. This does not apply to rooftop locations. A
lease agreement typically lasts for 25 years, often with a Some countries may require a separate building permit
further extension clause. to be obtained, depending on the nature of the project.
Where this is required, it should be noted that the
The leases and option agreements should include consenting authority may differ from the authority issuing
restrictions on developments to be installed on land the planning/land-use permits.
adjacent to the site that could have an effect on the
performance of the solar PV arrays. Furthermore, the Before a building permit is obtained, it may be
areas of land required for new access roads also need to be necessary to have other required permits in place or to
taken into consideration. complete a change in land-use categorisation. As above,
consultation at an early stage with the relevant authority
8.2.2 PLANNING AND LAND USE CONSENTS is recommended to establish country- and locally-specific
requirements.
All relevant planning consents/land-use authorisations
must be in place prior to the construction of a project.
8.2.4 ENVIRONMENTAL PERMITS
Consenting requirements vary widely in different countries
and regions and also depend on the size of the plant. All necessary environmental permits, licences and
Advice on planning-consent requirements in the project requirements must be obtained prior to commencing

8: Permits, Licensing and Environmental Considerations 95

construction. Environmental permits are country- Developers should be aware of the country-specific
and project-specific. Consultation with the relevant requirements and timeframes required for obtaining
environmental agencies and departments should be a generating licence. For example, in many European
undertaken to determine the requirement for any and Asian countries, an electricity generation licence is
environmental permits relevant to the project. A specialist obtained after construction of the plant, while in some
environmental consultant can also provide advice on the African countries the licence is required early in the
specific requirements. project development process.

Environmental permits and licences that may be required 8.3 ENVIRONMENTAL AND SOCIAL
include: REQUIREMENTS

Environmental impact assessment (EIA) permit. Development of any solar project will have both
environmental and social implications. The scale and
Endangered/protected species licence.
nature of these impacts depends on a number of factors
Agricultural protection permits. including plant size, location, proximity to settlements and
Historic preservation permits. applicable environmental designations. These issues are
discussed further in the following sections.
Forestry permits.
8.3.1 APPLICABLE STANDARDS
Further detail on environmental considerations is detailed
in Section 8.3 below. In order to deliver a project that will be acceptable to
international lending institutions (e.g., to enable finance
8.2.5 GRID CONNECTION APPLICATION to be provided), work should be carried out in accordance
with the requirements of the key standards and principles
A grid connection permit is required for exporting
set out in the following sections.
power to the network, which normally specifies the
point of connection and confirms the voltage-level that 8.3.1.1 Equator Principles
will be applied to that connection. The grid connection
The Equator Principles47 (EP) consists of ten principles
application should be submitted to the relevant
relating to environmental and social assessment and
transmission or distribution utility company for the
management. In addition, they include reporting
project.
and monitoring requirements for Equator Principles
The permit must be in place well in advance of the date Financial Institutions (EPFIs). The EP set a financial
that first export to the grid is required in order to allow industry benchmark that have been adopted by financial
sufficient timescales for associated works to be completed. institutions for determining, assessing and managing
Solar PV power plants will need to meet the requirements environmental and social risk in projects.
of the grid company that operates the network onto which
There are currently 78 EPFIs in 34 different countries
they will export power. This is discussed further in Section
that have officially adopted the EP standards.48 These
10.4.
institutions will not provide financing to clients that are
8.2.6 ELECTRICITY GENERATION LICENCE unwilling or unable to comply with the EPs. Some of these

The operator of an electricity generating facility is

required to hold a generating licence, which permits an 47 World Bank Group, The Equator Principles: A financial industry benchmark
for determining, assessing and managing environmental and social risk in
operator to generate, distribute and supply electricity. projects, 2013. http://www.equator-principles.com/resources/equator_
principles?III.pdf (accessed June 2014).
48 World Bank Group, The Equator Principles: Members & Reporting, http://
www.equator-principles.com/index.php/members-reporting

96 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

lenders, such as the European Bank for Reconstruction Performance Standard 2: Labour and Working
and Development (EBRD), may have additional standards Conditions
to which borrowers must adhere. Further information
Performance Standard 3: Resource Efficiency and
on financing requirements can be found in Section 14
Pollution Prevention
(Financing Solar PV Projects).
Performance Standard 4: Community Health, Safety
The EPs apply globally and to all industry sectors, hence and Security
their relevance to the solar industry. The ten EPs address
Performance Standard 5: Land Acquisition and
the following topics:
Involuntary Resettlement
EP1 - Review and Categorisation
Performance Standard 6: Biodiversity Conservation
EP2 - Environment and Social Assessment and Sustainable Management of Living Natural
Resources
EP3 - Applicable Environmental and Social Standards
Performance Standard 7: Indigenous Peoples
EP4 - Environmental and Social Management System
and Equator Principles Action Plan Performance Standard 8: Cultural Heritage

EP5 - Stakeholder Engagement

Compliance with the IFC performance standards will not
EP6 - Grievance Mechanism only ensure a socially and environmentally sustainable
project but will also facilitate the sourcing of finance for a
EP7 - Independent Review
project.
EP8 - Covenants
8.3.1.3 World Bank Group General Environmental
EP9 - Independent Monitoring and Reporting Health and Safety (EHS) Guidelines
EP10 - Reporting and Transparency The General EHS Guidelines is a technical reference
document containing general and industry-specific
8.3.1.2 IFC Performance Standards on Social and
Environmental Sustainability examples of good international industry practice.
The General EHS Guidelines contain guidance on
As set out in EP3, countries not designated as High
environmental, health, and safety issues that are applicable
Income Organization of Economic Cooperation and
across all industry sectors.
Development (OECD) countries should apply the social
and environmental sustainability standards laid down by 8.3.1.4 Local, National and International
the IFC.49 These standards have been developed for the Environmental and Social Legislation and
Regulations
IFCs own investment projects but have set an example for
private companies and financial institutions worldwide. Environmental and social legislation and regulations
vary between countries and specific regions; however the
The IFC PS relate to the following key topics: EP and IFC PS set the minimum acceptable standard for
Performance Standard 1: Assessment and Management project developments worldwide.
of Environmental and Social Risks and Impacts
A large number of countries have national legislative
requirements that are on par with or higher than the EP/
IFC standards. If national requirements are more onerous,
project developers should review and adhere to these
49 IFC, Performance Standards on Environmental and Social Sustainability, 2012, standards.
http://www.ifc.org/wps/wcm/connect/c8f524004a73daeca09afdf998895a12/
IFC_Performance_Standards.pdf?MOD=AJPERES (accessed June 2014).

8: Permits, Licensing and Environmental Considerations 97

In countries where environmental and social legislation environmental assessment should be carried out by
requirements are less demanding, a project must be an experienced independent consultant familiar with
developed in accordance with these requirements in conducting Environmental & Social Impact Assessment
addition to the lenders standards, which must as a (ESIA) studies.
minimum meet the EP/IFC standards.
8.3.2.1 Construction Phase Impacts
8.3.2 ENVIRONMENTAL AND SOCIAL IMPACT Construction activities lead to temporary air emissions
ASSESSMENT
(dust and vehicle emissions), noise related to excavation,
Projects may be required to carry out an initial scoping or construction and vehicle transit, solid waste generation
a full Environmental (and Social) Impact Assessment (EIA and wastewater generation from temporary building sites
or ESIA), depending on national regulatory requirements. and worker accommodation. In addition, occupational
health and safety (OHS) is an issue that needs to be
Relevant in-country environmental and social impact properly managed during construction in order to
assessment regulations and legislation should be reviewed minimize the risk of preventable accidents leading to
in the first instance to determine country-specific injuries and/or fatalitiesthere have been a number of
requirements, alongside the requirements of the EPs and fatal incidents in recent history at solar power plant
IFC PS. In general, in order to attract financing and meet construction sites around the world. Proper OHS risk
regulatory requirements, a screening study variously identification and management measures should be
referred to as an Initial Environmental Examination (IEE) incorporated in every projects management plan and
or Environmental Scoping Study needs to be commissioned standard EPC contractual clauses. Where projects
involving an independent environmental consultancy to have construction worker-accommodation camps,
establish the nature and scale of environmental impacts accommodation should meet basic requirements in
and extent of assessment required. Once the level of relation to space, water supply, adequate sewage and
potential impacts and site sensitivity has been determined, garbage disposal, protection against heat, cold, damp,
it can then be confirmed if a full environmental and social noise, fire and disease-carrying animals, storage facilities,
assessment is required. lighting and (as appropriate to size and location) access to
basic medical facilities or personnel.
If deemed necessary, the likely environmental effects of
the proposed development should be considered as part 8.3.2.2 Water Usage
of a full ESIA and based upon current knowledge of the
Although water use requirements are typically low for
site and the surrounding environment. This information
solar PV plants, Concentrated Solar Power (CSP) plants
will determine what specific studies are required. The
may have higher requirements and clusters of PV plants
developer should then assess ways of avoiding, reducing
may have a high cumulative water use requirement
or offsetting any potentially significant adverse effects
in an arid area where local communities rely upon
as described in IFC PS 1. The studies will also provide
scarce groundwater resources. In such scenarios, water
a baseline that can be used in the future to monitor the
consumption should be estimated and compared to local
impact of the project. Note that only impacts deemed to
water abstraction by communities (if any), to ensure
be significant need to be considered as part of an ESIA.
no adverse impacts on local people. O&M methods in
relation to water availability and use should be carefully
Key environmental considerations for solar PV
reviewed where risks of adverse impacts to community
power plants are detailed below. Note that the list of
usage are identified.
considerations is not exhaustive. Environmental and
social topics for assessment should be determined on
a project by project basis. It is recommended that the

98 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

8.3.2.3 Land Matters for wildlife and protected species such as bats, breeding
birds and reptiles. Ecological baseline surveys should
As solar power is one of the most land-intensive power
be carried out where potentially sensitive habitat,
generation technologies, land acquisition procedures
including undisturbed natural habitat, is to be impacted,
and in particular the avoidance or proper mitigation of
to determine key receptors of relevance to each site.
involuntary land acquisition/resettlement are critical to
Mitigation measures can include careful site layout
the success of the project(s). This includes land acquired
and design to avoid areas of high ecological value or
either temporarily or permanently for the project site
translocation of valued ecological receptors. Habitat
itself and any associated infrastructurei.e., access
enhancement measures could be considered where
roads, transmission lines, construction camps (if any)
appropriate to offset adverse impacts on sensitive habitat
and switchyards. If involuntary land acquisition is
at a site, though avoidance of such habitats is a far more
unavoidable, a Resettlement Action Plan (dealing with
preferable option (as per the site selection discussion in
physical displacement and any associated economic
Section 6.3).
displacement) or Livelihood Restoration Plan (dealing
with economic displacement only) is typically required by 8.3.2.6 Cultural Heritage
financiers to make the project bankable. This is often a
Potential impacts on cultural heritage can include impacts
crucial issue with respect to local social license to operate,
on the setting of designated sites or direct impacts on
and needs to be handled with due care and attention by
below-ground archaeological deposits as a result of
suitably qualified persons.
ground disturbance during construction. Where indicated
8.3.2.4 Landscape and Visual Impacts as a potential issue by the initial environmental review/
scoping study, field surveys should be carried out prior to
Key impacts can include the visibility of the solar panels
construction to determine key heritage and archaeological
within the wider landscape and associated impacts on
features at, or in proximity to, the site. Mitigation
landscape designations, character types and surrounding
measures can include careful site layout and design to
communities. Common mitigation measures to reduce
avoid areas of cultural heritage or archaeological value
impacts can include consideration of layout, size and scale
and implementation of a chance find procedure that
during the design process and landscaping/planting in
addresses and protects cultural heritage finds made during
order to screen the modules from surrounding receptors.
a projects construction and/or operation phases.
Note that it is important that the impact of shading
on energy yield is considered for any new planting 8.3.2.7 Transport and Access
requirements.
The impacts of transportation of materials and personnel
Solar panels are designed to absorb, not reflect, should be assessed in order to identify the most
irradiation. However, glint and glare should be a appropriate transport route to the site while minimizing
consideration in the environmental assessment process the impacts on project-affected communities. The
to account for potential impacts on landscape/visual and requirement for any oversized vehicles/abnormal loads
aviation aspects. should be considered to ensure access is appropriate. On-
site access tracks should be permeable and developed to
8.3.2.5 Ecology and Natural Resources minimise disturbance to agricultural land. Where project
Potential impacts on ecology can include habitat loss/ construction traffic has to traverse local communities,
fragmentation, impacts on designated areas and traffic management plans should be incorporated into
disturbance or displacement of protected or vulnerable the environmental and social management plan and EPC
species. Receptors of key consideration are likely to requirements for the project.
include nationally and internationally important sites

8: Permits, Licensing and Environmental Considerations 99

8.3.2.8 Drainage/Flooding Community engagement is an important part of project
development and should be an on-going process involving
A review of flood risk should be undertaken to determine
the disclosure of information to project-affected
if there are any areas of high flood risk associated with the
communities.51 The purpose of community engagement is
site. Existing and new drainage should also be considered
to build and maintain over time a constructive relationship
to ensure run-off is controlled to minimise erosion.
with communities located in close proximity to the
8.3.3 CONSULTATION AND DISCLOSURE project and to identify and mitigate the key impacts on
project-affected communities. The nature and frequency
It is recommended that early stage consultation is
of community engagement should reflect the projects risks
sought with key authorities, statutory bodies, affected
to, and adverse impacts on, the affected communities.
communities and other relevant stakeholders.50 This is
valuable in the assessment of project viability, and may 8.3.4 ENVIRONMENTAL AND SOCIAL MANAGEMENT
guide and increase the efficiency of the development PLAN (ESMP)
process. Early consultation can also inform the design
Whether or not an ESIA or equivalent has been completed
process to minimise potential environmental impacts and
for the site, an ESMP should be compiled to ensure
maintain overall sustainability of the project.
that mitigation measures for relevant impacts of the
type identified above (and any others) are identified
The authorities, statutory bodies and stakeholders that
and incorporated into project construction procedures
should be consulted vary from country to country but
and contracts. Mitigation measures may include, for
usually include the following organisation types:
example, dust suppression during construction, safety
Local and/or regional consenting authority. induction, training and monitoring programs for
Government energy department/ministry. workers, traffic management measures where routes
traverse local communities, implementation of proper
Environmental agencies/departments.
waste management procedures, introduction of periodic
Archaeological agencies/departments. community engagement activities, implementation of
chance find procedures for cultural heritage, erosion
Civil aviation authorities/Ministry of Defence
control measures, fencing off of any vulnerable or
(iflocated near an airport).
threatened flora species, and so forth. The ESMP should
Roads authority. indicate which party will be responsible for (a)funding,
Health and safety agencies/departments. and (b)implementing each action, and how this will be
monitored and reported on at the project level. The plan
Electricity utilities.
should be commensurate to the nature and type of impacts
Military authorities. identified.

51 IFC, Stakeholder Engagement: A Good Practice Handbook for Companies

50 IFC, Performance Standards on Environmental and Social Sustainability, 2012, Doing Business in Emerging Markets, 2007, http://www.ifc.org/wps/wcm/
Performance Standard 1, paragraphs 25-31, http://www.ifc.org/wps/wcm/co connect/topics_ext_content/ifc_external_corporate_site/ifc+sustainability/
nnect/115482804a0255db96fbffd1a5d13d27/PS_English_2012_Full-Document. publications/publications_handbook_stakeholderengagement__
pdf?MOD=AJPERES (accessed June 2014). wci__1319577185063 (accessed June 2014).

100 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Box 6: Permits, Licensing and Environmental Considerations

There are many types of permits required for a multi-megawatt solar PV power plant, which in accordance with country requirements
will vary in terms of purpose of requirements. Shown below is an indicative, non-exhaustive list of the key permits that were required
to be obtained in South Africa for a ground-mounted fixed-tilt PV plant. These permits apply specifically to the case study; permitting
requirements differ across other regions of South Africa and especially in different countries. Some of the case studys permits were
issued with condition-requirements including time limits for commencing and rules for the processes of construction, operation and
decommissioning. The majority of these permits were applied for and in place prior to the start of construction, as is deemed best practice.

An Environmental Impact Report was compiled for the project under the required Environmental Impact Assessment (EIA) Regulations and
Natural Environmental Management Act. The EIA process was used to inform the preferred layout for the project in order to reduce the
potential for significant environmental impacts. Elements of the project design thus reduced the potential for impact on water resources
and included a visual buffer zone from nearby roads, railway lines and farms, in addition to avoiding sensitive areas/heritage resources.
Mitigation measures proposed to further reduce impacts during construction included:
Pre-construction ecological checks.
Rehabilitation/re-vegetation of areas damaged by construction activities.
Implementation of soil conservation measures, such as stockpiling topsoil or gravel for remediation of disturbed areas.
Bunding of fuel, oil and used storage areas.

Implementing these mitigation measures ensured that the only significant impacts likely to arise from the project would be those
associated with visual impacts.

International lending standards (Equator Principles and IFC Performance Standards) were also applicable, such that this project required an
appropriate degree of environmental and social assessment to meet these standards. A principle finding of the environmental assessment
work carried out to meet these international criteria was a recommendation for a bird breeding survey in order to assess fully the project
impacts upon the population of a species of conservation concern. This recommendation was identified following the completion of the
EIA, highlighting the importance of the consideration of Equator Principles and IFC Performance Standards alongside EIA preparation from
the very outset of the project. This will help ensure reaching a standard that is acceptable to lenders.

The following table provides the key permits that were required in order to develop the project.

Permit Authority Requirements

Land-use Re-zoning Relevant Municipality Standard condition requirements
Environmental Department of 30 condition requirements that included:
Authorisation Environmental Affairs Work must commence within a period of five years from issue.
Requirement to appoint an independent Environmental Control Officer
(ECO) for the construction phase of development to ensure all mitigation/
rehabilitation measures are implemented.
Heritage Resources South Africa Heritage SAHRA recommendations were incorporated into the condition requirements of
Resources Agency the Environmental Authorisation to include avoidance of areas with important
(SAHRA) heritage resources.
Mineral Resources Department of Mineral No condition requirements.
Resources
Aviation Consent Civil Aviation Authority No condition requirements.
Water Use Licence Department of Water No condition requirements.
Affairs
Building Permit Relevant Municipality No condition requirements.

8: Permits, Licensing and Environmental Considerations 101

 Permitting, Licensing and Environmental
and Social Considerations Checklist

The checklist below details the basic requirements and

procedures to assist developers with the permitting and
licensing aspects of a project.

Land lease agreement obtained.

Advice sought on planning/consenting/permitting from

local regulatory authorities and any environmental
assessments required.

Initial Environmental Examination (IEE) completed.

Environmental and social assessments carried out (as

required).

Relevant supporting documents for consent/licensing

applications completed (including environmental
assessment reports, access details, drawings and plans).

Community consultation undertaken.

Consents, licences and permit applications completed.

Grid connection application completed.

Electricity generation licence obtained.

102 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 EPC Contracts 9
9.1 EPC CONTRACTS OVERVIEW

While multiple contracts could Engineering, procurement and construction (EPC) contracts
be signed to build a PV plant, are the most common form of contract for the construction
of solar PV power plants. Under an EPC contract, a principal
the most common approach is
contractor is engaged to carry out the detailed engineering
a single EPC contract. Often, design of the project, procure all the equipment and materials
a standard form (boilerplate necessary, and then construct and commission the plant for the
contract) is used. client. In addition, the contractor commits to delivering the
completed plant for a guaranteed price and by a guaranteed
date and furthermore that the completed plant must perform
to a guaranteed level. Failure to comply with any of these
requirements will usually result in the contractor having to pay
financial compensation to the owner in the form of liquidated
damages (LDs). See the checklist at the end of the chapter
highlighting the basic requirements that a developer may wish to
consider during the EPC contracting process.

The following sections describe the most important features of

an EPC contract. A full EPC contract term sheet detailing key
contractual terms specific to solar PV power plant construction is
presented in Annex 1.

9.2 BASIC FEATURES OF AN EPC CONTRACT

The EPC contract for any project-financed solar PV power plant

will typically be held between a project company (the owner) and
the EPC contractor (the contractor).

It is common practice to use a standard form of contract

(sometimes referred to as a boilerplate contract) as a template
and basis for the EPC contract. The following standard form of
contracts are considered good options for delivery of solar PV
power plants on a turnkey basis:

The Conditions of Contract for EPC/Turnkey Project First

Edition, 1999, published by the Federation Internationale des
Ingenieurs-Conseils (FIDIC).

9: EPC Contracts 103

 The Institution of Engineering and Technologys Model Plant design.
Form of General Conditions of Contract (MF/1 Rev. 4)
PV modules.

The key clauses for a project owner in any construction Inverters.

contract are those that relate to time, cost and quality. In
Mounting structures, including piled or ballasted
the case of solar PV power plant construction, a strong
foundations.
EPC contract will address the following areas:
DC cabling.
A turnkey scope of work.
AC cabling.
A fixed completion price.
Switchgear.
A fixed completion date.
Transformers.
Restrictions on the ability of the contractor to claim
extensions of time and additional costs. Grid connection interface.

A milestone payment profile that is suitably protective Substation building.

to the owner and based upon the completion of pre- Earthing and lightning protection.
defined sub-tasks.
Metering equipment.
Plant PR guarantees.
Monitoring equipment.
LDs for both delay and performance.
Permanent security fencing.
Financial security from the contractor and/or its parent
Permanent security system.
organisation.
Temporary onsite security during construction.
A defects warranty.
Temporary and permanent site works, including
Each of these areas is discussed further below with specific provision of water and power.
reference to solar PV power plants.
Permanent access tracks (both internal and external).

9.3 SCOPE OF WORK Site drainage.

The benefit of an EPC contract to a plant owner is that Plant commissioning.

the contractor assumes full responsibility for all design,
Handover documentation (including as-built drawings,
engineering, procurement, construction, commissioning
O&M manual and commissioning certificates).
and testing activities. Given this transfer of risk, the
scope of work detailed within the EPC contract should be Spare parts package.
sufficiently prescriptive to ensure that all key supply and
All technical requirements should be fully specified within
engineering tasks relating to the construction of a solar
a schedule to the contract. These should be suitably
PV power plant have been adequately considered and
prescriptive and unambiguous. The more detailed and
specified.
accurate the scope of work, the lower the risk that
The contractors scope of work should include all requests for variation will be made by the contractor
supervision, management, labour, plant equipment, during the construction phase. The contract should also
temporary works and materials required to complete the clearly define terminal points, or points that designate
works, including: where the contractors scope of work ends.

104 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

9.4 PRICE AND PAYMENT STRUCTURE Table 17: Typical EPC Payment Schedule

On signing of the contract, the contractor commits to Percent of

Contract
delivering the works for a fixed price. The contract should Payment Payment Due Upon Price
make it explicitly clear that at the time of signing, the 1 Advance payment (commencement 10-20
contractor is satisfied as to the correctness and sufficiency date)

of the contract price to deliver the works in line with the 2 Civil works completed 10-20

contractually agreed specifications. 3 Delivery of components to site 40-60

(usually on a pro-rata basis)

The contract price should cover all of the contractors 4 Modules installed 5-15

obligations under the contract and all items necessary for 5 Grid connection achieved 5-15
(energisation)
the proper design, execution and completion of the works.
6 Mechanical completion 5-10
The owner should not be required to increase the contract
7 Provisional acceptanceplant 5-10
price, other than in accordance with the express provisions
taken over
of the contract.

During the construction phase, payment will typically be owner can occur. Until this time, the contractor remains
made to the contractor by way of milestones relating to fully responsible for the site and construction activities.
the completion of individual work items. The payment Completion typically takes the form of a number of
schedule should be fair and reasonable for both parties acceptance tests and inspections to be conducted by the
and should allow the contractor to remain cash neutral owner or an independent third party that demonstrates
throughout the build process, as the contractor will be that the plant has been installed and is performing as per
paying the sub-contractors and equipment providers on a the contractually agreed specifications. The requirements
regular basis. Payment milestones should be drafted to be in these areas are generally detailed in a dedicated testing
clear, measureable, and made on completion (rather than and commissioning schedule.
commencement) of the individual scope items.
A diagram outlining key completion events occurring during
Any advance payment made to the contractor on signing a solar PV plant construction project (in chronological order
of the contract should be accompanied by an advance from left to right) is shown in Figure 20. These are described
payment guarantee, usually in the form of a bond held further below.
within a bank that can be drawn upon in the event of
contractor default or insolvency. The value of each 9.5.1 GUARANTEED COMPLETION DATE
milestone should roughly reflect the value of the completed
The contract should include a guaranteed completion
works. It is normal that approximately 5-10 percent of the
date, which is typically either specified as a fixed date or
contract value should be held back until handover of the
as a fixed period after commencement of the contract. The
works (Provisional Acceptance) has been achieved.
actual works stage to which the guaranteed completion
An example payment schedule is shown in Table 17. date relates will be project-specific, and this may be driven
by a countrys regulatory regime as well as the date that
9.5 COMPLETION AND HANDOVER OF THE projects become eligible for receiving tariff support. For
PLANT example, the guaranteed completion date could coincide
with the date the plant is scheduled to be connected
The contract should clearly outline the criteria for
to the local electricity grid, commissioned or is ready
completing the contractors scope of work and therefore
to be handed over to the owner. The key point is that
when handover of the completed plant from contractor to
the owner needs to be certain as to what date the plant

9: EPC Contracts 105

 Figure 20: Typical EPC Construction Phase and Handover Protocol

2 Year EPC Warranty Period

Provisional Intermediate Final

Construction Mechanical Commissioning Acceptance Testing Acceptance Testing Acceptance Testing Owner Take-over
Completion (5-15 days) (12 months) (12 months)

Provisional Intermediate Final

Acceptance Acceptance Acceptance
Certicate Certicate Certicate

will be exporting to the grid and therefore generating a 9.5.2 MECHANICAL COMPLETION
return on the investment. Inability to meet the expected
Mechanical completion of a project refers to the stage
completion date for beginning to export power to the grid
whereby all principal sub-components forming the final
has important implications from a regulatory or financial
power plant have been installed and are mechanically
perspective.
and structurally complete. At such a time, it would be
advisable for the owner or a third party independent of
To mitigate the risk of the owner suffering financial loss
the contractor to inspect the works in order to compile an
resulting from the contractor failing to deliver a completed
initial list of construction defects (commonly referred to as
plant to the agreed timetable, the contract should include a
a punch list or snagging list).
provision for claiming financial compensation (liquidated
damages or LDs) from the contractor. LDs should be
Mechanical completion allows for commissioning
sized to be a genuine pre-estimate of the loss or damage
activities to commence.
that the owner will suffer if the plant is not completed
by the target completion date. Delay LDs are usually 9.5.3 COMMISSIONING
expressed as a rate per day that represents the estimated
Commissioning should be considered throughout the
lost revenue for each day of delay. For a solar PV project,
course of the construction phase, however, most of the
this is a relatively straightforward calculation and can be
commissioning activities will occur following mechanical
based upon an energy yield estimate for the completed
completion when the system is ready to be energised.
plant utilising a long-term solar irradiation dataset for the
project location.
The commissioning process certifies that the owners
requirements have been met, the power plant installation
If there is potential for the owner to suffer additional
is complete and the power plant complies with grid
financial losses beyond lost revenue resulting from delay
and safety requirements. Successful completion of the
(perhaps due to the presence of a tariff reduction date)
commissioning process is crucial to achieving provisional
then provisions addressing the owners right to collect LDs
acceptance, the process of handover of the plant from
for any such losses should also be included in the contract.
contractor to owner.

106 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Commissioning should prove three main criteria: fires involving PV systems have been traced back to
reverse polarity.
1. The power plant is structurally and electrically safe.
Open Circuit Voltage (Voc) Test: This test checks
2. The power plant is sufficiently robust (structurally and
whether all strings are properly connected and whether
electrically) to operate for the specified lifetime.
all modules are producing the voltage level as per the
3. The power plant operates as designed and its module data sheet. The Voc of each string should be
performance falls in line with pre-determined recorded and compared with temperature-adjusted
parameters. theoretical values. For plants with multiple identical
strings, voltages between strings should be compared
Critical elements of a PV power plant that require to detect anomalies during stable irradiance conditions.
commissioning include: Values from individual strings should fall within 5
1. PV module strings. percent of each other.
Short Circuit Current Test (Isc): This test verifies
2. Inverters.
whether all strings are properly connected and the
3. Transformers. modules are producing the expected current. The Isc
4. Switchgear. of each string should be recorded and compared with
temperature-adjusted theoretical values. For plants
5. Lightning protection systems.
with multiple identical strings, voltages between strings
6. Earthing protection systems. should be compared to detect anomalies during stable
irradiance conditions. Values from individual strings
7. Electrical protection systems.
should fall within 5 percent of each other.
8. Grid connection compliance protection and
Insulation Resistance Test: The insulation resistance of
disconnection systems.
all DC and AC cabling installed should be tested with
9. Monitoring systems (including meteorological a megohmmeter. The purpose of the test is to verify the
sensors). electrical continuity of the conductor and verify the
integrity of its insulation.
10. Support structure and tracking systems
(whereemployed). Earth Continuity Check: Where protective or bonding
conductors are fitted on the DC side, such as bonding
11. Security systems.
of the array frame, an electrical continuity test should
9.5.3.1 Typical Commissioning Tests be carried out on all such conductors. The connection
to the main earthing terminal should also be verified.
Prior to connecting the power plant to the grid, electrical
continuity and conductivity of the plants various sub- After the above commissioning tests have been successfully
components should be thoroughly checked by the completed and the correct functioning and safe operation
contractor (or specialist electrical subcontractor). Once of subsystems have been demonstrated, commissioning of
mechanically and electrically complete, the following tests the inverters may commence. The inverter manufacturers
should be conducted on all module strings and on the DC directions for initial start-up should always be adhered to.
side of the inverters:
9.5.3.2 Grid Connection Interface
Polarity Check: The polarity of all DC cables should
Grid connection should only be performed once all DC
be checked. This is one of the simplest and most
string testing has been completed. It is likely that the
important safety commissioning tests. Several rooftop
distribution or transmission system operator will wish to
witness the connection of the grid and/or the protection

9: EPC Contracts 107

relay. Such a preference should be agreed in advance as photovoltaic systemsMinimum requirements for system
part of the connection agreement. documentation, commissioning tests and inspection.

The grid connection agreement often stipulates certain 9.6 PROVISIONAL ACCEPTANCE
requirements, such as electrical protection, disconnection
Provisional acceptance is a common term used to refer to
and fault, to which the solar PV power plant is required
the stage at which the contractor has complied with all of
to adhere. Usually, these conditions need to be met and
its construction-related obligations and the plant is ready
demonstrated before commissioning the grid connection
to be handed over to the owner. The criteria for achieving
interface and energisation of the plant.
provisional acceptance should be clearly outlined in the
9.5.3.3 General Commissioning Recommendations contract and may include:

Commissioning activities should commence following Mechanical completion having taken place in
mechanical completion of the plants various sub- accordance with the agreed technical specification and
components or, where appropriate, sequentially as module the plant being free from defects (other than non-
strings are connected. One exception to this rule is for critical punch list items).
power plants employing modules that require a settling-in
The aggregate value of the punch list items does not
period, such as thin-film amorphous silicon (a-Si) modules.
exceed a pre-determined value (typically 12 percent of
In this case, performance testing should begin once the
the contract price).
settling-in period has been completed and the modules
have undergone initial degradation. Grid connection and energisation of the plant have
been achieved.
Since irradiance has an impact on performance,
All commissioning tests have been successfully
commissioning should be carried out under stable sky
completed.
conditions and ideally at irradiance levels above 500W/m2.
The temperature of the cells within the modules should be The provisional acceptance performance ratio (PR) test
recorded in addition to the irradiance and time during all has been passed.
testing. All equipment and sub-contractor warranties have
been assigned to the project company.
Commissioning activities should incorporate both visual
inspection and functional testing. Such testing should be All handover documentation is in place and hard and
conducted by experienced and specialist organisations, soft copies provided to the owner.
typically sub-contractors to the EPC contractor. Operation and maintenance training of the owners
personnel has taken place.
The testing outlined in this section does not preclude local
norms, which will vary from country to country. Any delay or performance-related liquidated
damages (LDs) incurred by the contractor during the
Test results should be recorded as part of a signed-off construction phase have been paid to the owner.
commissioning record. While the contractor would be
Any performance security or bond required during the
expected to carry out these tests, it is important that the
EPC warranty period has been delivered to the owner.
owner is aware of them and makes sure that the required
documentation is completed, submitted and recorded. Once provisional acceptance has been achieved, the owner
would typically be obliged to make the final milestone
A useful reference for commissioning of PV systems can
payment to the contractor, at which point 100 percent of
be found in IEC standard 62446:2009 Grid connected
the contract value would have been paid.

108 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

The provisional acceptance date would also mark the 9.6.2 INTERMEDIATE AND FINAL ACCEPTANCE
commencement of the contractors EPC warranty period,
The contractor will typically be required to deliver a
which commonly lasts for 24 months.
number of guarantees in relation to their works. These are
described below.
9.6.1 PERFORMANCE RATIO TESTING
Defects Warranty: It would be normal for the
Prior to granting provisional acceptance, the owner needs
contractor to provide a fully-wrapped plant defects
confirmation that the completed plant will perform in
warranty for a period of at least two years following
line with the contractually agreed criteria (in terms of
the date of provisional acceptance. This makes the
output, efficiency and reliability). The industry standard
contractor responsible for the rectification of any
for achieving this within solar EPC contracts is through
defects that may be identified during this period.
testing of the plants PR.
Performance Warranty: In addition to the short-
A standard PR test period at the stage of provisional term PR test at provisional acceptance, it is industry
acceptance would be for a minimum of five consecutive standard for the contractor to provide a PR guarantee
days (commonly up to 15 days) of continuous testing. It to be measured at one or two separate occasions within
is desirable to test plant efficiency and reliability over a the defects warranty period. Industry best practice is
range of meteorological conditions. for the PR to be tested annually over the first year and
then over the second year of plant operation. Testing
Calculation of the plant PR is determined using the plant PR annually removes the risk of seasonable bias
contractually agreed formulae. Attempting to predict affecting the PR calculation and allows for a true
the plant performance during varying environmental appraisal of plant performance.
conditions experienced over the years with just
several days of testing is a complex task and different Given that an EPC warranty period typically lasts two
methodologies are used (e.g., temperature compensation years from the date the plant is accepted by the owner,
or seasonal adjustment). For this reason, an independent PR testing over the first year of operation is commonly
technical advisor is often employed to draft the formulae referred to as the intermediate acceptance test. PR testing
defining the provisional acceptance performance tests. during the second year of plant operation is commonly
referred to as final acceptance testing. If these performance
The PR measured over the test period should be compared tests are passed (along with other contractual conditions)
against the guaranteed value stated in the contract. If the then an Intermediate Acceptance Certificate (IAC) and
measured PR exceeds the guaranteed value then the test Final Acceptance Certificate (FAC) may be signed.
is passed. If the measured PR is below the guaranteed
value, the contractor should perform investigations into If the PR measured during the IAC or FAC tests were less
the reasons for plant under-performance and rectify these than the guaranteed levels, then the contractor would
prior to repeating the test. be required to pay LDs to the owner to compensate for
anticipated revenue losses over the project lifetime. To be
Given the short duration of the test, it would be unusual enforceable in common law jurisdictions, LDs must be
that performance LDs would be attached to the result. It a genuine pre-estimate of the loss that the owner would
is normal that LDs are instead linked to the results of the suffer over the life of the project as a result of the plant
annual PR tests measured at the end of one or two years of not achieving the specified performance guarantees. LDs
plant operation. It is unusual for PR guarantees to extend are usually a net present value (NPV) calculation based on
beyond two years within an EPC contract, although they the revenue forgone over the life of the project as a result
sometimes may be part of a long-term O&M contract. of the shortfall in performance.

9: EPC Contracts 109

At the end of typically two years of plant operation
(following the provisional acceptance date) and assuming
successful IAC and FAC PR tests, rectification of any
observed defects and payment of any incurred delay or
performance-related LDs, the owner is obliged to sign the
FAC. This has the effect of discharging the contractors
construction-related obligations and handing the plant
over to the owner. At such a time, any performance bond
that may have been in place to secure the contractors
obligations during the EPC warranty period would be
returned to the contractor.

110 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

EPC Contracting Checklist

Below is a checklist of basic requirements that a developer may

wish to consider during the EPC contracting process.

Legal and Technical Advisors engaged to advise on form of

contract.

Scope of work drafted to include all engineering,

procurement, construction, commissioning and testing
tasks.

Proposed contractor able to provide security by way of

performance bond or parent company guarantee. Security
to remain in place until Final Acceptance (FA) is achieved.

Payment milestone profile drafted to be suitably protective;

milestone amounts sized to accurately reflect works
completed with sufficient funds held back until plant is
taken over.

Contractor provides a defects warranty period of at

least two years commencing on the date of provisional
acceptance.

Defined terms, such as commissioning, work completion,

provisional acceptance and final acceptance are clear and
measureable.

Contract contains provision for PR testing at two to

three stages during the contractors warranty period.
Performance ratio (PR) test prior to provisional acceptance
should be conducted over a period of at least five days.
Repeat PR tests at IAC and FAC to be over full 12-month
periods.

Contract contains provision for obtaining LDs in event of

delay or plant underperformance.

LDs sized to be a genuine pre-estimate of losses likely to be

incurred.

9: EPC Contracts 111

 10 Construction

10.1 CONSTRUCTION OVERVIEW

The construction phase of a solar PV power plant should be There are a number of common
managed so that the project attains the required standards of
issues that may arise during the
quality within the time and cost constraints. During construction,
construction phase. Most of
issues such as environmental impact, and health and safety of
the workforce (and other affected people) should be carefully these can be avoided through
managed. appropriate design, monitoring,
quality control and testing onsite.
Key project management activities that will need to be
carried out, either by the developer or a contractor, include
interface management, project planning and task sequencing,
management of quality, management of environmental aspects,
and health and safety.

There are a number of common issues that may arise during

the construction phase. Most of these can be avoided through
appropriate design, monitoring, quality control and testing onsite.

Provided at the end of the chapter is a checklist of both basic

required procedures and recommended actions, which should
assist developers during the construction phase of a solar PV
project.

The following sections summarise critical considerations for the

construction of a megawatt-scale solar PV power plant.

10.2 CONSTRUCTION MANAGEMENT

The management of the construction phase of a solar PV project

should be in accordance with general construction-project
management best practices.

The approach to construction project management for a solar PV

power plant will depend on many factors. Of these, one of the
most important is the project contract strategy, whether multi-
contract or full turnkey EPC. The vast majority of megawatt-
scale solar PV power plants are built using a fully-wrapped EPC
approach.

112 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 From a developers perspective, construction project
management for a full turnkey EPC contract will be Figure 21: O&M Workers at a Large-scale Solar PV Power
significantly less onerous than that required for a Plant

multi-contract approach.

An EPC contract is nearly always more expensive than

an equivalent, well-managed multi-contract approach.

A multi-contract approach gives the developer greater

control over the final plant configuration.

EPC avoids interface issues between contractors and

shifts risks to the EPC contractor instead of the project
developer.

Regardless of the contract strategy selected, there are a

number of key activities that will need to be carried out,
either by the developer or a contractor. These activities are
described in the following sections.
Image courtesy of First Solar
Typical EPC contract terms may be found in Annex 2:
Contract Heads of Terms.
that requires on-going supervision. To some extent
10.3 INTERFACE MANAGEMENT interfaces between the project and its surroundings (for
example, grid connection) will remain the responsibility
Interface management is of central importance to the
of the developer. Furthermore, in many countries legal
delivery of any complex engineering project, and solar
responsibility will remain with the developer regardless
PV projects are no exception. The main interfaces to be
of the form of contract that is put in place with the
considered in a solar PV project are listed in Table 18. It
contractor.
should be noted that the interfaces may differ, depending
on the contracting structure and specific requirements of If a turnkey EPC strategy is chosen, then a contractor
particular projects. with a suitable track record in the delivery of complex
projects should be selected to minimise this type of legal
For a multi-contract strategy, the developer should
risk. Information should also be sought from potential
develop a robust plan for interface management. This
contractors on their understanding of the project
plan should list all project interfaces, describe which
interfaces and their proposed approach to managing them.
organisations are involved, allocate responsibility for each
interface to a particular individual, and explicitly state
10.4 PROGRAMME AND SCHEDULING
when the interface will be reviewed. In general, design and
construction programmes should be developed to minimise A realistic and comprehensive construction programme is
interfaces wherever possible. a vital tool for the construction planning and management
of a solar PV project. The programme should be
Opting for a turnkey EPC contract strategy will, in sufficiently detailed to show:
effect, pass the onus for interface management from
Tasks and durations.
the developer to the EPC contractor. But interface
management will remain an important issue and one Restrictions placed on any task.

10: Construction 113

 Table 18: Solar PV Project Interfaces
Item Element Organisations Interface / Comments
1 Consents/Permits All contractors Monitoring of compliance with all consent conditions and
Landowner permits.
Planning authority
2 Civil Works Civil contractor Site clearance. Layout and requirements for foundations,
Mounting or tracking system supplier plinths, hardstandings, cable trenches, earthing, ducts,
Central inverter supplier roads and access tracks.
Electrical contractor
Grid connection contractor
Security contractor
Installation/crane contractor
3 Security Civil contractor Layout of the security system, including power cabling
Electrical contractor and communications to the central monitoring system.
Security contractor
Communications contractor
4 Module Mounting or Tracking Mounting or Tracking system supplier Foundations for the mounting or tracking system,
System Civil contractor suitability for the module type and electrical connections,
Module supplier and security of the modules. Earthing and protection of
Electrical contractor the mounting or tracking system.
5 Inverter Civil contractor (for central inverters) Foundations for larger central inverters, or suitability
Mounting system supplier (for string for the mounting system. Suitability of the module
inverters) string design for the inverter. Interface with the
Module supplier communications for remote monitoring and input into
Inverter supplier the SCADA system. Many grid requirements or constraints
Electrical contractor can be managed within the design.
Grid network operator
Communications contractor
6 AC/DC and Communications Electrical contractor Liaison with regard to cable redundancy, routes, sizes,
Cabling Civil contractor weights, attachments and strain relief requirements.
Communications contractor Liaison with regards to the signalling requirements within
Security contractor the site and to be provided to external parties throughout
Power purchase (off-taker) company operation.
Grid network operator
7 Grid Interface Civil contractor Liaison with regard to required layout of building
Electrical contractor equipment and interface with site cabling installed by the
Inverter supplier site contractor. More interface outside the site boundary
Network operator for the grid connection cable/line to the network
operators facilities.
8 Communications Electrical contractor Interface between the security system, inverter system,
Security contractor central monitoring (SCADA), the monitoring company,
Communications Contractor and the owner or commercial operator of the PV plant.
Owner and commercial operator
9 Commissioning All contractors Commissioning of all systems will have several interface
issues particularly if problems are encountered.

114 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Contingency of each task. contingency. It will also allocate allowance for weather
risk or permit restrictions for each task.
Milestones and key dates.

Interdependencies between tasks. Interdependencies between tasks will allow the programme
to clearly define the ordering of tasks. A project-
Parties responsible for tasks.
scheduling package will then indicate the start date of
Project critical path. dependent tasks and highlight the critical path.
Actual progress against plan.
Critical path analysis is important to ensure that tasks
All tasks and the expected timescales for completion that can affect the overall delivery date of the project are
should be detailed along with any restrictions on a highlighted and prioritised. A comprehensive programme
particular task. For example, if permits or weather should also take into account resource availability.
constraints are predicted to potentially stop construction This will ensure that tasks are scheduled when required
during particular months, this should be noted. staff or plant components are available. For example,
when exporting to a high voltage transmission line, a
For a solar PV project, it is likely that the programme will large substation facility may need to be designed and
incorporate different levels of detail around each of the built according to the grid company requirements and
following main work areas: interconnect agreement specifications. The outage date
for connecting to the transmission line will be planned
Final design works.
well in advance. If the developer misses the outage date,
Procurement and manufacture of equipment. significant delays can be incurred, which can have a major
Site access. impact on the development. The outage date is thus a
critical path item around which the project development
Security.
and construction timeline may need to be planned.
Foundation construction.
Incorporating a procurement schedule that focuses on
Mounting frame construction.
items with a long manufacturing lead-time (such as
Module installation. transformers, central inverters and modules) will ensure
that they are ordered and delivered to schedule. It will also
Substation construction.
highlight any issues with the timing between delivery and
Electrical site works. construction, and the need for storage onsite.
Grid interconnection works.
To share this information and to save time and effort, it
Commissioning and testing. is strongly recommended that an off-the-shelf project-
scheduling package is used and that the programme is
A high-level programme should be produced to outline
monitored against site progress regularly.
the timescales of each task, the ordering of the tasks and
any key deadlines. This should be completed as part of the To obtain visibility of the works on a day-to-day basis,
detailed design. and receive early notice of any slippage in programme,
a good management and tracking tool to use is a weekly
The programme will then be built up to detail all the
look-ahead programme. This can be drawn up either
associated tasks and sub-tasks, ensuring that they will
by the EPC contractor or the project management team
be completed within the critical timescale. A thorough
onsite.
programme will keep aside time and resources for any

10: Construction 115

10.4.1 MILESTONES Access requirements.

Milestones are goals that are tied in with contractual Resource availability (plant, equipment and
obligations, incentives or penalties. Incorporating manpower).
milestones in the programme helps the project team to
Training and learning curve of manpower, especially if
focus on achieving these goals. In effect, construction must
in a new market or if local resources are being utilised.
be planned around certain milestones or fixed dates (for
example, the grid connection date). Consenting (or other regulatory) restrictions.

Safety considerations.
If the contracted milestones are included in the
programme, the impact of slippage on these dates will Grid availability.
be apparent. Appropriate budgetary and resourcing
10.4.3 RISK MANAGEMENT
decisions can then be made to address those delays. The
milestones can also indicate when payments are due to a The risks associated with the project should be identified,
contractor. Payment of contracted milestones should be assessed and managed throughout the construction
associated with the delivery of all relevant documentation process. The hazards need to be incorporated in the
to ensure the work has been built to specification and planning and scheduling of the project. Each aspect of
quality standards. This will ensure that the contractors the project should be assessed for likelihood and impact
are focused on delivering the paperwork as well as the of potential risks. The next step would be to develop
physical works. It will also help to minimise the potential a suitable action plan to mitigate identified risks. If a
for programme slippage later in the works due to awaiting particular risk could affect the delivery of the whole
documentation. project, alternatives for contingency (in terms of time and
budget) should be included.
10.4.2 PLANNING AND TASK SEQUENCING
Risk items may include timing delays, weather risk,
Appropriate sequencing of tasks is a vital part of the
grid connection delays, staff and equipment availability,
planning process. The tasks must be sequenced logically
transportation, ground conditions and environmental or
and efficiently. The overall sequence of works is
health and safety incidents. Many of these risks will have
generally site access, site clearance, security, foundation
been mitigated during the planning and design stage, for
construction, cable trenches and ducts, substation
example, by completing studies and plant design.
construction, mounting frame construction, module
installation, electrical site works, communications,
Some risks will remain until the equipment is on site:
site grid works and finally, testing and commissioning.
lost equipment or equipment damaged in transport, for
Each of these work areas should be broken down into a
example. This risk is reduced by selecting an experienced
series of sub-tasks. Alongside these, an assessment of the
supplier with suitable transport equipment. Insurance
inputs required for each task (especially when interfaces
will cover the cost associated with sourcing replacement
are involved) will help develop a logical and efficient
equipment, however if a key component such as the grid
sequence.
transformer is lost, then insurance will not compensate
for the time delays and loss of generation associated with
Consideration should also be given to any factors that
the component not being available. Such risks should be
could prevent or limit possible overlap of tasks. These
considered when drafting the EPC contract terms.
factors could include:

116 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

10.5 QUALITY MANAGEMENT construction contractor(s) can take appropriate steps that
adhere to the mitigation strategy. Implementation of the
Controlling construction quality is essential for the success
ESMP is necessary to ensure that all national and lender-
of the project. The required level of quality should be
specific conditions related to environmental, health, safety
defined clearly and in detail in the contract specifications.
and social impacts of the project are met. Contractor
A quality plan is an overview document (generally in a performance should be monitored and corrected as
tabular form), that details all works, deliveries and tests to be necessary. Further details on health and safety aspects of
completed within the project. This allows work to be signed the ESMP are provided below in Section 10.7.
off by the contractor and enables the developer to confirm if
the required quality procedures are being met. A quality plan 10.7 HEALTH AND SAFETY MANAGEMENT
will generally include the following information: The health and safety (H&S) of the project work force
Tasks (broken into sections, if required). should be carefully overseen by the project developer.
Apart from ethical considerations, the costs of not
Contractor completing each task or accepting
complying with H&S legislation can represent a major
equipment.
risk to the project. Furthermore, a project with a
Acceptance criteria. sensitive approach to H&S issues is more likely to obtain
international financing.
Completion date.

Details of any records to be kept (for example, The World Bank Group General EHS Guidelines cover
photographs or test results). H&S during construction, including:

Signature or confirmation of contractor completing General facility design and operation.

tasks or accepting delivery.
Communication and training.
Signature of person who is confirming tasks or tests on
Physical hazards.
behalf of the developer.
Chemical hazards.
Quality audits should be completed regularly. These
Biological hazards.
will help developers verify if contractors are completing
their works in line with their quality plans. Audits also Personal protective equipment (PPE).
highlight quality issues that need to be addressed at Special hazard environments.
an early stage. Suitably experienced personnel should
Monitoring.
undertake these audits.

Solar-specific construction experience indicates that falls

10.6 ENVIRONMENTAL AND SOCIAL
from height, electrocution, incidents involving heavy
MANAGEMENT
lifting machinery (i.e., cranes) and traffic accidents are
As noted in Section 8.3.4, the environmental and social the most common causes of serious worker injuries or
impact assessment (ESIA) or equivalent undertaken for fatalities in solar projects.
each project should result in an associated Environmental
and Social Management Plan (ESMP), which sets out The EHS guidelines give guidance on how each of these
key environmental, health, safety and social impacts aspects of H&S should be approached, outlining minimum
identified for the project and addresses how these will be requirements for each aspect and listing appropriate
mitigated. It is important that this document is referenced control measures that can be put in place to reduce risks.
or incorporated into the EPC contract so that the

10: Construction 117

Furthermore, IFC PS2 sets out requirements in relation to 10.8.2 MECHANICAL
occupational H&S.
The mechanical construction phase usually involves the
installation and assembly of mounting structures on the
As a minimum standard, compliance with local H&S
site. Some simple mistakes can turn out to be costly,
legislation should be documented and rigorously enforced.
especially if these include:
Where local legal requirements are not as demanding
as the EHS guidelines, it is recommended that the EHS Incorrect use of torque wrenches.
guidelines and requirements within IFC PS2 are followed.
Cross bracing not applied.

10.8 SPECIFIC SOLAR PV CONSTRUCTION ISSUES Incorrect orientation.

The following sections describe common pitfalls or Misalignment of structures.

mistakes that can occur during the construction phase of a Lack of anti-corrosion paint applied to structures.
solar PV project. Most of these pitfalls can be avoided by
appropriate design, monitoring, quality control and onsite If a tracking system is being used for the mounting
testing. structure, other risks include:

Lack of clearance for rotation of modules.

10.8.1 CIVIL WORKS
Actuator being incorrectly installed (or specified),
The civil works relating to the construction of a solar PV
resulting in the modules moving or vibrating instead of
plant are relatively straightforward. However, there can
locking effectively in the desired position.
be serious and expensive consequences if the foundations
and road networks are not adequately designed for
These mistakes are likely to result in remedial work being
the site. The main risks lie with the ground conditions.
required before hand-over and involve extra cost.
Importantly, inadequate ground investigation reports that
do not provide sufficient detailed ground information 10.8.3 ELECTRICAL
may result in misinterpretation of ground conditions
Cables should be installed in line with the manufacturers
leading to inappropriate foundation design. Importantly,
recommendations. Installation should be done with
ground surveys lacking meticulous detailing or proper
care as damage can occur when pulling the cable into
data interpretation could lead to risks such as installing
position. The correct pulling tensions and bending radii
unsuitable foundations.
should be adhered to by the installation contractor to
Brownfield sites pose a risk during the civil engineering prevent damage to the cable. Similarly, cables attached
works. Due to the nature of the excavation works digging to the mounting structure require the correct protection,
or pile driving for foundations, it is important to be aware attachment and strain relief to make sure that they are not
of hazardous obstacles or substances below ground level. damaged.
This is especially important when considering former
Underground cables should be buried at a suitable depth
industrial sites or military bases. Typical hazards may
(generally between 500mm and 1,000mm) with warning
include ground gases and leachate from former landfill
tape or tiles placed above and marking posts at suitable
operations, contaminated land due to historical industrial
intervals on the surface. Cables may either be buried
works or processes and unexploded ordnance from
directly or in ducts. If cables are buried directly, they
previous wartime activities, such as on or near active/
should be enveloped in a layer of sand or sifted soil in
retired military bases or other sites that may have been
order to avoid damage by backfill material.
mined or bombed.

118 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Comprehensive tests should be undertaken prior to For larger tracking systems, central inverters, or pre-
energisation to verify that there has been no damage to the manufactured inverter stations, cranes may be required.
cables. Therefore, suitable access and space for manoeuvrability,
including room for the crane to extend its legs for stability
In markets where electrical standards are being updated or within the site, is essential (see Figure 23). This issue
have been recently updated the developer should consider should also be assessed from an operational perspective to
obtaining expert advice from an electrical engineer or ensure any equipment can be replaced upon failure or end
consultant to confirm prior to order that any electrical of life.
equipment imported into the country, including cables,
will meet the local requirements. 10.8.6 SECURITY

A robust security plan needs to be put in place, especially

10.8.4 GRID CONNECTION
in areas where there may have been objections to the
The grid connection will generally be carried out by a works or where unemployment or crime is an issue. The
third party over whom the project developer may have project is likely to have a substantial quantity of metal
limited control. Close communication with the grid including copper with significant scrap value. The modules
connection contractor is essential to ensure that the grid themselves can be the targets of theft and may also be
requirements are met. Delay in the completion of the grid damaged by malicious acts.
connection will affect the energisation date, which will
delay the start of commercial operation. The security arrangements for the site need planning and
adequate budgeting. Security arrangements can provide a
Where the grid network contains only traditional sustained benefit to the region by creating jobs for local
generation sources there is an additional risk that the grid personnel.
code requirements for renewable generation will not have
been fully established at the time of contract signature. In
these cases, certain provisions may need to be included in
the PPA; also, it is especially important to maintain regular
communication with the grid operator and if possible
engage the support of local consultants. Communicating Figure 22: Spacing between Module Rows

with other solar plant developers in the area, if there

are any, is strongly recommended and may enable the
developer to benefit from the lessons learned during the
implementation of these other projects that have already
been constructed.

10.8.5 LOGISTICAL

Logistical issues can arise if designs or schedules have not

been well thought through. Issues that may arise include:

Lack of adequate clearance between rows of modules

for access (see Figure 22).

Constrained access due to inclement weather

conditions.
Image courtesy of First Solar

10: Construction 119

 lack of knowledge of the possible impact of completing
Figure 23: Module Installation on a Large Tracking System works in the wrong order, which can have a costly impact
on the project. However, with appropriate training, the
use of inexperienced local staff can present a low-cost and
locally-beneficial method of developing a solar PV power
plant.

Strict quality management is required. A rigorous plan

should be developed to ensure that risks and problems are
identified early and quickly so that they can be resolved in
a timely way.

10.9 CONSTRUCTION SUPERVISION

It is recommended that the owner of and lenders to

the project are kept informed of developments during
construction. Construction supervision may be carried out
Image courtesy of a+f GmbH by in-house resources. Alternatively, a technical advisor
or Owners Engineer may be commissioned to carry out
the work on their behalf.
10.8.7 EMERGING MARKET ISSUES
The role of the technical advisor during the construction
In new markets, there may be limited options for phase involves ensuring contractor compliance with the
obtaining/importing the equipment required, starting up relevant contracts, as well as reporting on progress and
new manufacturing plants, or modifying construction budget. The construction supervision team generally
facilities to satisfy local demand. Any supply solution that comprises a site engineer supported by technical
is adopted has associated risks. experts based in an office. The main parts of the
technical advisors role are: review of proposed designs,
Imported equipment can be subject to long transport times
construction monitoring and witnessing of key tests.
and customs delays, especially if this is the first import for
a company or project. Design reviews will generally be carried out on:

New manufacturing suppliers in emerging markets can Design basis statements.

have quality issues associated with the work; additional Studies/investigations.
time and monitoring is generally required to ensure that
Design specifications.
the products being delivered by such suppliers meet
quality requirements. The packaging and transportation Design of structures.
of these products to the construction site also requires
Drawings (all revisions).
careful consideration of how to prevent damage during
transportation. Calculations.

Execution plans.
Employees for project installation companies in emerging
markets are often inexperienced. This can lead to incorrect Risk assessments and method statements.
installation methods or procedures, and may include a Quality plans.

120 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Safety plans/reports. Witnessing of delivery/off-load of solar modules,
transformers, inverters and switchgear.
Material and equipment selection.
Inspection of module, switchgear and inverter
O&M manuals.
installation.
Test reports.
Witnessing of site acceptance tests.
The objective of the design review is to ensure that the Witnessing of completion tests.
contractor has designed the works in accordance with
Monitoring and expediting defects.
the contract agreements and relevant industry standards.
The review also aims to ascertain that the works will be
Besides the Owners Engineer, the lenders engineer has
suitably resourced and sequenced to deliver the project as
the additional role of signing off and issuing certificates
specified. The design review can also cover specific areas
that state the percentage of the project completed. The
such as grid compliance or geotechnical issues, depending
lenders will require these certificates prior to releasing
upon the specific project requirements and experience of
funds in accordance with the project payment milestones.
the developers.
In some cases there is a requirement for an independent
or consulting engineer to verify that the works meet all
Key stages and tests for witnessing include:
standards and codes on behalf of the grid company or
Inspection of road construction. power purchaser.
Inspection of foundations.

Verification of cable routes.

Inspection of cable tracks.

10: Construction 121

 Box 7: Construction Lessons Learned

The construction of a solar PV power plant is a relatively straightforward process. However, there are common mistakes that EPC contractors
can easily avoid with correct planning and training procedures. Examples of such mistakes are itemised below.

PV Module Installation

Common issues during installation of modules include:

Inadequate number of clamps used, or incorrect positioning resulting in reduced module load-bearing capacity.
Modified or wrong type of clamp used as a result of inadequate spacing between modules, compromising integrity of the fixing and
leading to invalidation of warranty.
Module clamp bolts initially hand tightened and then tightened to the correct torque after a period of delay. There is a risk that strong
winds can blow the modules off the structure if the time lag between assembly and tightening is too long. Tightening of bolts should
occur shortly after assembly.
Over-tightening of clamp bolts with power tools leading to deformation of clamp and damage to corrosion-resistant coatings.
Damaged or scratched modules due to poor installation technique. The front and rear surface of modules should not come into
contact with support structures.

Mounting Structure

Common issues in relation to the construction of the mounting structures include:

Dissimilar metals not isolated from one another leading to material incompatibility issues in the form of galvanic corrosion. Isolation
solutions such as neoprene pads can be used.
Deformation of mounting structure during piling process, compromising galvanisation or structure.
Piles installed out of position, leading to piles and steel sections being forced or bent out of alignment in order to line up with
framingsections.

Civil Works

Common issues in relation to the construction of the mounting structures include:

Poor dust suppression leading to excessive accumulation of dirt on modules.
Missing or delayed perimeter fencing leading to animal or human intrusion. A fence should be installed prior to construction
commencing.
Drains becoming blocked with silt during earth works.
Inadequate surface water run-off management during construction, leading to delays caused by flooded and waterlogged sites.
Exceeding load-bearing capacity of exiting public tracks, causing damage.
Lack of levelling works after installation.

Equipment Enclosures / Housings

The integrity of the controlled environment within equipment enclosures/housings can be compromised if not installed correctly. Examples of
common issues include:
Unused glands not sealed or replaced with dummies.
Unsealed cable conduits.
Damaged or missing gaskets on entrance doors.
Unsealed cable trenches leading into inverter housings.
Water ingress due to any/all of the above, leading to a humid atmosphere causing corrosion damage to electrical components.

Environmental Monitoring

Incorrect positioning of the environmental monitoring equipment can lead to inaccuracies during performance assessment. The most common
reasons for these inaccuracies include:
Pyranometers not positioned at the same tilt angle as the modules.
Pyranometers subject to shading, causing reporting of elevated performance ratio (PR) calculations.

(continued)

122 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Box 7: Construction Lessons Learned (continued)

Cable Management

The most common issues in relation to cable management include:

Cables crossing over sharp edges of mounting structures without suitable padding.
Insufficient labelling of cable ends.
Long unsupported spans due to an insufficient number of cable ties.
Cable bending radius too tight.
Inadequate cable burial depths.
Inadequate conduit cable protection.

Signage

Basic information requirements which are often omitted include:

General health and safety information including emergency contact numbers.
Lack of warning labels on electrical components.
Lack of warning labels on perimeter fence.
Support structure identification labelling.

Spare Parts
The permanent storage area for spare components is often not available when such components are delivered to the site, leading to
damage from poor temporary storage conditions.

10: Construction 123

 Construction Phase Checklist

Provided below is a checklist of basic required procedures in

addition to a list of recommended actions. It is intended to assist
solar PV power plant developers during the construction phase
of a PV project.

Required

Contract, fully signed and reviewed by technical advisor

covering all interfaces.

Design documentation completed.

Detailed programme of works completed.

Quality plan completed.

Health and safety plan completed.

Monthly reporting in place.

All consenting, permitting and financing requirements

inplace.

Commissioning and testing plan agreed to by all parties,

detailing requirements and any tests needing witnesses
orsign-off.

Recommended

Interface matrix drawn up.

Deliverables schedule prepared for all documentation.

Weekly look-ahead programme in place.

Risk register detailing all potential risks and any mitigation

measures in place.

Environmental plan completed.

Monthly report structure completed.

Matrix detailing the requirements and due dates prepared.

124 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Operation and Maintenance 11
11.1 OPERATION AND MAINTENANCE (O&M)
OVERVIEW
An operation and maintenance
Compared to other power generating technologies, solar PV
(O&M) contract is crucial for the
power plants have low maintenance and servicing requirements.
successful performance of the
However, proper maintenance of a PV plant is essential to
PV plant during its operating life. maximise both energy yield and the plants useful life. Optimal
operations must strike a balance between maximising production
and minimising cost.

The presence of an operation and maintenance (O&M) contract

is crucial to define the parameters for the operation and
maintenance of a project during its life. If an O&M contractor is
being employed to undertake these tasks, it is important that all
requirements relating to preventative and corrective maintenance,
performance monitoring and reporting are clearly stated in the
contract along with the frequency with which these activities
need to be conducted. This allows contractor performance to be
measured and if necessary challenged.

It is normal for an O&M contractor to guarantee plant

performance during the contract term. Typically this is achieved
through the presence of an availability- or performance-ratio
warranty covering the entire plant. In the event of the contractor
not honouring its obligations, resulting in the plant performing
below the guaranteed value, the owner would be eligible to claim
for compensation to cover lost revenues.

The basic requirements for drafting an O&M contract for a Solar

PV power plant are set out in a checklist at the end of the chapter.

11.2 O&M CONTRACTS

It is common practice on solar PV projects that O&M is carried

out by a principal contractor, who is responsible for all aspects of
O&M, including any of the works performed by subcontractors
that may be engaged to deliver specialist services, such as inverter
servicing, ground-keeping, security or module cleaning.

11: Operation and Maintenance 125

An O&M contract is required between the project 11.3.1 MODULE CLEANING
company and the O&M provider that details the legal
Module cleaning is a simple but important task. It can
and technical aspects of the O&M provision. More
produce significant and immediate benefits in terms of
information on O&M contracts is provided in Section
energy yield.
11.7, with typical O&M terms outlined in Annex 2.
The frequency of module cleaning will depend on local
Maintenance can be broken down as follows:
site conditions and the time of year. As the level of module
Scheduled maintenance: Planned in advance and aimed soiling is site-specific, the duration between cleans will
at fault prevention, as well as ensuring that the plant is vary significantly between sites. The frequency to clean
operated at its optimum level. modules will be dictated by factors such as site and
surrounding area ground covering (dusty and arid sites
Unscheduled maintenance: Carried out in response to
will result in more soiling) and local rainfall patterns
failures.
(drier areas will result in more soiling).
Suitably thorough and regularly scheduled maintenance
Figure 24 illustrates the cleaning of modules in a large
should minimise the requirement for unscheduled
tracking installation (water is seen being sprayed on the
maintenance although, inevitably, some unforeseen
module surface).
failures will still occur. A robust and well-planned
approach to both scheduled and unscheduled
Other, lower-tech methods of cleaning include the use
maintenance is therefore important.
of a brush trolley, shown in Figure 25, and use of a dust
broom, shown in Figure 26.
11.3 SCHEDULED/PREVENTATIVE MAINTENANCE

Appropriate scheduling and frequency of preventative

maintenance is dictated by a number of factors. These
include the technology selected, environmental conditions
of the site, warranty terms and seasonal variances.
Scheduled maintenance is generally carried out at
intervals planned in accordance with the manufacturers
Figure 24: Module Cleaning Using Crane
recommendations, and as required by equipment
warranties. Scheduled maintenance that requires plant
shutdown should be conducted where possible during non-
peak production periods, such as early morning or evening.

Although scheduled maintenance will both maximise

production and prolong the life of the plant, it does
represent a cost to the project both in terms of expenses
incurred and lost revenue due to reduced power generation.
Therefore, the aim should be to seek the optimum balance
between the cost of scheduled maintenance and increased
yield over the life of the system.

Specific scheduled maintenance tasks are covered in the

following sections.
Image courtesy of a+f GmbH

126 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

When scheduling module cleaning, consideration should Dust carried from deserts by wind that may also
be given to the following: appear following rain.

Environmental and human factors (for instance, Dust caused by vehicular traffic.
autumn fall debris and soiling from local agricultural
Site accessibility based upon weather predictions.
and industrial activities).
Availability of water and cleaning materials.52
Weather patterns: cleaning during rainy periods is less
likely to be required. If the system efficiency is found to be below the expected
level, then the cleanliness of the modules should be
checked and cleaning conducted as necessary.

Figure 25: Module Cleaning Using Brush Trolley The optimum frequency of module cleaning can be
determined by assessing the costs and benefits of
conducting the procedure. The benefit of cleaning should
be seen in an improved system performance ratio (PR)
due to the lower soiling loss and resultant increase in
revenue. A cost estimate to clean the PV modules should
be obtained from the O&M contractor and compared
with the potential increase in revenue. The agreed O&M
contract should detail an agreed number of cleans per
annum and their frequency. It should also outline the
labour rate or unit price at which the owner may request
an additional plant-wide clean of modules to allow this
cost-benefit analysis to be conducted.
Image courtesy of First Solar

11.3.2 MODULE CONNECTION INTEGRITY

Checking module connection integrity is important for

Figure 26 : Module Cleaning Using Dust Broom
systems that do not incorporate monitoring at the module
string level. This is more likely for plants utilising central
inverter technology. In such cases, faults within each
string of modules may be difficult to detect given that the
current within each string is not being monitored and
continuously compared to other strings.

If string level monitoring is not used, then the O&M

contractor should check the connections between modules
within each string periodically, at least on an annual basis.

Image courtesy of First Solar

52 Water in the amount of about 1.6 l/m2 of module surface may be required for
each module clean, dependent on the method adopted.

11: Operation and Maintenance 127

11.3.3 JUNCTION OR STRING COMBINER BOX Cleaning/replacing cooling fan filters.

All junction boxes or string combiner boxes should Removal of dust from electronic components.
be checked periodically for water ingress, dirt or dust
Tightening of any loose connections.
accumulation and integrity of the connections within
the boxes. Loose connections could affect the overall Any additional analysis and diagnostics recommended
performance of the PV plant. Any accumulation of water, by the manufacturer.
dirt or dust could cause corrosion or short circuit within
11.3.6 STRUCTURAL INTEGRITY
the junction box.
The module mounting assembly, cable conduits and any
Where string level monitoring is not used, the O&M other structures built for the solar PV power plant should
contractor should conduct periodic checks, at least on an be checked periodically for mechanical integrity and signs
annual basis, of the integrity of the fuses in the junction of corrosion. This will include an inspection of support
boxes, combiner boxes and, in some cases, the module structure foundations for evidence of erosion from water
connection box. run-off.

11.3.4 HOT SPOTS 11.3.7 TRACKER SERVICING

Potential faults across the PV plant can often be detected Similarly, tracking systems also require maintenance
through thermography. This technique helps identify checks. These checks will be outlined in the manufacturers
weak and loose connections in junction boxes and documentation and defined within the warranty
inverter connections, which is a common problem in hot conditions. In general, the checks will include inspection
climates where large variations between day and night for wear and tear on the moving parts, servicing of the
temperatures can cause contacts to loosen. Thermography motors or actuators, checks on the integrity of the control
may also detect hot spots within inverter components and and power cables, servicing of the gearboxes and ensuring
on modules that are not performing as expected. that the levels of lubricating fluids are appropriate.

A trained specialist should conduct thermography using a The alignment and positioning of the tracking system
thermographic camera at least on an annual basis. should also be checked to ensure that it is functioning
optimally. Sensors and controllers should be checked
11.3.5 INVERTER SERVICING
periodically for calibration and alignment.
Generally, inverter faults are the most common cause
of system downtime in PV power plants. Therefore, the 11.3.8 BALANCE OF PLANT
scheduled maintenance of inverters should be treated as a The remaining systems within a solar PV power plant,
centrally important part of the O&M strategy. including the monitoring and security systems, auxiliary
power supplies, and communication systems, should be
The maintenance requirements of inverters vary with
checked and serviced regularly. Communications systems
size, type and manufacturer. The specific requirements
within and externally connected to the PV plant should be
of any particular inverter should be confirmed by the
checked for signal strength and connection.
manufacturer and used as the basis for planning the
maintenance schedule. 11.3.9 VEGETATION CONTROL

Regular preventative maintenance for an inverter should, Vegetation control and grounds keeping are important
as a minimum, include: scheduled tasks for solar PV power plants. Vegetation
(for example, long grass, trees or shrubs) has the potential
Visual inspections.

128 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

to shade the modules and reduce performance. Prudent The contractual aspects of unscheduled O&M are
grounds keeping can also reduce the risk of soiling on the described in more detail below.
modules from leaves, pollen or dust.
11.5 SPARE PARTS
11.4 UNSCHEDULED MAINTENANCE
In order to facilitate a rapid response in the event of
Unscheduled maintenance is carried out in response to equipment failure, a suitably stocked spare parts inventory
failures. As such, the key parameters when considering is essential. Because spare parts cost money, their purchase
unscheduled maintenance are diagnosis, speed of response should be justified by the benefit they bring in reducing
and repair time. Although the shortest possible response plant downtime and avoiding revenue loss. The optimum
is preferable for increasing energy yield, this should be spare parts strategy will depend on the size of the plant,
balanced against the likelihood of increased contractual local availability of replacement parts and the potential for
costs of achieving shorter response times. sharing critical equipment across a number of plants under
common ownership. In general, adequate supplies of the
The agreed response times should be clearly stated within following essential components should be held:
the O&M contract and will depend on the site location
Mounting structure pieces.
and whether it is manned. Depending on the type of fault,
an indicative response time may be within 48 hours, with Junction/combiner boxes.
liquidated damages payable by the contractor if this limit
Fuses.
is exceeded. The presence of an availability guarantee
within the O&M contract will also provide motivation for DC and AC cabling components.
the contractor to provide an efficient and speedy repair Communications equipment.
in the event of equipment failure and resulting plant
Modules (in case of module damage).
downtime.
Spare inverters (if string inverters are being used)
For a well-designed and well-constructed plant, a large or components according to manufacturers
proportion of unscheduled maintenance issues may be recommendations in the case of central inverters.
related to inverter faults. Depending on the nature of the
Spare motors, actuators and sensors where tracking
fault, it may be possible to rectify the failure remotely.
systems are used.
This option is clearly preferable, if possible.

It is important that spares stock levels are maintained.

Other common unscheduled maintenance requirements
Therefore, when the O&M contractor uses components
include:
from the spares inventory, the contractor should be
Tightening cable connections that have loosened. responsible for replenishing the stocks as soon as is
Replacing blown fuses. feasible. This arrangement will reduce the time gap
between the identification of the fault and replacement of
Repairing lightning damage.
the non-operational component. This can be of particular
Repairing equipment damaged by intruders or during importance for remote locations where poor accessibility
module cleaning. or adverse weather conditions can delay the delivery of
components to the site. Consultation with manufacturers
Rectifying SCADA faults.
to detail the spare parts inventory, based upon estimated
Repairing mounting structure faults. component lifetimes and failure rates, is recommended.
Rectifying tracking system faults.

11: Operation and Maintenance 129

11.6 PERFORMANCE MONITORING, EVALUATION the contract, irrespective of its duration, in the event of
AND OPTIMISATION contractor default, underperformance or insolvency.
To optimise system performance, there is a need to ensure
11.7.1 PURPOSE OF AN O&M CONTRACT
that the plant components function efficiently throughout
the lifetime of the plant. Continuous monitoring of PV The purpose of an O&M contract is to optimise the
systems is essential to maximise the availability and yield performance of the plant within established cost
of the system. parameters. To do this effectively, the contract must be
suitably detailed and comprehensive. In particular, the
Section 7.7 describes monitoring systems for PV plants. A O&M contract should clearly set out:
SCADA system is able to monitor the real-time efficiency
Services to be carried out by, and obligations of, the
of the PV system and continuously compare it with the
contractor.
theoretical efficiency to assess if the system is operating
optimally. This information can be used by the O&M Frequency of the services.
contractor to establish the general condition of the system
Obligations of the owner.
and schedule urgent repair or maintenance activities such
as cleaning. Standards, legislation and guidelines with which the
contractor must comply.
11.7 O&M CONTRACTS FOR SOLAR PV PLANTS Payment structure.
This section describes the key issues with O&M contracts Performance guarantees and operational targets.
for solar PV power plants. For reference, the typical terms
Methodologies for calculating plant availability and/or
commonly seen in O&M contracts are included in Annex
performance ratio.
3: O&M Term Sheet.
Methodologies for calculating liquidated damages/
It is common for the PV plant O&M to be carried out by bonus payments in the event of plant under- or over-
specialist contractors. The contractor will be responsible performance.
for the O&M of the whole plant, its subcomponents
Terms and conditions.
and also the work of any subcontractors. In addition
to operating the plant and maintaining all equipment, Legal aspects.
the O&M contractor may also be responsible for the
Insurance requirements and responsibilities.
provision of plant security and grounds keeping.
These issues are discussed in the following sections.
The duration of O&M contracts will vary on a project-
by-project basis. Some plant owners (typically investment 11.7.2 CONTRACTOR SERVICES AND OBLIGATIONS
funds) like the cost surety and predictability that a lengthy
The O&M contract should list the services to be
contract term can bring. As such, contract durations in
performed by the contractor. This list should be site- and
excess of 20 years, covering the anticipated project lifetime
equipment-specific, and include the following:
are often seen. For other owners, a shorter duration,
such as one to five years, may be more desirable because Plant monitoring requirements.
it allows owners to take advantage of falling market
Scheduled maintenance requirements.
costs and negotiate more favourable terms when their
current contract expires. In all cases, termination events Unscheduled maintenance requirements.
should be clearly defined to allow the owner to terminate Agreed targets and/or guarantees (for example,
response time or system availability figure)

130 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Reporting requirements (including performance, track whether the agreed timetable is being met. As well as
environmental, health and safety, and labour relations ensuring that all equipment is being serviced in line with
reporting). manufacturers guidelines, this also allows for contractor
performance to be measured.
While the O&M contractors primary role is to maintain
the plant, ensuring that it and all subcomponents are 11.7.3 OBLIGATIONS ON THE OWNER
functioning and able to export electrical energy to the
In an O&M contract, the obligations of the owner/
grid, the contractor should also be contractually obliged
developer are generally limited to:
to optimise plant performance. Additionally, it should be
stipulated that all maintenance tasks should be performed Granting the O&M contractor access to the system
in such a way that their impact on the productivity of the and all the associated land and access points.
system is minimised. In particular, the contract should Obtaining all approvals, licences and permits necessary
state that preventative maintenance tasks that require the for the legal operation of the plant.
removal of equipment from service should be kept to a
Providing the O&M contractor with all relevant
minimum and performed during low irradiation hours.
documents and information, such as those detailed
The O&M contract will typically define the terms by above, that are necessary for the operational
which the contractor is to: management of the plant.

Provide, at intervals, a visual check of the system 11.7.4 STANDARDS, LEGISLATION AND GUIDELINES
components for visible damage and defects.
This section of the contract outlines the various conditions
Provide, at intervals, a functional test of the system with which the O&M contractor must comply while
components. carrying out the O&M of the plant. These conditions
Ensure that the required maintenance will be should be drawn from the following documentation:
conducted on all components of the system. As a Building or construction permits.
minimum, these activities should be in line with
Planning consents and licences.
manufacturer recommendations and the conditions of
the equipment warranties. Grid connection statement, the grid connection
agreement and power purchase agreement.
Provide appropriate cleaning of the modules and the
removal of snow (site-specific). Operating manuals for system components.

Make sure that the natural environment of the system Applicable legislation.
is maintained to avoid shading and aid maintenance
Local engineering practices (unless the documents and
activities.
conditions listed above require a higher standard).
Replace defective system components and system
components whose failure is deemed imminent. 11.7.5 PAYMENT

Provide daily (typically during business hours) remote The cost and remuneration of the O&M contract are
monitoring of the performance of the PV plant to generally broken down into:
identify when performance drops below set trigger Fixed remuneration and payment dates.
levels.
Other services remuneration and expenditure
A schedule of preventative maintenance activities should reimbursement.
be prepared and appended to the O&M contract to easily

11: Operation and Maintenance 131

Fixed remuneration outlines the payment for the basic greater than the guaranteed value. If the plant operates
services that are to be provided by the contractor under below this value, the contractor will be liable to pay
the O&M contract. This section should include the compensation in the form of liquidated damages to the
following: owner. Damages should be set at a level that is a genuine
estimate of the loss or damage that the owner will suffer in
Costusually a fixed price per kWp installed.
the event of plant under-performance.
Payment structure (monthly or quarterly, generally
inarrears). 11.7.7 LEGAL

Payment indexation over the duration of the contract. The contract will have a section outlining the governing
law and jurisdiction of the O&M contract. The governing
Remuneration for other services includes payment for any law is normally the law of the country in which the
services beyond the scope of the contract. This should project is located. A legal succession or a transfer of rights
include: condition is required for the developer to reserve the right
Method for determining level of other services carried to assign the O&M contract to a third party.
out.
It is also recommended that every contract have a non-
Agreed rates for conducting these services. disclosure agreement. This agreement between the O&M
Agreed method for approving additional expenses or contractor and the developer will outline the information
services with the owner. that is to be treated as confidential, as well as that
information which can be disclosed to third parties.
Any required spare parts and other components not
covered by individual warranties or held in the owners 11.7.8 INSURANCE
inventory.
The contract should have a section outlining the insurance
11.7.6 WARRANTIES/PERFORMANCE GUARANTEES responsibilities of the contractor for the O&M activities.
This insurance should cover damage to the plant, as well
The contract should include a plant-wide performance
as provide cover for employees conducting maintenance.
guarantee to be calculated on a regular basis. On large-
scale solar PV power plants this typically takes the form It is normal for the O&M contractor to arrange and pay
of an availability or performance ratio (PR) warranty. An for the full site insurance.
availability warranty provides a measure of plant uptime
and how successful the contractor is in keeping the plant 11.7.9 TERM OF AGREEMENT
functional and capable of exporting electrical energy
Every O&M contract needs to have a section that outlines
to the grid. A PR warranty provides a measure of plant
when the contract shall become effective and the duration
efficiency at converting solar irradiation into electrical
of the contract from the effective date. This section should
energy. While a PR warranty may be preferable because it
also include provisions to renew or extend the contract
incentivizes the contractor to optimise plant performance
upon conclusion of the originally agreed term.
rather than just ensure its operational readiness, some
third-party O&M providers are reluctant to provide such It is also recommended that this section include the
a warranty on systems they did not design or construct. circumstances in which either the maintenance contractor
or the developer would be entitled to terminate the
A PR guarantee is an industry standard and is considered
contract.
a pre-requisite to a suitable long-term O&M strategy.
The guarantee makes it the responsibility of the O&M
contractor to ensure that the plant achieves a PR level

132 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

11.7.10 RESPONSE TIME to a fault. If such guarantees are sufficiently strong, the
need for explicit response times within a contract may be
The guaranteed response time of a maintenance contractor
reduced.
is an important component of the O&M contract. As soon
as notification of a fault occurs, it is the responsibility of
11.7.11 SELECTING A CONTRACTOR
the contractor to go to the site within a set period of time.
The faster the response time, the swifter the issues can When choosing an O&M contractor, the capability of the
be diagnosed and the system returned to full production. company should be thoroughly examined. In particular,
The distance between the PV plant and the contractors the following aspects should be considered:
premises has a direct correlation with the duration of the Familiarity of the contractor with the site and
guaranteed response time. technology.

The time of year coupled with the accessibility to the site Location of the contractors premises.
can have a bearing on the actual response time for any Number and competency of staff.
unscheduled maintenance event. Restrictions to access
Experience and track record.
roads at certain times of the year can delay response.
Adverse conditions can also reduce the size of the payload Financial strength and ability to honour warranty
that can be transported to the site, thus extending the obligations.
duration of the maintenance work.
The intention should be to select a suitably experienced
The presence of a strong PR guarantee also ensures that contractor able to meet the requirements of the contract
the contractor is motivated to undertake an efficient for the duration of the project.
response and restore system performance when alerted

11: Operation and Maintenance 133

 O&M Contracting Checklist

The checklist below sets out the basic requirements for the
drafting of a strong solar PV power plant O&M contract.

Legal and technical advisors engaged to advise on form

ofcontract.

The O&M contractor is suitably experienced on a similar

scale plant and familiar with the technology.

Performance guarantees included to allow owner to claim

liquidated damages (LDs) in the event of low availability
orPR.

Payments are made to the contractor in arrears to allow for

deduction of any LDs over the corresponding period.

LDs sized to be a genuine pre-estimate of losses likely to be

incurred.

Rules for spare parts management are clearly defined.

Contractor is responsible for replenishing stock and
ensuring original level is maintained.

Rules for subcontracting clearly defined to ensure principal

contractor is fully responsible for all sub-contractor works.

The O&M contract requires the contractor to maintain all

equipment in line with manufacturer guidelines (to ensure
that all equipment warranties remain valid).

Preventative maintenance regime defined in contract is

comprehensive, helping to minimize the need for corrective
maintenance.

134 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Policies and Support Mechanisms for Solar PV 12
12.1 POLICIES AND SUPPORT MECHANISMS OVERVIEW

Developers should consider While the cost per kWh of solar PV power has come down
how policy provisions are dramatically and continues to fall, in most cases direct or indirect
financial incentives are still required in order to increase the
designed and what specific
commercial attractiveness of solar PV projects so that there is
support mechanisms for solar PV
sufficient investment in new projects to meet national goals for
projects are available to bridge renewable energy production.
the gap between the costs of
Price-based incentives such as FiTs remain among the most
conventional power sources and
common instruments to boost the commercial case for solar.
solar PV.
In place of price-based incentives, quantity-based mechanisms
use binding policy provisions to establish quotas that require
power utilities to purchase a specific percentage of their power
from a renewable source. Quotas translate into investment
opportunities for developers, who are able to supply utilities with
the required electricity generated by renewable energy facilities.
Complementing the arsenal of policy instruments available to
governments are fiscal incentivese.g., investment or production
tax credits, and direct public support schemes, such as soft
loans or an equity participation by a public entity. Policies that
guarantee and facilitate connection and access of PV plants to
the grid are also important for the viability of PV projects by
removing common barriers.

Developers should consider how policy provisions are designed

and what specific support mechanisms for solar PV projects are
available to bridge the gap between the costs of conventional
power sources and solar PV power.

It is important for developers to understand the conditions under

which they may access support schemes and the requirements
they must fulfil to do so within a given market. The process a
developer must follow to meet the requirements for obtaining
support differ from country to country, reflecting the priorities
of the regulatory regime and the structure of the power market.
Levels, types, and duration of support that developers can access
will vary. Incentives are generally offered at the national level.

12: Policies and Support Mechanisms for Solar PV 135

Sometimes state and provincial authorities offer additional renewable energy sources, or technology-specific where
incentives. different solar projects compete with each other. A
tender of a specific site is a call for bids for the rights
The critical mandate for any developer is to: to develop a PV project on a site pre-selected by the
Learn what support mechanisms are available. government or utility.

Determine whether the project will be able to meet Market-based Instruments: These accompany quantity-
the criteria for securing support and understand the based mechanisms, such as renewable portfolio
historical reliability of the delivery of these supports. standards or quota obligations. Certificates associated
with renewable energy production are traded on a
Factor all this information into the business plan and
market and result in additional revenue for renewable
demonstrate to investors that the discounted cash flows
energy producers. Examples include tradable
are appealing.
renewable certificates or carbon certificates.
Follow through meeting the requirements to secure the
Tax Incentives: Tax incentives can be used by a
support available.
project owner to offset capital costs or profits, or to
reduce specific taxes such as VAT or import duties.
Refer also to the checklist at the end of the chapter for key
Accelerated depreciation is another option intended
considerations in accessing support mechanisms in any
to attenuate the high capital costs of renewable energy
market.
projects.

12.2 POLICIES AND SUPPORT MECHANISMS Soft Loans: Soft loansi.e. those with a below-market
OVERVIEW interest rate or extended tenorare sometimes made
12.2.1 TYPES OF SUPPORT MECHANISMS available, especially in the early stage of technology
deployment by government-backed institutions.
This sub-section provides an overview of the six common
types of renewable energy support mechanisms used Capital Grants: Capital grants from public sources
by governments, including both mechanisms that help reduce the upfront financing burden and can stimulate
developers to improve cash flow and those that offer interest in a new market. This option was used in the
opportunities to competitively enter the market: early stages of PV development. As the technology has
matured, it is not necessary and now very rare.
Feed-in Tariffs (FiTs): A FiT is a predetermined price
for every unit of electricity generated by a solar PV The above provide direct and indirect financial supports
power plant, paid through a long-term contract. designed to cover the incremental costs of solar PV
Typically, projects must meet certain eligibility criteria power against conventional power supply options. The
and receive authorization from a government body to relative merits and conditions of different energy policy
receive the FiT (and usually preferential grid access as frameworks vary widely between countries and regions.
well); smaller projects may automatically receive the Hence, it is crucial for developers to consider the effect
FiT up to a certain maximum level of MWs (maximum on the commercial viability of their project, including
capacity). the private investment risk of policies within a specific
Reverse Auctions and Tenders: Reverse auctions political and economic context.53 The International
for independent power producers (IPPs) involve the
competitive procurement of energy, whether at a 53 For more on this topic, see IEA, IRENA, the US National Laboratories (including
specific site or without specifying where a new plant Lawrence Berkeley, Sandia, and the National Renewable Energy Laboratory)
and the World Banks Energy Management Assistance Program. See also,
must be built. Renewable energy auctions can be IRENAs Evaluating Policies in Support of the Deployment of Renewable
Power (2012), and the World Banks Renewable Energy Financial Instrument
technology-neutral where solar competes with other Tool (REFINe).

136 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Renewable Energy Agency and the International Energy making such projects easier to finance. However, in
Agency host a joint database that provides relatively accepting a FiT, the developer takes on policy and credit
comprehensive and up-to-date information on the types risk, and must assess whether the off-taker is required,
of support mechanisms and corresponding incentives willing, and able to provide support at the contracted level
available for renewable energy projects in different over the projects life; this is especially critical if the FiT is
countries.54 substantially higher than prevailing power prices. The key
issues and risks related to FiTs are summarized below.
12.3 SOLAR PV SUPPORT MECHANISMS
12.3.1.1 The Level of FiT and Sustainability of
This sub-section discusses in detail the six types of support Support
mechanisms that may be available to solar PV power plant
It is wise to assess the sustainability of the FiT
developers. It explains the nature of support provided by
specifically, whether the mechanism is sustainable through
each mechanism, as well its advantages and disadvantages.
which the incremental cost of a PV project is recovered.
Key concerns for the developer are also discussed for each
For example, if the regulatory framework specifies that
mechanism.
the incremental costs will be covered through a specific
component in the energy bill of the consumers, this may
12.3.1 FEED-IN TARIFFS (FiTs)
be viewed as sustainable and lower risk. However, if
FiTs offer a fixed, typically long-term (1025 years) the incremental cost is covered by sources that are not
electricity sales price, often combined with preferential certain, the sustainability of the FiT may be viewed with
grid access and other favourable off-take terms, such some caution. Countries that adopted FiTs early on, when
as priority dispatch. This fixed price, typically linked to the PV costs were still high, had to absorb substantial
inflation, is intended to cover the actual cost of renewable incremental costs, burdening either the end-user tariffs
energy generation (typically higher than conventional or the governments fiscal situation. As PV costs declined
power sources) and allow a sufficient margin to enable substantially (especially over the period 20102014),
investors to make a return commensurate with the risk these countries were under pressure to revise the FiTs.
profile of the project. Box 8 provides an example of FiTs Revision for future projects is rational, especially if
in Thailand for both rooftop and utility-scale solar PV PV costs decline, but retroactive revision (affecting PV
projects. plants already built) is not rational and has affected
developers who have incurred high costs. For example,
FiTs played a critical role in stimulating the early growth
due to the fiscal strain under which governments found
of solar PV energy, especially in Europe and Japan, and
themselves after the financial crisis in 2008, Spain in
remain a widespread tool to support PV projects in many
2010 retroactively altered their FiT, impacting contracted
markets. FiTs protect a PV project from competition with
projects. Spain was followed by Bulgaria in 2012 and
other sources of generation and from price fluctuations on
Greece in 2014.56 In late 2013, several Australian state
the wholesale electricity market, stabilizing revenues.55
governments proposed retroactive cuts to FiT schemes,
although these were withdrawn due to unpopular public
FiTs are generally attractive to lenders because they are
reactions.
secure and stable. The long-term revenues for a project
with a FiT can be modelled with a high degree of certainty,

54 http://www.iea.org/policiesandmeasures/renewableenergy/
55 There are many publications analyzing feed-in tariffs. Among them, see 56 Legislation: Royal Decree 1565/2010 adopted on 19 November 2010 by the
Feed-in Tariffs as a Policy Instrument for Promoting Renewable Energy and Council of Ministers. For more details, see the European Photovoltaic Industry
Green Economies in Developing Countries, United Nations Environment Associations Retrospective Measures at the National Level and their impact
Programme (UNEP), 2012. on the photovoltaic sector. 10 December 2013. Available at www.epia.org.

12: Policies and Support Mechanisms for Solar PV 137

Even for technologies where costs havent dropped as fiscal cost they represent. Also, some FiTs are envisioned
dramatically over the past decade, most governments will to be updated periodically (every 23 years); in this case,
today put in place cost containment measures for FiT changes should affect future contracts and will not be
schemes to cap the overall fiscal costs. In particular, tariff retroactive. Retroactive changes to FiT schemes are rare,
levels may decrease on a sliding scale over years or the but they can be extremely detrimental to the projects
support for new sites will be capped in terms of the total affected. It is more common for policies to be abruptly

Box 8: Thailands Feed-in Tariff (FiT) Policies

The solar market in Thailand is currently driven by two key Feed-in Tariff (FiT) policies designed to help the country meet its ambitious
targets for solar development by 2021.a
1. Rooftop solar projects policy.b
2. Ground-mounted solar projects policy.

The rooftop FiT policy provides an incentive for developing rooftop and community ground-mounted solar systems, and is capped at an
installed capacity of 200 MW. The FiT rate is scaled dependent on the project size. The FiT rates below are granted to projects that were
fully commissioned before December 2013 and are valid for a 25-year operational period.

FiT Rates for Rooftop Solar Projects in Thailand

FiT Rate (USD/kWh)
Project Size (kW) FiT Rate (Baht/kWh)
(1 Thai Bhat = 0.0310 USD)
010 6.96 0.22
10250 6.55 0.20
2501000 6.16 0.19

The ground-mounted FiT policy provides an incentive for up to 800 MW of projects to be commissioned by the end of 2014. The FiT rate
varies throughout the lifetime of a developed project and is presented below.

FiT Rates for Ground-mounted Solar Projects in Thailand

FiT Rate (USD/kWh)
Year FiT Rate (Baht/kWh)
(1 Thai Bhat = 0.0310 USD)
13 9.75 0.30
410 6.50 0.20
1125 4.50 0.14

For both the rooftop and ground-mounted FiT policies, the FiT rate can be considered relatively generous and project IRRs should be
attractive to investors. The Thai government has periodically revised the FiT rates and current information on incentives for projects
developed beyond 2014 can be found online.c

a http://thaisolarpvroadmap.org/wordpress/?p=940

b http://www.eppo.go.th/nepc/kpc/kpc-145.html

c http://www.iea.org/policiesandmeasures/renewableenergy/?country=Thailand

138 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

cancelled or altered, impacting un-contracted projects extraordinarily rapid increase in solar development in the
under development more than those already in operation. North may lead to strained grid capacity, while in Japan,
utilities concerned about maintaining power reliability
There are several types of existing insurances for project (and the price of solar PV power) have demonstrated
risks. The risk of retroactive changes in the regulatory reluctance to embrace high volumes of solar energy and
support framework has surfaced in recent years and have delayed grid connection.
attempts have been made to provide insurance coevrage.
For example, the World Bank Group may cover such 12.3.1.3 Off-take Agreement
risks through Partial Risk Guarantees. In many cases, a The tariff with its feed-in provisions is secured through a
lender will require appointing an insurance advisor who PPA between the solar producer and the off-taker, which
can ensure the adequacy of insurance for a solar power can be the utility, the system operator, or the specially-
project. created institution. As with any power sale agreement, the
main risk factor to consider is the creditworthiness of the
12.3.1.2 FiT Limitations
off-taker. For example, Kazakhstan has adopted relatively
Commensurate with the determination of the tariff, the attractive FiTs for renewable technologies, but private
regulator or utility usually set a maximum level of capacity projects cannot get commercial financing because the
(MW) or energy (GWh) eligible for the FiT. For distributed bankability of the PPA with the off-taker Cost Settlement
generation, i.e., small-scale energy generated close to its Center (CSC) is a key concern. The CSC is a newly-created
point of use, the volume of power and number of projects entity with no assets, credit history or established cash
eligible for the tariff may be open-ended (although, given flows. More information on the PPA is provided in Section
the experience of several European countries overwhelmed 13.
by an unexpected response to such incentives, setting a
cap in line with public budget priorities seems wise). For 12.3.1.4 Currency Exchange Risk
utility-scale projects (the focus of this guide), it is more Considering that in many countries a substantial
common for the FiT to set limits, i.e., 200 MW of capacity percentage of the investment requirement is in hard
in a given technology category, whereby the threshold currency while the revenue is in the local currency, there
is often a function of the national target a government may be substantial risk associated with foreign exchange
intends to reach for its renewable energy production. fluctuations. Some countries have recognized this and
have indexed the FiT to a hard currency. This reduces the
In addition to transparently-announced capacity limits,
risk exposure of the developer. If such protection is not
there may also be de-facto limits on securing the FiT. If
provided, the developer needs to assess the risk exposure
particular permits are required prior to FiT application,
and take appropriate precautions.
bottlenecks may develop around key approval points,
for example authorizations from local or national 12.3.1.5 Sustainability of the Power Sector
planning authorities, energy regulators or environmental
It is always advisable for a developer to consider the
authorities. Developers should also consider the available
financial sustainability of the tariff in the context of the
transmission capacity to carry power from their project
local power market, including the forecasted demand for
site/the areas suited for solar PV project development to
power, the current and projected levelized cost of energy
the areas that require power.57 In Chile, for example, an
from the existing power mix, the marginal cost of power
supply (present and future), the ability of the utility to
pass on the costs to consumers, and public willingness to
57 While solar is less site-specific than other renewables like hydro or wind,
utility-scale ground-mounted projects require large plots of un-shaded land, pay for renewable energy. When the FiT is out of line with
ideally of relatively low value. These areas are more likely to be in remote areas
than in large urban areas where demand for power is growing, particularly in other trends in the market or significant price distortions
rapidly urbanizing developing countries.

12: Policies and Support Mechanisms for Solar PV 139

exist, extra caution is merited, and it is wise to consider Tender awards will be allocated to developers who have
the project economics in the event of policy changes. the lowest tariff bid, starting with the lowest electricity
sales price bid. For example:
12.3.2 REVERSE AUCTIONS AND TENDERS
Solar PV Project A: 25 MW @ $0.10/kWh
The alternative to a policymaker or off-taker pre-
Solar PV Project B: 15 MW @ $0.12/kWh
determining the FiT to be offered for a solar PVproject is
to conduct a reverse auction (or tender) for new capacity. Solar PV Project C: 10 MW @ $0.14/kWh
Developers bidding for the opportunity to construct the
project determine the level of the FiT. In this way, the price The developer with the lowest electricity production costs
that the off-taker pays the developer that wins the bid is will be best positioned to bid the lowest tariff, and most
competitively determined. Sometimes reverse auctions likely to be awarded a contract. If the cap set in the tender
allow for developers to propose project sites, while other was for 40 MWs, for example, only Projects A and B
times a tender will be announced with sites pre-selected would be awarded a contract.
by the off-taker. Conducting such a process requires
The details of tender award allocation will differ between
specialized expertise and can incur higher transaction
countries and potentially even within rounds of the same
costs, but ultimately may be more cost-effective, as
country program. Awards may be made until the quota
competition can drive the tariff to the lowest level
for that technology has been fully allocated, or sometimes
necessary to support projects.
only partially completed tenders take place.
12.3.2.1 Procedure
When a tendered bid has been confirmed, the project
A reverse auction starts with an announcement from a
developer and the off-taker will sign a PPA based on the
government or utility that has responsibility for this task. The
proposed tariff over the predefined period of time.
government or utility then invites developers to bid the tariff
they are willing to receive to provide solar energy. The tender 12.3.2.2 Risks and Issues
will seek an announced number of MW and may be limited
The main risk for a developer under a tender scheme
to (or sub-divided by) projects of a certain size (i.e., above
is that s/he will not win the bid. Preparing a bid for a
or below 10MW), in certain regions (i.e., near an area with
large-scale PV installation can be costly. Developers must
need for more capacity), and for certain technology (solar
be willing to expend considerable time and resources
PV rather than CSP). In order to participate in a tender,
in costing projects and potentially optioning land
a developer must qualify by fulfilling certain criteria to
lease rights without any certainty that their bid will be
demonstrate the ability to finance and implement the project.
successful. These costs are non-refundable if the project
As a rule, qualification requirements include providing
fails to win the tender. Developers must therefore balance
financial information about the developers business and
their expenditure against the risk that their bid will be
relevant technical experience. Additional criteria aimed at
unsuccessful. Tender issuers can promote an efficient
maximizing the beneficial impact of the investment on the
market by being transparent and sharing information on
local economy can also play a role in the process, e.g., the
the number of qualified bidders, expectations of whether
nationality of key staff, employees, relationships with local
the tender will be oversubscribed, and information on
suppliers/content providers, etc. 58
future tenders. A second major risk is that competition
becomes so great that margins are eroded to unsustainable
levels, driving developers with lesser resources out of the
market.
58 For a good example of renewable energy tenders generally, and the inclusion
of local content requirements more specifically, in the context of South Africa,
see: Eberhard, A., 2013. Feed-In Tariffs or Auctions, Procuring Renewable Energy
Supply in South Africa, Viewpoint, The World Bank, Washington, D.C.

140 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Box 9: South Africaa REIPPP

South Africa has in place policies and initiatives that are aimed at accelerating growth in the solar PV power sector, including REIPPP and
the Eskom Standard Offer.

REIPPP

South Africas REIPPP is split into different bidding rounds. The allocated resources are shown below for Rounds 1 to 3. The decreasing trend
in average PV bid price and the increase in local content is indicative of the policys success in incentivizing solar development, although it
remains to be seen whether developers can truly sustain operation at such low prices.a

Under Round 1 of the REIPPP, construction has commenced on 18 large-scale solar PV projects with a combined installed capacity of 630
MW. In Round 2, a total of nine projects with a combined capacity of 417 MW were awarded preferred bidder status and are currently under
construction. An additional six projects with a capacity of 435 MW have achieved preferred bidder status in Round 3 and are approaching
financial close. In 2013, nearly all of South Africas solar PV power market consisted of large ground-mounted systems and it is expected
that this market will remain strong.

However, historically there have been a number of delays with the bidding process. In September 2012, the Department of Energy
announced delays to Round 3 of the REIPPP due mainly to difficulty in progressing the first round projects to financial close. The need to
focus on financial closure for projects selected during the first two bidding rounds had a knock-on effect.b

In 2013, the government delayed an announcement on a final list of preferred bidders in the third round of its national renewable energy
programme. This was finally completed in November 2013, more than 12 mosnths later than expected.

The Department of Energy is now in the process of finalising the financial close protocol for the Round 3 preferred bidders.

Allocated Resources for Rounds 1 to 3c

Parameter Bid Window 1 Bid Window 2 Bid Window 3d
Date 5 November 2012 9 May 2013 4 November 2013
MW allocated for Bid Window 632 417 435
Average Bid Price/kWh $0.26 $0.15 $0.097
Local Content 28.5% 47.5% 53.8%

a http://www.esi-africa.com/sas-third-round-bidding-sees-prices-drop-dramatically/

b http://irp2.files.wordpress.com/2011/10/pvsouthafricamap-2013-04-17.pdf

c www.esi-africa.com/sas-third-round-bidding-sees-prices-drop-dramatically/

d www.ey.com/UK/en/Industries/Cleantech/Renewable-Energy-Country-Attractiveness-Index---country-focus---South-Africa

Competitive bidding processes have been successfully While involving higher preparation costs for the entity
implemented recently in several emerging markets, running the tender, and higher risks for the parties
including India and South Africa. In South Africa, bidding, the competitive bidding process does offer
the Renewable Energy Independent Power Producer a greater level of assurance that projects are being
Procurement (REIPPP) scheme (see Box 9) is a bidding incentivized at the minimum levels required (revealed
process in which proponents bid to be awarded a power prices). As such, it can be a good strategy for larger
sale agreement until a certain MW quota (announced for markets that have established interest and are looking to
each round) is reached. Similarly, India operated a reverse scale up installed capacity.
auction to award successful proponents a PPA as part of
the Jawaharlal Nehru National Solar Mission (JNNSM). Box 10 summarises key elements of Indias regulatory
support framework, which has evolved over time and used
multiple options, including FiTs, tenders and renewable

12: Policies and Support Mechanisms for Solar PV 141

 Box 10: Indias Evolving Regulatory Support Mechanisms

India has implemented a number of different regulatory support schemes including FiTs, renewable obligations and reverse auctions.

The National Action Plan on Climate Change (NAPCC) of India sets Renewable Purchase Obligation (RPO) targets for each state in India.
This provides a minimum level of the total power that electricity distribution companies need to purchase from renewable energy sources.
Although this is not directly related to solar projects, it requires the states to incentivise the development of renewable energy projects.
Among the states, Gujarat has offered the highest FiT, at 12 Rupees ($0.20), resulting in an installed capacity of 916.4 MW as of 31 March
2014. Below is a short summary of the FiT rates by state awarded by individual state-based solar energy policies.a

Feed-in Tariffs of Selected States

State Feed-in Tariff (in Rupees)
Rajasthan Flat rate of 6.45/kWh (USD 0.106) for 25 years.
Flat rate of 12/kWh (USD 0.198) for first 12years and 3/kWh (USD
Gujarat
0.049) from 13 to 25 years.b
Bihar Flat rate of 9.85/kWh (USD 0.163) for 25 years.
Minimum FiT awarded was 7.40/kWh (USD 0.122) and highest
Punjab
was 8.70/kWh (USD 0.144).
Minimum FiT awarded was 5.5/kWh (USD 0.091) and highest
Karnataka
was 8.0/kWh (USD 0.132).
Tamil Nadu 6.48/kWh (USD 0.107) with an escalation of 5 percent every year.
Andhra Pradesh Fixed 6.49/kWh (USD 0.107).
Minimum FiT awarded was 6.47/kWh (USD 0.107) and highest
Madhya Pradesh
was 6.97/kWh (USD 0.115).

The national Jawaharlal Nehru National Solar Mission (JNNSM),c also referred to as the National Solar Mission, was launched in January 2010
to specifically incentivise the development of solar power as part of the broader national renewable energy targets. JNNSM set a target of
20GW of grid-connected solar power by 2022. It aims to reduce the cost of solar energy-to-grid parity by supporting large-scale deployment
(through a reverse auction scheme in Phases 1 and 2), long-term policy, research and development and domestic production. The develop-
ment road map of JNNSM is divided into three phases, presented below.

JNNSM Road Map and Solar PV Targets

Grid connected, including
Timeline Status as of March 2014
Roof-Top Plan
Phase 1 (20102013) 1,100MW 67% of the projects commissioned.
Phase 2 (20132017) 10,000MW 750 MW projects selected after bidding.
Phase 3 (20172022) 20,000MW Details not yet announced.

In the first phase, selected developers were awarded a PPA with the Central Electricity Regulatory Commission (CERC) through a reverse
auction scheme. The average tariff was approximately US$0.15/kWh, representing a 43 percent decrease on the benchmark tariff approved
by the CERC. It is noted that only 67 percent of Phase 1 projects were commissioned as of March 2014. There are a variety of reasons for this,
including delays to financial close, land acquisition and grid connection issues. Reverse auction was used in Phase 2d through which 10,000
MW are expected to be awarded.

a http://mnre.gov.in/file-manager/UserFiles/guidelines_sbd_tariff_gridconnected_res/salient_features_for_State-wise_solar_policies.pdf

b http://geda.gujarat.gov.in/policy_files/Solar%20Power%20policy%202009.pdf

c Ministry of New and Renewable Energy, Towards Building SOLAR INDIA Available at: http://mnre.gov.in/pdf/mission-document-JNNSM.pdf

d http://seci.gov.in/content/innerpage/phase-ii--batch-i-log-of-documents-releasednotifications-issued.php

142 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

purchase obligations. Also, it shows that in India (as in the electricity itself and be traded in the form of renewable
many other countries), the regulatory support framework energy credits (RECs), also called green certificates. (More
of the federal/central government may be supplemented by on RECs is provided in sub-section 12.3.3.1).
initiatives of the state/local governments.
A quota system instructs electricity utility companies
12.3.3 MARKET BASED INSTRUMENTS to comply with quota obligations, but may or may not
specify how the quota is to be achieved. The utility
Market-based instruments accompany quantity-based
may build renewable generation capacity itself or it
mechanisms such as renewable portfolio standards or
may procure it through a tender process. The utility
quota obligations. They involve the creation of a credit/
also may negotiate power prices with IPPs independent
certificate, which can be traded in the open market.
of government, or off-take renewable energy at a FiT
Renewable energy credits and carbon credits are the most
determined by government.
common of such certificates.

By design, quotas only provide an incentive to produce

Market-based mechanisms are appealing because they
renewable energy up to the level stipulated. For a
promise greater cost-efficiency in reaching a renewables
developer, the major risk of operating in response to a
target set by a government, by providing regulated
renewable quota is that the project may not be approved
entities with greater flexibility to achieve compliance with
before the quota cap is exceeded. This is especially an
renewable energy obligations. However, as discussed in
issue if there is limited transparency on future quotas
the two examples below of renewable energy credits and
or incentives. For this reason, markets with smaller
carbon credits, they can also be complex and demand a
quotas can struggle to attract interest from private sector
fairly high level of sophistication both from the regulator
developers and investors, as the business opportunity is
and covered entities. They are best suited for markets
not sufficiently large to justify the transaction costs of
where the power sector is already highly competitive and
entering the market. In such instances, quotas may need to
there is sufficient capacity amongst market players to
be combined with other incentive programs and reforms.
implement the system.
12.3.3.1 Renewable Energy Credits
Quotas require electricity suppliers (typically utilities) to
derive a specific percentage of the electricity they sell from Market-based instruments encourage investment in
renewable sources. Quotas are different from government renewable energy by setting a specified quota of renewable
targets/political goals because they have legal force and energy to be developed by the market players, usually
some form of penalty for non-compliance. For example, if utilities or generators. These utilities or generators
an electricity supplier sells 100 GWh of electricity per year can meet their quota obligations either by developing
and 10 percent of that must be generated by renewable renewable energy projects themselves or by purchasing
sources, the supplier would either need to generate or from other market players the proofs for specific
purchase 10 GWh from renewable facilities. amounts of renewable energy electricity, which are
commonly referred to as Renewable Energy Credits
In some instances, a quota will require that the supplier (RECs), Renewable Obligation Certificates (ROCs)
purchase renewable power from within a certain and Tradable Green Certificates (TGCs). As with other
jurisdiction, for example within regional or national mechanisms, the quota is typically split into technology
borders. Other quotas require only that the supplier types. If there is no technology type split, the market will
purchase a certain proportion of renewable electricity, seek the cheapest form of renewable energy first, which is
which can be sourced from anywhere within reach of the the purpose of an efficient market, yet may not fulfil public
transmission network. Yet another model for quotas is one policy goals to support a range of technologies.
that allows for the renewable energy to be stripped from

12: Policies and Support Mechanisms for Solar PV 143

Under a REC program, a government announces a signal provided by RECs, which in many markets are only
quota, or series of quotas (annual or multi-annual), for traded in significant volume a few years in advance. A
renewable energy supply, which electricity suppliers are developer seeking to hedge price risk by selling their RECs
obligated to meet over a given time period. Unlike a forward over the lifetime of the power project will often
traditional quota or renewable portfolio standard though, have to accept a price well below the current forward
the renewable aspect of electricity can be stripped price, if they are able to find a buyer at all.
from the energy itself. In other words, a PV power plant
will be awarded RECs based on its generated energy The REC model has been popular in the United States
or installed capacity. These RECs can be traded in the (with multiple state and voluntary schemes in existence)
market separately from the electricity that is generated by and the United Kingdom (with varying degrees of success).
the same facility. Depending on the rules of each specific Several emerging markets, including India, Romania, and
market, the covered entity does not necessarily have to El Salvador have introduced REC trading schemes as well.
deliver the energy generated by the renewable plant into
Market-based mechanisms represent significantly more
the central market. Sometimes the electricity can be sold
risk for developers than other incentives. In small markets,
to a third-party (which may be physically closer or have
if there is insufficient active trading (low liquidity), then
better transmission networks) at prevailing power prices,
REC markets are especially prone to experience boom
while the renewable aspect embodied in the REC can be
and bust cycles. Banks are likely to highly (even entirely)
sold separately on a dedicated exchange. This allows for
discount the potential value of RECs unless they are sold
greater flexibility in developing solar PV power plants
forward to a highly credit-worthy off-taker, effectively
where the resource or transmission capacity may be
making them pure upside for the developer, i.e. a
best, rather than requiring them to be developed within
potential benefit to a project that cannot be borrowed
the physical reach of the covered entities transmission
against in the same manner as power revenue. If REC
networks, which ultimately are expected to reduce overall
markets evolve and deepen, they may become bankable,
compliance costs.
but it is wise for developers to approach RECs with some
By setting a quota that increases over time, the demand caution.
for certificates should increase, stimulating the market to
12.3.3.2 Carbon Credits
deliver more certificates through investment in renewable
energy. If the market is short (i.e., demand is greater Unlike the other incentives described here, carbon credits
than supply), prices will go up, and if the market is long are an indirect form of support for solar energy, primarily
(i.e., there are more certificates than needed), prices will designed to reduce greenhouse gas (GHG) emissions.
go down. In theory, the fluctuating price of RECs provides Electricity generated by renewable facilities replaces
a real-time calibration of market needs and guides new electricity generated by energy sources, which utilize fossil
investment prospects. fuels and release CO2 emissions. The renewable facility is
awarded carbon credits for the avoided CO2 emissions.
In order to enforce a REC scheme, penalties are required
to ensure compliance by the off-taking utilities. Penalties Carbon markets seek to price GHG emissions and
need to be considerably higher than the expected value incentivize their reduction. However, in the markets that
of certificates in order to motivate quota compliance. If have (or had) a robust carbon price, namely the EU-ETS
penalties are set too low, they will become a price ceiling. and the state of California, that price has recently been
insufficient to act as the main driver for solar energy
In practice, it has proven challenging in many situations projects because the price for carbon is driven by the
to match a solar PV project developers need for long-term lowest-cost technology (typically energy efficiency or fuel-
revenue certainty with the short-term demand and price switching).

144 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

The Kyoto Protocols Clean Development Mechanism Developers should undertake a thorough review of the
did briefly provide an incentive for renewable energy local tax laws with qualified professionals to ensure
(although very little solar)59 in developing countries, but they take advantage of all potential tax efficiencies. Tax
for various reasons, this incentive effectively no longer benefits are often difficult to find, and it can be challenging
exists, and it has not yet been replaced by national carbon to determine the criteria for eligibility and to understand
markets. However, numerous countries, provinces, and the related administrative procedures. Appropriate time
cities are considering or beginning implementation of to consider local tax issues should always be built into the
carbon pricing policies, including South Africa, Chile, project timeline.
and China (see the World Banks Partnership for Market
Readiness for examples).60 In addition to carbon credit The largest market with tax credit support for solar PV
trading, carbon taxes or reductions in fossil fuel subsidies projects is the United States. The U.S. investment tax
are also under consideration to incentivize energy credit provides owners of a project with a 30 percent tax
efficiency and lower emissions.61 Thus, while the price credit on the capital expenditure of a solar PV project
of carbon in most countries is absent or too low to be to offset against their tax liabilities. The United States
the main driver for solar energy at present, there is a also offers wind developers a production tax credit based
possibility that carbon pricing will again become more on the energy generated rather than the initial capital
relevant in the future.62 investment. In order to take advantage of either tax credit,
the project owner must have a substantial or tradable
12.3.4 TAX INCENTIVES tax burden. While this model has been quite successful
at incentivizing solar power (both distributed and utility-
Tax incentives are a common tool to promote solar and
scale) in the United States, it is generally recognized that
other renewable energy, including tax credits for capital
the form of the incentive generates significant transaction
expenditure, reduced Value-Added Tax (VAT), reduced
costs and is attractive only to investors with a large
corporate income tax, import/customs and excise tax
tax burden. Further, it would be of limited relevance
holidays, accelerated depreciation, and (though not
in economies where collection of corporate income tax
exactly a tax incentive) relaxed rules on foreign exchange
remains low. A similar outcome could be achieved with a
borrowing and foreign investment.63 Due to the differing
capital grant (see Section 12.3.5 below on soft loans).
tax bases and nature of taxes levied, the tax incentives,
which have been successful in developed economies
Other tax policies that reduce the amount of tax paid
such as the United States, may or may not be relevant to
on equipment or reduce the rate of tax on corporate
emerging markets.
profit have been utilized in emerging markets, including
Thailand and India. An important consideration is import
duties. Some countries have elected to eliminate them
59 As of February 2015, 369 out of 7,598 registered CDM projects were solar, less
or reduce them to reduce the cost of renewables. Other
than 5%. See www.cdmpipeline.org. countries may have very high import duties whereby the
60 The Partnership for Market Readiness (PMR), for which the World Banks
acts as Secretariat, trustee and delivery partner supports countries to motivation for the latter can be the protection of local
prepare and implement climate change mitigation policiesincluding carbon
pricing instruments in order to scale up GHG mitigation. It also serves as a
industries (or the promotion of their emergence).
platformwhere countries share lessons learned and work together to shape
the future of cost-effective GHG mitigation. See www.thepmr.org for more
information. As with all renewable energy policies, there is a risk of
61 For more analysis on this, see Moarif, S and Rastogi, N. Market-Based Climate policy expiration, which can be mitigated by closely
Mitigation Policies in Emerging Economies, Center for Climate and Energy
Solutions (C2ES). December 2012. following policy discussions and considering project
62 See 2014 State and Trends of Carbon Pricing, The World Bank (Publication economics should the incentive be phased out.
88284). May 2014
63 For an overview of numerous countries tax incentives, see for example Taxes
and incentives for renewable energy, by KPMG (2014). Available at kpmg.com/
energytax.

12: Policies and Support Mechanisms for Solar PV 145

12.3.5 SOFT LOANS of financing entities and it is not possible to engage the
broader commercial banking sector.66 Soft loans can play
Loans with low interest rates and other concessionary
a role in building interest in solar technology in new
terms, such as extended tenors or risk sharing, have
markets, and offer few risks to developers, other than
also been deployed by governments to support solar PV
constraints that are typically presented clearly in policy
development. Such loans are typically available only
statements and loan documents.
to a small volume of projects and only through certain
designated financial intermediaries, typically a national,
12.3.6 CAPITAL GRANT SCHEMES
regional or multilateral development bank. To obtain
concessionary loans, certain criteria must be fulfilled, Capital grants awarded through a tender or
potentially constricting the type of technology employed, application process have also helped support solar PV
or the contractors to be employed in the development of a projects, especially in the early stages of PV power
project. Soft loans are often part of a broader renewable commercialization when its costs were very high, the
energy policy platform that also includes other incentives, awareness of its characteristics limited, and the perceived
such as a guaranteed Feed-in Tariff (FiT). risks high. Grants can be awarded based on a fixed
incentive amount per MW or as a percentage of capital
National governments that play a strong role in cost. Capital grant schemes are often introduced by
the banking sector often take a more policy-driven governments on a temporary basis or for limited capacity,
perspective, seeing subsidized loans as a direct method of with the intention of providing market traction for a
achieving renewable energy targets. For example, China specific technology that is unproven or considered high-
has stimulated renewable energy development through risk.
state-mandated concessional loans.64 Depending on how
soft loans are implemented, they can be a relatively cost- Capital grants present few risks for developers or
efficient means of achieving a policy goal.65 financers. However, as with other incentives offered on
a short-term basis, grants can create a boom and bust
Soft loans are generally offered only at early stages of cycle, with prices for services and equipment bid up in
a technologys introduction into a new market. Unlike the period prior to the incentive expiration, only to crash
a policy-based incentive, which is applied uniformly when it is no longer available and the number of profitable
across all projects meeting certain criteria, soft loans project opportunities is reduced. To mitigate these business
require individual, project-specific due diligence to avoid cycle risks, developers can consider longer-term contracts
financing projects that will not be well-implemented or with equipment suppliers and service providers and seek
operated as efficiently as possible. As such, soft loans have out opportunities (perhaps in niche markets) where solar
relatively high transaction costs. The use of soft loans to projects are viable with no support.
support broader market development is typically achieved
through financial intermediaries at a large scale, as the The 1603 federal cash grant program introduced in
use of a wide-reaching banking instrument is able to bring the United States in 2009 is one example of a large-scale
down transaction costs associated with individual loans. capital grant program for solar PV projects, introduced
This approach becomes difficult in particular markets in recognition that the tax-based incentives typically
where loan provision is limited to a single or small set provided were ineffective during a recessionary period.67

64 For more, see B. Shen et al., Chinas Approaches to Financing Sustainable 66 The Green Climate Funds stated intention to work directly with the private
Development: Policies, Practices, and Issues, Lawrence Berkeley National Lab sector raises the interesting possibility of combining multilateral donor funding
paper LBNL-5579E. June 2012. with local implementation, but is still in early stages.
65 For one assessment of policies in India, see G. Shrimali, et al., Solving Indias 67 1603 Treasury Program, section of the Solar Energy Industry Associations
Renewable Energy Financing Challenge: Which Federal Policies can be Most website, available online at http://www.seia.org/policy/finance-tax/1603-
Effective?, Climate Policy Initiative. March 2014. treasury-program

146 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

India has also provided capital grants at both the national here, as the purpose of this guide is to focus on aspects of
and state level over many years. project development unique to solar PV power plants.69

12.4 FURTHER GUIDANCE TO DEVELOPERS ON Given how rapidly solar PV power costs have dropped in
REGULATORY SUPPORT FRAMEWORKS the last five years (20092014), it is especially important
for solar energy developers to consider the possibility
Developers need to be aware of secondary regulations
that solar energy incentives will evolve as well, either
that may influence project transaction costs. For example,
through anticipated policy expirations and adjustments or
a lengthy waiting period for generation permits could
unexpected policy changes. By the end of 2014, most FiTs
significantly delay the start-up of the new plant, and
in Europe were reduced substantially from the peak levels
thus create financial losses for the developer. Another
observed in 2008, reflecting the reduction in capital cost
example is power quality regulations, which may include
of a solar PV power installation. Interestingly, thus far,
frequency regulation (defined by a grid code) that
it is governments in developed economies (such as Spain,
applies to all electricity producers. While power quality
Italy, and Greece) that have made retroactive changes to
requirements are not solar specific, they can make it more
pre-existing support mechanisms in order to reduce levels
difficult for sources of intermittent power, such as solar,
of support provided to existing solar PV projects. While
to meet criteria for grid integration.68 Further examples
retroactive changes of this kind are not common (and, in
of regulations that are secondary to solar, including
the case of the countries cited above, were influenced by
important aspects of the grid connection process, are
the strained financial situation of a number of European
covered in Section 8 on Permits and Licenses.
countries in the global recession after 2008), it is wise to
Renewable energy policies need to be considered in the consider the risk that policies may change.
context of the broader power market in which the project
If the share of renewable energy in a market coming
is being developed. Is the market fully de-regulated with
from variable output power plants is high or expected
generation, transmission, and distribution each operated
to become high (over 510 percent), it is important to
independently? Or is the project being developed for a
understand not only the support policies for solar power
vertically-integrated, state-owned utility through a Public
per se, but also the policies that have an impact on the
Private Partnership?
overall power system, including the grid development,
In markets where a state-owned entity controls generation, investment in storage and flexible power generation,
the major opportunity for a developer is likely to be in and demand-side management. In other words, support
response to a public tender or a Public Private Partnership, mechanisms for solar PV power cannot be considered
such as a Build-Operate-Transfer (BOT) or a Build- in isolation because integration of solar and other types
Own-Operate (BOO) with a PPA. The structure of the of renewables into a given power system and electricity
power market defines the types of project development market creates additional challenges that may affect
opportunities available. However, while having this a developer, if the level of penetration of intermittent
broader context on the structure of the relevant power renewable power grows to high levels.
market is critical, this topic will not be discussed further

69 While not the focus of this publication, electricity market structure and reform
68 In many emerging markets, where maintaining the power supply is the is a priority topic for the World Bank Group. World Banks Energy Sector
predominate concern and the penetration of intermittent renewables such Management Assistance Program (ESMAP) and the World Bank Energy
as solar is low, power quality and variable energy integration may not be top Practice Group have many publications and activities covering this important
concerns. However, as the share of renewables grows in global markets, power issue from the perspective of the government/regulator. Many have a specific
quality may become more of a priority. country or regional focus.

12: Policies and Support Mechanisms for Solar PV 147

 Leveraging Financial Incentives Checklist

The checklist below identifies key considerations for developers

seeking to access support mechanisms for solar PV projects in
any market.

Review structure of electricity market, dynamics of energy

pricing, and potential for near-term changes in market
prices.

Review energy generation regulations, including specific

policies for renewables and evidence of application in
current market.

Identify specific support mechanisms for utility-scale

solar PV power projects, evidence of their utilization and
government adherence to terms in the current market,
as well as project qualification criteria, application cut-off
dates, and other potential risks.

Understand the grid regulatory regime, including integra-

tion of regulatory and approval processes for new genera-
tion projects using renewables, specifically solar PV power
projects.

Develop a PPA model based on best understanding of viable

public incentives.

Mitigate policy risks by considering project economics

without incentives, which may include hedging on market-
based instruments and/or political risk insurance.

148 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Power Purchase Agreements 13
13.1 POWER PURCHASE AGREEMENT OVERVIEW

The PPA is the most important Solar PV power plant projects generate revenue by selling power.
agreement for financing a How power is sold to the end users or an intermediary depends
mainly on the power sector structure (vertically integrated or
solar PV project. All other
deregulated) and the regulatory framework that governs PV
related agreementsthe loan
projects. Power can be sold either through a long-term PPA or
agreement, grid connection through participation in an open market (merchant plant).
agreement, and EPC contract
At the writing of this guide (early 2015), there were only a few
should be aligned with the PPA.
merchant solar projects in the world; the vast majority of PV
power plants are developed using longer-term PPAs. Merchant
PV power plants are rare because PV costs typically result
in power that is more expensive than other energy sources
and excessively risky to financiers. Also, regulations (support
mechanisms) promoting PV technology and other renewables
are usually based on some form of long-term PPA. However, as
PV costs continue to decline, merchant PV plants may become
more common. For example, in 2014, IFC and other partners
financed the first merchant solar PV project in Chile, the La
Huayca II project, with no subsidy and no PPA. Merchant plants,
depending on how the power sector is structured, may be able to
sell both energy and capacity (the latter in a day-ahead market).
Including La Huayca, as of early 2015, IFC had financed four
large-scale PV projects in Chile, of which three were merchant
projects and only one had a PPA. These projects are described
briefly in Table 19.

This section looks at the key elements of the typical PPA for
large-scale PV projects, and describes how small solar power
plants (distributed generation) can utilize similar contractual
arrangements.

PPAs are legally binding agreements between a power seller

and power purchaser (off-taker). The party that is selling the
power is, in most cases, the owner of the solar PV plant. The
purchaser of power could be a power company, power trading
company, or individual consumer, depending on the structure

13: Power Purchase Agreements 149

 Table 19: IFC-financed, Utility-scale PV Plants in Chile
Project Name Description
The Project consists of the construction and operation of an approximately 100 MW solar PV power plant
Sun Edison Cap in the municipality of Copiapo in Chiles Atacama Region. Energy produced from the project will be injected
PPA (2014) into the Chilean Central Interconnected System. The project has a 20-year Contract for Differences with
Compania Minera Del Pacifico S.A., an iron ore mining company.
The Project is to expand the existing 1.4 MW La Huayca I PV solar power plant, to a total capacity of 30.5
La Huayca II
MW. The plant is being developed by Selray Energias Ltda. and would be the first large-scale merchant solar
Merchant (2014)
project in Chiles SING (Northern Interconnected Electricity) system.
The Project consists of the construction and operation of a 141 MW-ac solar photovoltaic power plant in the
Luz del Norte
municipality of Copiapo in Chiles Atacama Region. Energy produced from the project will be injected into
Merchant (2014)
the Chilean Central Interconnected System at prevailing spot market prices.
The Project consists of the construction and operation of an approximately 50 MW solar PV power plant in
Sun Edison MER
the municipality of Copiapo in Chiles Atacama Region. Energy produced from the project is to be injected
Merchant (2015)
into the Chilean Central Interconnected System at prevailing spot market prices.

of the power market. For renewables (including PV) that and creating greater certainty around the revenue stream.
are supported by regulatory mechanisms (see Section 12), Off-taker credit-worthiness is a factor whose importance
the most common option is to sell all electricity generated cannot be overemphasized. It is one of the most critical
to a power company (vertically integrated, transmission elements considered when developing a PPA and the focus
or distribution), often wholly or partially government- of thorough due diligence.
owned. However, a solar PV plant may also sell electricity
to a trading company or a consumer, provided that this PPAs may be standardized and non-negotiable (except
is allowed by market rules. In the latter case, wheeling possibly for the tariff); standardized to provide an
charges may have to be paid by one of the two parties of initial framework for negotiations; or open to bilateral
the PPA. negotiations. PPAs for solar PV projects have historically
been shaped by the supporting regulatory framework, as
The PPA is the most important agreement for financing described in Section 12. For example, it has been common
a solar PV project. All other related agreementsthe for the tariff, off-take terms (take or pay), and contract
loan agreement, grid connection agreement, and EPC duration to be pre-defined by a national or regional policy
contractshould be aligned with the PPA. The PPA should (see sub-section 12.3).
define all of the commercial terms affecting the sale of
electricity between the two parties, including the date the While the classic PPA model of a utility off-taker paying
project will begin commercial operation, the schedule a fixed price to the producer is likely to remain common
for delivery of electricity, the tariff, the volume of energy in the coming years, developers and financers should stay
expected to be delivered, payment terms, penalties for abreast of market developments, and consider both the
underperformance on either side, and provisions for risks and opportunities introduced by changes in pricing
termination. and business models. Box 11, at the end of this section,
considers the recent rise in opportunities for distributed
As such, the PPA is the principal agreement that defines generation projects, sometimes referred to as Commercial
the revenue stream, and thus the credit quality of an PPAs.
electricity-generating project, and is therefore a key
instrument of project financing. A robust PPA helps de-risk Refer also to the checklist at the end of this section for
projects by clearly specifying rights and responsibilities, basic requirements specific to PPAs for solar PV projects.

150 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

The remainder of this section describes the key elements electricity from PV power approaches that of conventional
of a typical PPA. There are numerous sources that readers power tariffs (often referred to as grid parity), tariff
can consult for more in-depth coverage,70 as well as several setting may change. For example, in South Africa, the
brief overviews on the topic.71 average solar PV tariff fell 68 percent, from over US$0.34/
kWh to $0.10/kWh between Round I auctions conducted
13.2 MAIN POWER PURCHASE AGREEMENT over 20112012 and Round 3 auctions in 2013.72 Tariffs
TERMS around $0.10/kWh were also reached in other locations
The PPA sets out the terms of the power purchase, around the world, such as India and Brazil, and fell still
including the tariff, the volume of power to be sold, lower to $0.06/kWh in an auction in Dubai.73
and the duration of the agreement. Some of the key
Also, as the solar PV market evolves, PPAs are likely to
commercial, legal, and technical terms to be considered
introduce increasing levels of exposure to market risk. For
while reviewing a PPA are described below. Where
example, in 2013, IFC financed the Aura Solar Project in
appropriate, these descriptions include comments on the
Mexico, a 38.6 MWp greenfield PV project with a 20-
potential risks associated with the key terms.
year PPA in which the off-taker pays a tariff determined
13.2.1 TARIFF OF ENERGY SOLD by marginal cost of power supply, with no subsidy. Aura
is the largest PV solar power plant to be built to date in
The methodology for calculating the electricity price
Mexico.
will depend on the market within which the project is
operating and the prevailing regulatory regime. Under The PPA also specifies the expected installed capacity of
a FiT regime, a flat-fixed rate price could be offered for the solar PV project (in MW) and the predicted annual
the life of the project. Alternatively, the tariff may be set electricity production in MWh. The installed capacity of
through a reverse auction, negotiated or based on power a solar PV plant is simply the maximum power of the PV
market parameters (e.g., marginal cost of power supply). plant, as specified and warranted by the PV plant supplier.

The tariff may be adjusted based on an index that reflects The predicted annual energy production is estimated
annual inflation and foreign exchange fluctuations. If based on the projects installed capacity, solar irradiation,
indexation is not included, the developer should assess and the resulting capacity factor or performance ratio,
the risks associated with inflation and changes in foreign as described in detail in Section 5 on Energy Yield. The
exchange rates. Long-term operating costs for solar predicted annual production should take into account
projects are very low, making inflation less of a concern seasonal variations in solar irradiation and system losses
than for other technologies, but should still be considered. to the point of metering. Also, panel degradation loss
In markets where it is difficult to obtain long-term should be taken into account reflecting how efficiency and
financing in local currency, foreign exchange rates reflect annual energy production may be reduced year-on-year
substantial risk exposure. Foreign exchange is also a over the life of the plant.
substantial risk linked to repatriation of profits.
An accurate annual production prediction gives the off-
Tariffs for solar power projects may continue to be taker comfort in knowing how much energy it will receive
determined through regulations, but as the cost of and the seller comfort knowing how much it can sell. The

70 The World Bank Group has publicly available PPA resources at http://ppp. 72 Ebehard, A., Kolker, J. and Leigland, J. South Africas Renewable Energy
worldbank.org/public-private-partnership/solar-power-energy IPP Procurement Program: Success Factors and Lessons. Public-Private
71 For example, see Understanding Power Purchase Agreements, funded by the Infrastructure Advisory Facility (PPIAF) of the World Bank. May 2014.
U.S. governments Power Africa initiative, available at no cost online at http:// 73 Upadhyay, A. Dubai Shatters Solar Price Records Worldwide Lowest Ever!
go.usa.gov/FBzH Cleantechnica Website, November 29th, 2014.

13: Power Purchase Agreements 151

level of accuracy required of this prediction is dependent years or more, which is also suited to PPAs with long
on the market in which the project operates. For small duration.
distributed solar PV installations operating under a FiT
regime, it may be acceptable to use software tools made 13.2.3 RIGHTS TO ENVIRONMENTAL CREDITS
available by the regulator. However, utility-scale projects Some regulatory frameworks may offer environmental
should include a professional independent energy yield credits (i.e., RECs) as part of an incentives package for
assessment, produced and/or verified by an experienced new solar PV projects. The developer should determine the
consultant with a track record of producing bank grade eligibility of the PV project for receiving environmental
data, and a confidence interval of at least P75, if not P90. credits and ensure the assignment of rights to any credits
linked to the project is clearly specified in the PPA. This
The projects actual energy generated will be based on
should include the term for which these rights will be
meter readings. However, the energy yield prediction gives
assigned (usually the project lifetime or duration of
both parties a reference against which any anomalies in
project eligibility), as well as provisions for the assignment
production can be checked and is sometimes used as a
of environmental credits that may potentially become
back-up to meter readings in the event of meter failure or
available in the future.
discrepancies. Thus, energy yield prediction is important
both during project planning and during operation. 13.2.4 CONDITIONS TO COMMENCEMENT

Most solar and other renewable energy, as non- Conditions to commencement or conditions
dispatchable forms of power, are sold on an obligation precedent define conditions that must be satisfied by the
to take or take or pay basis, whereby all power they developer prior to commencement of the PPA term.
generate must be accepted by the grid. If this is not the
These conditions generally include securing the required
case, then the volume of power being transacted should
project permits/approvals, the execution of an O&M
also be specified, with clarity on any penalties due should
agreement (covering civil works for land maintenance,
that volume of power not be delivered.
module and balance of system routine inspections),
13.2.2 PPA DURATION a secure grid connection, and issuance of a takeover
certificate.
The PPA specifies the expected start and termination dates
of the agreement. The duration of the PPA should be equal The conditions to commencement set out a common
to and ideally longer than the period of time required to understanding of the requirements of the project before
repay the projects lenders and to meet expected equity commissioning. If the project developer does not satisfy all
returns. In some cases, the duration will be determined by conditions, the off-taker may have the right to terminate
the regulatory support mechanism under which the solar the PPA. However, conditions to commencement often
PV project is developed; in other cases, the PPA duration define requirements for the developer that, if not met,
can be negotiated. PPAs covering a 15- to 25-year period might leave the project legally exposed. Therefore, it is in
are desirable for PV plants and are relatively common. The all parties interest for the conditions to commencement to
longer the term of the PPA, the less exposure the project be met.
has to future changes in power prices, and the more secure
its revenue stream. A sufficiently long PPA duration is 13.2.5 GRID CONNECTION AGREEMENT
especially critical for solar PV plants because the vast
The PPA will typically reference and summarise the terms
majority of costs are incurred up front and must be repaid
of the Grid Connection Agreement, often in an annex.
over the projects life. PV power plants are expected to
It is very common for grid connection to be delayed,
operate with fairly predictable degradation rates for 20
and where the off-taker or grid company is responsible,

152 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

the seller will want to clearly specify the method for Metering arrangements are usually defined in the countrys
calculating liquidated damages related to such delays. grid code or metering code and ownership of the meter
will normally reside with the grid operator or the off-
13.2.6 GRID CODE COMPLIANCE taker. The PPA should define how electricity generation
The grid code, controlled by the grid operator, specifies will be measured or calculated in the event that the meter
how a generating plant must connect to and interface is damaged or found to be inaccurate or there is a dispute
with the electricity distribution network. The PPA should over the reading. Even if the PPA or grid code does not
reference the grid code and clearly specify how compliance require a back-up meter, it is good practice to install one,
with that code is determined as a condition for commercial in the event of failure of the main meter or inaccurate
operation. There may be room to negotiate relaxation of operation. Generally, in the event of a faulty or damaged
grid code requirements for solar projects if specific code meter, output will be based on historic data or on
for renewables has not yet been adopted. If the grid code predicted energy yield values.
has not been updated to cover intermittent energy sources,
It is usually the project developers responsibility to install
such as solar, certain provisions may need to be included
meters, but it is not uncommon for the off-taker to be
in the PPA.
responsible for metering arrangements and for ownership
13.2.7 USE OF NETWORK CHARGES of the meter to pass to the grid operator or off-taker.

The owners of the electricity distribution and/or 13.2.9 PRODUCTION FORECASTING

transmission networks normally charge a fee for
The PPA may define additional responsibilities of the seller
facilitating the evacuation of electricity from the
and the buyer beyond delivering and paying for power,
generating plant and delivering it to the consumer.
such as production forecasting. Production forecasting is a
Renewable facilities may be exempt by the regulatory
future prediction of energy production from a generating
support framework. In some cases, the owner of the local
plant. Forecasting time horizons can vary from hours to
distribution network may be different than the owner
days depending on the requirements specified in the grid
of the transmission network and different fees may be
code. The grid operator uses regular updates of production
payable to each owner. The size of the solar PV plant can
forecasts from across its distribution and transmission
dictate whether fees are payable to one or both owners.
network to balance the flow of electricity across the
For example, a fee may be payable only to the distribution
network, which will require other electricity generators
network owner if the installed capacity is below a
(typically thermal plants) to reduce or increase production
specified level. If the rated capacity is above the specified
to accommodate the varying output from renewable
level, then a fee will be payable to both the transmission
sources, such as solar.
and distribution owners, recognising that the electricity
generated will not necessarily be consumed locally. The
Production forecasting becomes more necessary as the
associated costs will be specified in the grid connection
size of the renewable energy generator increases and the
agreement and referenced in the PPA.
proportion of intermittent generation on the distribution
and transmission networks increases. Consequently, it may
13.2.8 METERING ARRANGEMENTS IN COMPLIANCE
WITH GRID OPERATOR not be necessary for smaller solar PV plants to implement
production forecasting for a solar PV facility, and this
Metering arrangements are critical to ensure the project
requirement may therefore be a negotiable part of the PPA.
owner is fully compensated for electricity generated.
However, metering arrangements are often poorly defined
in PPAs, with weaknesses only brought to light when there
is a dispute.

13: Power Purchase Agreements 153

13.2.10 SCHEDULED & UNSCHEDULED OUTAGES 13.2.11 CURTAILMENT, GRID DOWNTIME & NETWORK
MAINTENANCE
Just as the PPA addresses periods when the off-taker may
be unable to accept delivery (curtailment), it should also As discussed earlier in this section, power delivery can be
address periods when the project will be unable to deliver reduced both by project outages (by the seller), as well as
energy. A scheduled outage is one that is planned and is by the grid operator (who may or may not be the same
reasonably under the control of the solar PV facilitys party as the buyer). The grid operator provides access to
owner. An example is periodic inspection of electrical the distribution and transmission network to allow for
infrastructure. Unscheduled outages are unpredictable and electricity export from the solar PV plant. This network
random events, for example an electrical fault within the requires maintenance (scheduled or unscheduled); also,
solar PV facility that forces it to shutdown suddenly. unexpected operating conditions may happen requiring
curtailment of power in-flows locally or to the grid in
As an outage will disconnect all or part of a solar PV general. In such cases, the grid operator may require
facility, the grid operator will normally require advance that the solar PV plant be disconnected from the grid
notification so it can plan accordingly. The notification temporarily.
requirements should be specified in the PPA. In turn,
these notification requirements should be reflected in the The grid operator should be obligated in the PPA to advise
projects O&M contract, as the O&M contractor will the solar PV plant operator of scheduled grid downtime,
likely be responsible for notifying the grid operator. with sufficient notice to allow the operator to plan
accordingly. The duration and frequency of downtime
The PPA may also specify the number and timing of events must be clearly specified in the PPA.
scheduled outages and this can often be negotiated. For
example, it would best suit a solar PV facility to plan Unscheduled grid downtime, also referred to as
scheduled outages at night or in the least sunny season in curtailment, is even more critical to address. The PPA
order to minimise the impact on electricity production. should specify the level of availability that the grid
operator expects to provide. The PPA should either
Depending on the size of a solar PV facility, repeated identify how to determine deemed generation or another
unscheduled outages could cause problems with regard to form of compensation/penalty if the grid operator fails to
the stability of the electrical distribution and transmission maintain the agreed level of grid availability, with a clear
network. Consequently, the PPA may detail punitive methodology for calculating the compensation due to lost
measures that will be enforced on the solar PV facility production caused by grid downtime.
should its production be unstable, and it is recommended
that the criteria that might trigger any punitive measures The PPA should outline clearly how curtailment will
are negotiated with the off-taker. be addressed. In markets with very high penetration
rates of renewable energy (e.g., Germany and some
Finally, the PPA should include a methodology to remote regional or island grids), curtailment may be due
determine the amount of energy that could have been specifically to the volume of intermittent energy. However,
delivered by the generator and that could not be accepted some amount of curtailment is to be expected as part
by the off-taker, often referred to as deemed generation. of routine operations due to grid constraints and load
The energy yield prediction, updated based on actual balancing needs. The amount of curtailment can generally
operational performance, may be used as the basis for be expected to be higher in many emerging economies
determining deemed generation. This is discussed further where transmission networks are more constrained. Also,
in sub-section 13.2.11, Curtailment, Grid Downtime & in emerging markets, it is more common for the power off-
Network Maintenance. taker to also be the grid system operator, making them the
responsible party for grid availability. If the roles of power

154 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

off-taker and grid operator are separate, then curtailment Arbitration is generally considered to be preferable
might instead be dealt with under the grid connection to going to court as it is faster, offers privacy and is
contract. It is common for PPAs to allow up to a certain typically less expensive. Further, for projects in emerging
level of curtailment for which the solar PV plant owner markets, it can be the only realistic approach to dispute
is not compensated; however, the PPA states the terms of resolution in light of overly-burdened local courts. From
payment above this level. In some cases, the solar PV plant a lenders perspective, it is preferable for arbitration
owner is getting paid for all the curtailed generation. to be conducted internationally for large projects to
ensure that the arbitration panel is neutral. For small
13.2.12 CHANGE OF LAW AND QUALIFIED CHANGE IN projects, international arbitration is unrealistic due to
LAW
the potentially high costs of dispute resolution. Different
The change in law clause protects the developer against arbitral rules may be selected, such as the World Banks
changes to applicable laws and regulations or new laws International Centre for Settlement of Investment
introduced after the PPA is executed and that have a Disputes (ICSID), the United Nations Commission on
financial impact on the project. Law refers broadly to International Trade Law (UNCITRAL) model provisions
legislationfor example, commitments and incentives for or International Chamber of Commerce (ICC) rules.
renewable energyas well as regulations and technical National/state-owned off takers are often reluctant to
guidance, such as the grid code or interconnection accept foreign jurisdiction.
procedure. The PPA should also address how any
appropriate compensation should be determined in 13.2.15 FORCE MAJEURE
response to a change of law. Force majeure events are those events that are completely
beyond the control of either party and have a material
13.2.13 ASSIGNMENT AND STEP-IN RIGHTS
impact on a project, such as wars, natural disasters, and
It is important for the PPA to contain assignment rights extreme weather events. Events of force majeure should be
empowering the project owner to assign the present/future listed in all PPAs to exclude situations over which either
rights, bank receivables, and interest from the project to party has reasonable control.
the financing institutions (both equity and debt) to serve
as security. In the event the developer runs into serious The duration for which a force majeure event can continue
problems, step-in rights facilitate a smoother transfer of prior to a party seeking termination of the PPA should also
control over a project to its creditors. The lenders will be defined. This is termed Prolonged Force Majeure, which
seek to resolve the issue and if possible, also step-out may have its own definition in a PPA. Termination due to
of the developers role. Including assignment rights in force majeure can generally occur if the event continues
the PPA improves bankability by improving the worst- for a continuous six- to 12-month period, or an aggregate
case scenario, and can improve financial terms for the period of 12 to 18 months.
developer.
It is important that neither party be defined in the PPA
13.2.14 ARBITRATION as being liable to the other party in the case of a force
majeure event. At the same time, the recognition of force
While a good PPA will help identify potential areas of
majeure does not mean that parties should not seek out
disagreement and provide clarity on how defaults can be
appropriate insurance to cover such risks.
remedied, disputes are always possible. After informal
steps like closed-door negotiation or the appointment of 13.2.16 LIMIT OF LIABILITY
an independent engineer for technical disputes, arbitration
The overall limit of liability of either party to the other
is the next step towards dispute resolution. The venue and
party will be defined in a PPA. There is no industry
rules of arbitration should be specified in the PPA.

13: Power Purchase Agreements 155

standard for limits of liability and these vary widely. Default in performance of obligations under the PPA
Limits may be an aggregate value over the full PPA term, when not cured or remedied within the specified period
limited on an annual basis or limited per event. Although including:
it is beneficial for liability not to be limited on an annual
Failure to meet conditions precedent.
basis but instead as an aggregate limit, it is more common
for an annual limit to be in place. The key risk associated Failure to meet licensing or permitting requirements.
with the limit of liability is that the limit is too low and
Failure to make payments due.
does not cover potential lost revenue or costs incurred due
to an act or omission of the other party. The suitability Reaching the limit of liability.
of a limit of liability can be determined by comparing the
This section focused on aspects of a typical PPA for
liability limit with the revenue assumptions in the financial
grid-connected utility-scale solar PV power projects.
model.
PPAs for distributed generation PV installations have
many similarities with utility-scale PV plants, and some
13.2.17 TERMINATION
important differences too. Box 11 provides information on
The contract will specify an end date, which is its natural PPAs for distributed PV systems, even though this report
termination. In addition to this, the PPA should list early does not cover such installations in a comprehensive
termination events, along with a clear methodology for manner.
determining termination payments. Termination events
generally include:

Insolvency events or similar.

156 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Box 11: Distributed Generation and Commercial PPAs

As a modular technology, solar power can easily be scaled up to meet a range of power needs. While this publication focuses on financing
and business models suited to utility-scale solar power projects, informally defined as 5 MW or larger, much of the technical guidance it
contains also applies to smaller projects (see Annex 4 on Rooftop PV Systems). As the price of solar power has fallen, there are increasingly
interesting opportunities for distributed generation of solar power in emerging economies. This is especially true in economies where the
price of power is high and/or reliability of the grid is low, and solar power can effectively compete with diesel generators and other forms of
back-up power generation.

Distributed generation refers to power generation that occurs close to the load or end user, and involves plants with typically small generat-
ing capacity located on the off-takers land or nearby. In a traditional utility model, power generation takes place at a large central plant and
is transmitted through the grid and sold by a distribution company to end-users. In contrast, distributed generation projects sell power di-
rectly to the end user and can exist independent of the grid, although sometimes power is delivered to the end user (e.g., off-taker) over the
grid, in a process known as wheeling. Depending on local regulations, wheeling may or may not require paying a fee to the grid company.

Distributed generation projects still require purchasing agreements, sometimes called Commercial PPAs, which obligate the customer to
purchase power for a period of time suitable to pay off project debt and earn a suitable return. There are a variety of business models, the
potential of which depends on the particular power market and its regulations. Commercial PPAs may govern the sale of electricity to a
range of customers, from individual residencesa to large-scale industrial facilities. However, a very large project selling to a single buyer is
more commonly referred to as captive power.b In many emerging economies, the credit worthiness of individual commercial or industrial
customers may be superior to that of the utility, and customers may be willing to pay a tariff higher than that offered by the utility to ensure
they have an adequate and high-quality supply of power.

An opportunity sometimes exists to sell excess power from distributed generation to the grid. This model of distributed generation rep-
resents over half the recent growth of solar energy in Germanyc and between a quarter and half of recent solar PV growth in the United
States.d In Germany, this growth was driven by a national feed-in tariff (FiT) for distributed solar. In the U.S., distributed solar has been largely
driven by regulations that allow net-metering.e Also referred to as behind the meter pricing, net metering allows the customer to sell elec-
tricity back to the grid, typically at the same rate as a utility tariff, and pay only for the net amount of grid power consumed.

Several distributed generation sites may collectively function similarly to a utility-scale project if they have significant exposure to the utility
alongside private buyers as a key off-taker. The terms of sale to the grid from distributed PV projects are often standardized, with a pre-
determined price and a requirement for the utility to purchase all electricity from projects under a certain installed capacity.

The amount of distributed solar power in emerging markets at present is very small, but there is significant potential for growth. While the
models that proved successful in the United States and Europe may be taken as starting points, new business models are likely to develop in
response to unique local conditions. In many emerging markets, insulation levels for solar power are high (increasing capacity factors), and
utility efficiency and reliability are lowfactors that improve the competitive position for distributed solar power. Improvements in energy
storage will drive further innovation. While still in its infancy, the potential for distributed solar power (and other distributed renewable
energy) presents interesting opportunities. Thailand, the Philippines, and Pakistan have recently introduced legislation permitting distributed
generation.

a Although this publication does not address business models for off-grid or mini-grid solar PV, this topic is addressed in IFCs publication From Gap to
Opportunity: Business Models for Scaling Up Energy Access.

b Whether an opportunity exists to serve different customer types in a specific market depends on many factors, including whether it is permitted under local
regulation.

c Trabish, Herman K. Why Germanys Solar is Distributed. Greentech Media, May 29, 2013.

d Solar Energy Industries Association (SEIA), Solar Market Insight Report 2014 Q4.

e The Investment Tax Credit (ITC), representing a 30% tax credit on allowed capital investment, also plays a key role in promoting both utility-scale and distributed
solar within the United States, but the focus here is on the specific incentive for distributed (as opposed to utility-scale) solar.

13: Power Purchase Agreements 157

 Solar-Specific Power Purchase Agreement (PPA) Checklist

The checklist below sets out some of the basic requirements that
are specific to solar PV for drafting of a PPA.

PPA terms specify the expected installed capacity of the

solar PV project (in MW) and the predicted annual electricity
production in MWh.

PPA includes take-or-pay provision, or otherwise specifies

volume of power to be transacted and penalties for failure
to deliver.

PPA term meets or exceeds the term of debt repayment.

Conditions to commencement agreed with off-taker.

Metering arrangements in place that align with national

code, including for installation and ownership.

Terms of loan agreement, grid connection agreement, EPC

contract, and O&M contract are aligned with the terms of
PPA.

Obligations for grid code compliance included in PPA.

PPA outlines clearly how curtailment will be addressed,

including how liquidated damages will be calculated.

Assignment and step-in rights established.

PPA defines limits of liabilities, early termination events, and

methods to calculate termination payments.

158 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Financing Solar PV Power Projects 14
14.1 FINANCING SOLAR PV POWER PROJECTS
OVERVIEW
This section focuses on forms of
In order to obtain financing, the developer must prepare
financing, key considerations of
comprehensive documentation of the project details so that
project financing, and the due
potential financiers are able to assess the risk of the investment.
diligence process that are unique This is particularly true of project financing, as the lender
to solar PV power projects. depends entirely on the cash flow of the project for repayment
rather than on the balance sheet of the sponsor.

A range of financing structures can be used for solar PV

development, however project finance is the most common. The
appropriate structure will be influenced by the commercial and
financial needs of investors, as well as the market and incentives
available for solar PV power projects in a particular geography.
At early stages, equity financing is used to explore and develop
a project opportunity, and later, debt is typically brought in for
project construction. In general, most financing structures will
involve two key components:

Equity from one or more investors, injected directly or via

the project developer into a special purpose vehicle (SPV or
project company).

Non- or limited-recourse debt from one or more lenders,

secured against the assets owned by the SPV.

This section provides an overview of the financing process,

focusing on aspects that are unique to solar PV projects.74
This includes forms of financing (debt versus equity), key
considerations of project finance (requirements, timing, and
structure), and the due diligence process (risks and ways to
mitigate them). Issues related to project costs and revenues, as
well as solar PV-specific aspects of the projects financial model
are discussed in Section 15.

74 Two well-known textbooks on this subject: E.R. Yescombe, Principles of Project Finance,
2nd Edition, 2002, Elsevier Academic Press; Scott Hoffman, The Law and Business of
International Project Finance, 3rd Edition, 2008. Cambridge University Press.

14: Financing Solar PV Power Projects 159

Refer to the checklist at the end of this section for the rated utility or conglomerate. It is also utilized, even for
basic steps in seeking project financing for solar PV large projects, in economies that do not have a strong
projects. tradition of off-balance-sheet financing, such as Japan.
Figure 27 illustrates corporate financing.
14.2 FORMS OF FINANCING
14.2.2 100 PERCENT EQUITY FINANCING
14.2.1 CORPORATE FINANCING
In general, debt is cheaper than equity, and thus it is
Large companies may fund solar plants on balance
more attractive to finance projects using debt financing.
sheet, providing equity themselves and obtaining debt as
However, in certain circumstances, solar PV power
part of their broader operations and corporate financing.
projects may be financed entirely with equity. If debt is
This model would be typical for self-generation (i.e., for
not available at attractive pricing or tenors, all-equity
a single users own power needs), rather than the larger
financing may be pursued, especially for smaller projects.
utility-scale projects that this guide focuses on. This type
of financing can also be an appropriate model when the For example, in Europe following the global financial
project developer is a large entity that has access to very crisis, many banks previously active in the project
low-cost financing, which might be the case for a highly- financing space were no longer lending, or were only
lending for shorter tenors than in earlier years. However,
due to strong policy incentives, renewable energy projects
still offered sufficiently high returns in comparison with
Figure 27: Corporate Financing
other investment opportunities available at the time to
make all-equity investment in solar projects attractive,
Equity
Investor/ and all-equity deals took place.
Corporate Lender
Entity
Today, in many developing countries, the local market for
$ $ $ $ long-term financing is still not very deep, and developers
may be obliged to finance a larger portion of the
Sponsor/ project with their own equity. Whether this is attractive
Developer
Holding ultimately comes down to a projects expected return and
Company the developers other options to deploy capital.

Equity financing may also be opportunistic; equity can

often be deployed more rapidly than debt, so if there is
SPV or a high-return opportunity and strict timelines to secure
Project
Company incentives such as feed-in tariffs (FiTs) by a certain date,
a developer may be willing to finance the entire project
out of pocket or in partnership with a co-sponsor such
Corporate Financing as an infrastructure fund. Once the project is built and
Single ownership structure. operational and the risk profile is reduced, the equity
May be suitable for developers that can finance an entire proj- holders can then seek to refinance it using cheaper debt
ect to completion and then re-finance the development to free
up equity. financing. Figure 28 illustrates equity financing options.
A project sponsor has full ownership of the project but is also
exposed fully to the risks.
May be applicable for companies with a large balance sheet or
for smaller projects.

160 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Given the limited recourse to the parent company, lenders
Figure 28: Equity Financing require that there is a secure revenue stream from the
project, and will undertake in-depth due diligence of
the project to gain confidence on the projects ability to
Equity Equity service debt repayments. This will include a thorough
Investor Investor
technical and legal review of the project and all associated
contracts, especially the PPA, so that confidence can be
$ $ $ $ placed in project revenues. Due diligence is described in
sub-section 14.4. PPAs are described in Section 13.

Sponsor/Developer Holding Company Project financing can be particularly useful in emerging

markets where perceived and actual risks may be higher
and guarantees from the host country government or
another party may be required. Bilateral and multilateral
lending agencies (such as the IFC) are also able to provide
SPV or Project Company
credit enhancement and other support, and in some
instances (typically in less developed countries) may
also be able to mobilize some concessional financing to
mitigate certain risks.
100% Equity Financing
Development funds secured internally or from a third party Solar PV projects have historically been well suited to
equity partner.
project financing because many sell power at a fixed tariff
Often can be deployed rapidly.
Independent developers can use their local or solar technology (as opposed to a fluctuating price on a merchant market)
experience to attract equity from new equity providers who and often on a take-or-pay basis whereby the off-taker
have the capital but not necessarily the solar experience.
purchases whatever volume of power is produced, thus
mitigating both price and volume risk. Further, as there
is no fuel, there is no price uncertainty to be hedged on
14.3 PROJECT FINANCING
any feedstock. While project financing can be obtained
Project financing is the most common approach to long- even in the absence of these conditions with appropriate
term financing of utility-scale solar projects. The main risk mitigation, these favourable off-take conditions have
distinguishing feature of project financing is that loans are helped smooth the introduction of solar technology into
made based on the strength of ring-fenced project revenue, new markets. If recent price declines of solar technology
with no or limited recourse to the project sponsor. This continue, it can be expected that solar will be increasingly
approach separates an individual project from other competitive even with contractual conditions that today
activities of the sponsor. Project financing is attractive are typical for fossil-fuel power plants. Figure 29
for developers as it can allow for higher rates of leverage illustrates project financing options.
(thereby maximising return on equity) and move liabilities
to a project company rather than keeping them with the 14.3.1 THE ROLE OF THE SPV
developer. It also allows developers to free up equity in
Developers and equity partners typically begin the
order to develop more projects. With a project financing
development process by forming a project company or
structure, projects are normally held in a project company
SPV, which is assigned all the rights and obligations of
or a special purpose vehicle (SPV) that holds all project
the project. The SPV owns the project and plant when
assets and liabilities.

14: Financing Solar PV Power Projects 161

 Figure 29: Project Financing

Equity
Investors

Equity $ $
Contribution
Sponsor /
Developer Project-Level
Holding Equity Lenders
Company Investors

Equity Equity Loans

Contribution $ $ Contribution $ $ $ $

SPV or Project Company

Inter-
connection EPC O&M
PPA Contract Contract
Agreement
Inter- Purchasing
connecting Utility / O&M Service
Contractor
Utility O-taker Provider

Project Financing
Lenders loan money for the development of the project based on projected cash flows of the project.
Enables developers and equity partners to leverage their funds by securing debt against the revenues of a solar PV project.
In the event of default, recourse is against the SPV.
Pricing and structuring of the debt based on the forecasted cash flows.
Lenders require extensive due diligence to gain confidence in the projected cash flows

constructed, signs the EPC contract, O&M contract, the laid out in a highly-specified cash waterfall) will the
PPA, and is paid project revenues. equity partners realize their return, often in the form of
dividends. SPVs can be governed by local law or may
Such project structures offer businesses the opportunity to refer to appropriate international law, depending on the
isolate the solar PV project from the rest of the developers requirements of the country in which the project is being
business activities. The working capital requirements and developed and the preferences of the shareholders.
debt servicing are taken from project cash flows as well
(although the sponsor may be required to inject capital 14.3.2 EQUITY AND DEBT POINT OF ENTRY
in the event that required debt coverage ratios are in
The terms of financing for a solar power project will
danger of being breached). A debt service reserve account
evolve over the course of its development. Initially, the
is typically required (usually six months of debt service),
project is not well defined: there are risks and uncertainties
which functions as the support mechanism on the debt
with regards to many aspects of the project, including
coverage. Covenants are also typically required by the
solar resource, expected yield, grid connection, and land
lenders to prevent equity holders from receiving dividends
lease and development rights with the landowner. As a
when debt service ratios fall below a specified point. Only
project progresses, it becomes better defined: the solar
when other financial obligations have been met (typically

162 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Box 12: Equity Investment and Joint Development Support from IFC InfraVentures

IFC InfraVenturesthe IFC Global Infrastructure Project Development Fundhelps develop public-private partnerships and private projects
for infrastructure in developing countries. It provides early-stage risk capital and actively participates in the project development phase to
create private infrastructure projects that are commercially viable and able to more rapidly achieve financial close.
Through IFC InfraVentures, the World Bank Group has set aside a $150 million fund, from which IFC can draw to initiate project development
in the infrastructure sector. IFC serves as a co-developer and provides expertise in critical areas, while partially funding the projects
development.
IFC InfraVentures is an additional resource for addressing the limited availability of funds and for providing experienced professionals dedi-
cated to infrastructure project development, both of which are key constraints to private participation in infrastructure projects in frontier
markets.
http://www.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Industries/Infrastructure/IFC_InfraVentures/

resource assessment is carried out and the outline design progresses and development activities are performed, the
allows an energy yield prediction to be performed. project becomes better defined, and the associated risk
falls.
A solar PV project developer entering a new geography
may assess the feasibility of numerous potential solar If an early-stage developer does not have sufficient capital
PV project sites, but many will not be selected. As the to bring a project to completion, the developer must
project progresses and is defined in more detail, the risks consider when in the project cycle to seek additional
are reduced and the project becomes more valuable and financing from other equity investors. The earlier equity
attractive to potential investors. investors are involved in the project, the higher the risk
they take, and the higher the return they will demand,
The balance of risk and definition as the development commensurate with that risk. A debt provider will not loan
progresses is illustrated in Figure 30. At the start, there is to a project until there is a high degree of certainty that the
little project definition and high associated risk. As time project can proceed and it has been sufficiently de-risked.

Figure 30: Project Risk versus Project Definition

Level of Project Risk

Level of Denition
100

75
Percent

50

Residual Risk 25

0
Time

Source: Holland and Holland Enterprise Ltd, Project Risk versus Project Definition, 2011, http://www.successful-project-management.com/
images/risk-vs-definition.jpg (accessed June 2014).

14: Financing Solar PV Power Projects 163

14.3.3 THE PROJECT DEVELOPMENT CYCLE & PROJECT successfully realized, the less certain its revenue stream,
VALUATION and the more discussion there is likely to be between the
Different developers play different roles in the project buyer and seller on the value of the project. The challenge
development cycle. Some developers focus solely on of agreeing on a project price is certainly not unique
the early stages of project development and the local to solar PV power projects, but it can be more difficult
knowledge required to secure land, permits, and a grid in new markets, where industry standards have not
connection. Especially if they do not have access to their yet developed and there is a lack of clear information
own capital, their business model may be selling their on different steps in the development process and the
project for a success fee to another (typically larger) value each step adds. Solar PV is also unique in that the
developer, who then takes on construction of the shovel- technology has experienced dramatic drops in cost, leaving
ready project. developers who purchased panels only 18 months earlier
than other developers with a comparatively expensive and
In another example, smaller developers might initiate un-competitive project.
project development and desire to carry the project
through to commercial operation, but lack sufficient 14.3.4 PROJECT FINANCING STRUCTURE
financing of their own prior to the stage where it would As shown in Figure 32, in a typical project financing
be possible to seek project debt. The developer might then structure, there will be one or more equity investors
seek additional equity from a second project sponsor, injecting funds directly or via the project developer
either from a passive financial investor looking for a into the project company (SPV). Lenders, typically a
return, or a specialized fund providing both financing consortium of banks, provide debt, which is secured
and implementation expertise. As a condition of external against the assets contained within the SPV.
equity investment, the first developer is often expected
to remain partially invested so that all parties have an When considering project financing, developers should
incentive to ensure that the project reaches completion. consider the following:

The usual term of a project financing loan ranges from

When a project or equity stake in a project is sold, the
10 to 15 years or longer. For solar PV projects, the
two parties must agree on a project valuation. The earlier
term may be limited to the period of the PPA or FiT,
a project is in its development, the less certain it is to be

Box 13: IFC Financing of Solar Energy

IFC is the largest global development institution focused on the private sector, bringing its AAA credit rating to 108 offices around the globe.
As of May 2015 IFC has made over 350 investments in power in more than 65 countries, and is often at the forefront of markets opening to
private participation.
The majority of IFCs current portfolio in power generation is in renewable energy (76 percent in fiscal year 2014, and renewable energy
consistently makes up two-thirds of IFCs portfolio), including more than $500 million in solar power projects. IFC has invested in more than
55 solar projects that generate more than 1,397 MW, with key transactions in Thailand, the Philippines, India, China, Jordan, Mexico, South
Africa, Honduras, and Chile.
IFC provides a range of financing solutions, including debt and equity at the project or corporate level. IFC can offer long maturities tailored
to meet project needs, flexible amortization schedules, fixed or floating interest rates, and lending in many local currencies. IFC also helps
to mobilize additional sources of financing through syndications as well as third-party capital managed by the IFC Asset Management
Corporation (AMC).
IFC works with experienced and best-in-class new developers who demonstrate commitment to project success through their equity
contribution to the project.

164 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 potentially introducing re-financing risks should the Developers should be aware that due to the global
project require debt financing beyond that period. financial crisis and introduction of Basel III reforms75
there are tighter restrictions on bank reserve requirements.
Lenders may have requirements or conditions related
Banks may have a reduced risk appetite and may be less
to the term (duration) and form of the PPA structure,
willing to provide loans of long duration.
making it ideal to finalize contracts after discussions of
key terms with the lender have taken place. However,
In new solar PV markets, local banks may not be familiar
the PPA is essential to bankability and some lenders
with solar PV projects and may be less willing to lend.
may not sign mandates or proceed with appraisal
Global development finance institutions (such as IFC)
without a PPA in place, in which case it is necessary to
and regional development finance institutions (such as
sign a direct agreement that will allow the PPA to later
the Asian Development Bank and African Development
be amended with lender requirements.
Bank) can play a role in helping to build a local banks
Long-term financing for solar PV projects is confidence in new technologies and business models by
increasingly available for projects meeting certain investing in projects themselves, by offering risk-sharing
criteria, but in many emerging markets, may take products, and, under certain circumstances, by offering
longer to obtain. concessional financing.

Individual projects from smaller developers may

14.4 DUE DILIGENCE
receive financing with a loan-to-value ratio of 75
percent (e.g., leverage ratio of 75 percent), whereas As with all investments, investors and lenders in a solar
portfolios of solar PV projects from experienced PV project need to understand the risks. This is especially
developers may be financed with leverage up to 80 important for lenders providing project financing, as loan
percent. repayments depend upon the cash flow of the project,
with no or limited recourse to the balance sheet of the
Depending on the sponsor, the market, and the
sponsor. Lenders require that due diligence is carried out
project financing fees, project financing may not be
on projects before they are willing to close the financing
attractive for projects less than approximately 10 MW.
and fund the loan.
Developers can consider consolidating several solar
PV plants in a portfolio to obtain financing on a larger
The process of due diligence can require considerable
portfolio. For example, a developer may aggregate ten
effort from the developer to satisfy the requirements of
5 MWp solar PV projects and seek financing on a 50
commercial lenders. Developers should plan to commence
MWp portfolio.
the financing process several months prior to the expected
Lenders will conduct due diligence on the project prior date that financing is required (frequently six months, in
to achieving financial close, and will include particular the case of IFC).
covenants that mitigate debt service risk throughout
the life of the loan. Lenders will also include conditions The due diligence process will identify risks and help
precedent (requirements to be achieved prior to develop solutions to mitigate the risks identified, typically
the disbursement of funds), such as a permit being including the following disciplines:
obtained or a PPA being executed.

Equity investors may rely on the lenders due diligence

or conduct their own.

75 Bank for International Settlements, International Regulatory Framework for

Banks (Basel III), 2011 & 2013, http://www.bis.org/bcbs/basel3.htm (accessed
June 2014).

14: Financing Solar PV Power Projects 165

 Legal due diligence to assess the permits and project The due diligence conducted at the equity stage may
contracts (EPC and O&M), including assignability and be based on preliminary technical information that is
step-in rights. provided by the developer. As the due diligence for lenders
of project financing is conducted at a later stage in the
Environmental and social due diligence to assess
development process, it will often be supported with more
environmental and social impacts and risk mitigation,
detailed technical information and designs, and a higher
including relevant stakeholder consultations. This is
level of certainty.
discussed briefly in Box 10, and in greater detail in
Section 8.
As banks in new markets may not be familiar with solar
Technical due diligence to assess the technology, PV technology, developers should be prepared for a
energy production profile, design, construction risks, rigorous due diligence process and incorporate sufficient
integration, and technical aspects of the permits and time to discuss and address the lenders requirements.
contracts (EPC and O&M). Technical due diligence While risk is inherent in every project, the developer
will cover technical concepts discussed throughout this should reduce and mitigate these risks where possible.
guidebook and summarised in sub-section 14.4.1. The Those projects deemed to be low risk are capable of
technical due diligence process may identify risks that attracting debt at a lower cost.
are unacceptable to the lender, in which case changes in
the design, components or contracts may be required in Lenders and equity partners may often want to influence
order to make the project bankable for the lenders. the choice of the equipment technology, design, and
terms of contracts based on what they perceive to be
Financial/commercial due diligence to assess the
bankable. They may require consent on key decisions,
financial health of the project company. This will
such as the panel manufacturer or selection of inverter.
include an assessment of the quality and commercial
It is therefore advisable to have discussions with the
viability of the PPA. Section 14 discusses the financial
potential project financing partners early in the design
analysis process and analysis required to secure
phase to help satisfy the requirements of all partners and
external financing. It is important that the developers
to avoid revisions. However, engaging fully with the due
have realistic financial models with contingencies
diligence process too early can result in excessive and
clearly shown.
unnecessary expenditure if changes in project technology,
design, or even choice of lender is required. This cost will
ultimately be borne by the developer.

Box 14: Environmental, Social, and Governance Issues in Financing

While solar PV projects are often considered to be inherently socially beneficial based on their potential to reduce greenhouse gas (GHG)
emissions and local pollution, it is still important to consider the full scope of environmental, social, and governance impacts of any project. In
addition, lenders often require compliance with social and environmental standards, such as the Equator Principles (EPs)a before agreeing to
finance a project (see Section 8 for further details on EP requirements).
International development finance institutions, such as the IFC, have their own social and environmental standards (IFC Performance
Standards directly inform the Equator Principles). Government bodies may aim to mitigate the adverse impact of developments through
permitting requirements. Developers should strive to follow best practices to mitigate environmental and social risks even when this is not
required or enforced by national law.

a The Equator Principles (EPs) are a set of 10 environmental and social principles adopted by the Equator Principle Financing Institutions (EPFIs). These principles
are criteria that must be met by projects seeking financing from these institutions. EPs ensure that the projects that receive finance are developed in a manner
that is socially responsible and reflect sound environmental management practices. The full set of principles can be accessed through the following link: http://
www.equator-principles.com

166 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Dedicating sufficient time at the negotiation stage of PPA 14.4.2 RISK MITIGATION STRATEGIES
and EPC agreements to achieve favourable terms will
Developers and investors should make every effort to
save time and money at the financing stage by avoiding
understand, and where possible, mitigate the project
extensive re-negotiation.
risks. Advice from independent experts will in some
instances be required. Table 20 summarises the key risks
14.4.1 TECHNICAL DUE DILIGENCE
and corresponding strategies for risk mitigation that a
Investors and project financing lenders, in particular, developer should consider when seeking financing for a
will require technical due diligence to be carried out on solar PV project.
the solar PV project in order to understand the risk to
investment. The technical due diligence process can take 14.4.3 RISK MITIGATION PRODUCTS
several weeks and as a minimum will involve technical
Demand for solar PV project insurance is increasing.
experts carrying out the following tasks:
However, in most countries, the insurance industry has
Site visit to assess the suitability of the site for the not standardised insurance products for PV projects or
installation of a solar PV power plant. components. A number of insurers provide solar PV project
insurance policies, but underwriters risk models have not yet
Solar resource assessment and energy yield prediction
been standardised. The data required for the development
with uncertainty analysis.
of fair and comprehensive insurance policies are lacking as
Review of system design to confirm viability. insurance companies often have little or no experience with
Technology review of modules, inverters, transformers, solar PV projects. As a consequence, developers should seek
and mounting or trackers, including warranties and insurance offers from a number of parties in order to drive
design life. competitive terms and expose potentially punitive conditions.

Contracts review (EPC, O&M and PPA), including In general, large solar PV systems require liability and
acceptance testing procedures and liabilities within the property insurance, and many developers may also opt to
EPC contract. have coverage for environmental risks too. Various types
Assessing the warranty and guarantee positions within of insurance available to developers are:
the contracts. General Liability Insurance covers policyholders for
Review of grid connection agreement and timelines. death or injury to persons or damage to property owned
by third parties. General liability coverage is especially
Review of permitting status to confirm compliance
important for solar system installers, as the risk to
with all necessary permits and approvals, and absence
personnel or property is at its greatest during installation.
of serious environmental issues.
Property Risk Insurance protects against risks not
Review of financial model inputs to help ensure
covered by the warranty or to extend the coverage
financial projections are realistic.
period. The property risk insurance often includes theft
Review of acceptance testing procedures. and catastrophic risks, and typically covers PV system
components beyond the terms of the manufacturers
The process of technical due diligence typically requires warranty. For example, if a PV module fails due to
the sponsor to place project documentation in an online factors covered by the warranty, the manufacturer is
data room and culminates in the delivery of a technical responsible for replacing it, not the insurer. However,
due diligence report. if the module fails for a reason not accounted for
in the warranty, or if the failure occurs after the

14: Financing Solar PV Power Projects 167

 Table 20: Solar PV Project Risk Matrix
Risk Description Mitigation
Interest rate risk If debt is provided on a variable rather Finance projects on long-term fixed interest rate loans, as opposed to
than a fixed rate, the interest payable variable rate loans.
may increase if rates rise. Obtain an interest rate swap; development finance institutions, such as
the IFC, provide swaps even in markets where a strong commercial swap
market does not yet exist.
Foreign exchange risk Debt may be denominated in a Use hedging to reduce exposure (however, this does entail a cost).
different currency from the cash flows Transfer the risk through bonds, contracts, and insurance.
generated by the solar PV project. Obtain local currency financing when possible if the PPA or project
This can create gains or losses for the revenues will be in local currency.
developer and project owners. See Box 15.
Debt structure Should the project not proceed as Structure debt payment to maintain adequate liquidity.
expected, the project may be unable Create a contingency account in case of short-term cash flow issues.
to repay debt. Limit leverage (ratio of debt to equity).
Seek financing of the appropriate tenor to avoid re-financing risks.
Quality of off-take The reliability of revenue payment is Use PPA with a term in excess of the debt term.
agreement dependent on the terms of the power Reduce exposure to power market risk.
off-take agreement. For cross-border transactions, ensure both local and international counsel
have reviewed the contract for enforceability.
Counterparty Credit In many emerging markets, there is Carry out thorough evaluation of the off-taker creditworthiness.
Risk only one or a small number of power Consider options to sell power to alternative off-takers in the event of
off-takers, and this entity may not default.
have a strong balance sheet or credit Seek a guarantee from the government or a multilateral institution; see
history. Box 15 World Bank Group Risk Mitigation Products.
Reserve account may need to be set up.
Technology Risk that the system (especially Carefully select technology and pursue technical due diligence (see Box 7
modules, inverters, and transformers) on Construction Lessons Learned).
do not function as expected, or Ensure proper contracting, maintenance, warranties, and third party insur-
performance degrades more rapidly ance, as described in Box 1, Module Risk.
than projected.
Solar resource Variation of the solar resource from Use services of a technical consultant to ensure high quality resource data
that predicted in the pre-construction is used and covers a sufficient time period.
financial models. Carry out an uncertainty analysis (P90 resource estimate) as discussed in
Section 5.
Reduced energy yield Failure to deliver the projected energy Ensure pre-construction technical due diligence, including analysis of
yield (and therefore cash flow) to confidence in the energy yield.
service the debt requirements. Choose technology with reliable and known performance.
Include maintenance, performance penalties, and warranties within O&M
contracts.
Reduce exposure to revenue losses due to grid curtailment by addressing
this issue pro-actively in the PPA.
Cost escalation Exposure to changes in the prices of Use fixed-price EPC contracts.
components. Include a contingency fund for construction and operation.

Delay Contractors or third-party suppliers Use a fully wrapped EPC contract.

delay commercial operation, including Contractually define liquidated damages.
delays with the grid connection. Delay Reduced price paid to the contractor if delays miss subsidy support cut-off
will impact project cash flows and dates.
could impact project eligibility for Use experienced contractors.
tariff incentives. Schedule allowance for delays.
Thoroughly research grid connection procedures, import/duty procedures
for equipment and other local regulations in each market to ensure
appropriate timelines are built into the EPCs schedule.

Continued

168 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Table 20: Solar PV Project Risk Matrix (Continued)
Risk Description Mitigation
Construction Risk that construction has not been Engage early with the relevant agency responsible for granting permits.
Permitting carried out in compliance with Thoroughly complete the technical due diligence.
permits.
Grid connection Risk that the connection to the Become familiar and follow required design specifications and procedures.
distribution or transmission network Submit grid connection applications early in development phase.
has not been completed or is not Define grid connection deadlines in contracts.
approved by the relevant authority Thoroughly research grid connection procedures to ensure appropriate
before the expected date of timelines are built into the EPCs schedule.
commercial operation.
Incentive eligibility Special tariffs, tax credits/holidays, and Ensure familiarity with the regulatory environment.
other incentives for renewable energy Insert clauses in EPC contracts to ensure eligibility based on timeline.
development may have strict cut-off
dates and eligibility criteria.
Policy change Change in government policy towards Choose politically stable countries with strong regulatory frameworks and
solar energy, including retroactive evidence of long-standing support to solar PV projects.
subsidy cuts or new taxes that have Be wary of excessive dependence on the incentive system.
a material impact upon project
revenues.
Operation and Poor operation and maintenance Include performance tests within the O&M contract, with associated
Maintenance (O&M) can give rise to poorly liquidated damages. This is described further in Section 11 and Annex 3.
performing plants with a material Use experienced contractors.
impact on project revenues. Seek advice from technical advisors when negotiating contract scope.
Consider performance incentives within the O&M contract.
Ensure plant performance is monitored.
Ensure spare parts are readily available.
Include maintenance reserve accounts and/or extended component
warranties.

warranty period has expired, the insurer must provide with solar PV projects and as installed capacity increases.
compensation for the replacement of the PV module. A 2010 study by the United States National Renewable
Energy Laboratory (NREL), referring to solar PV systems
Environmental Risk Insurance provides environmental
installed in the USA, stated:
damage coverage, and indemnifies solar PV system
owners against the risk of either environmental damage
Insurance premiums make up approximately 25% of a
inflicted by their development or pre-existing damage
PV systems annual operating expense. Annual insurance
on the development site.
premiums typically range from 0.25% to 0.5% of the total
Business Interruption Insurance provides coverage for installed cost of a project, depending on the geographic
the risk of business interruption, and is often required location of the installation. PV developers report that
to protect the cash flow of the solar PV project. This insurance costs comprise 5% to 10% of the total cost
insurance policy can often be a requirement of the of energy from their installations, a significant sum for a
financing process. capital-intensive technology with no moving parts.

Though solar PV project insurance costs can be quite high, The benefits of insurance need to be weighed against
it is likely that rates will drop as insurers become familiar the price; for small projects, some developers may feel

14: Financing Solar PV Power Projects 169

 Box 15: World Bank Group Risk Mitigation Products

IFC Risk Management Tools

The International Finance Corporation (IFC) provides financing in nearly 60 local currencies, at both fixed and variable rates, which allows a
company with local currency revenues (such as tariff payments under a PPA) to obtain long-term financing denominated in that currency,
reducing foreign exchange risks. IFC also provides interest rate and currency swaps and credit enhancement structures that enable
clients to borrow in local currency from other sources. IFC is one of the few multilateral development banks prepared to extend long-
maturity risk management products to clients in emerging markets. More information can be found at http://www.ifc.org/wps/wcm/
connect/Topics_Ext_Content/IFC_External_Corporate_Site/Structured+Finance.

World Bank Guarantees

World Bank Guarantees are risk mitigation instruments intended to diversify the financing options of the governments and government-owned
entities through credit enhancement. They protect the beneficiaries against the risk of default by sovereign or sub-sovereign governments
with respect to their obligations arising from contracts, law, or regulations. There is a wide range of risks that could be covered by World Bank
Guarantees, such as off-take/payment risk, regulatory risk, change in law, political force majeure (including war, revolution, and expropriation),
transferability & convertibility of foreign exchange, etc. The World Bank Guarantee can be issued in foreign or local currency.

World Bank Guarantees are only given for projects that are strongly supported by the government, which is embodied in a counter-
guarantee from the government to the World Bank. They are anchored on the strong day-to-day relationship of the World Bank with the
government, through policy dialogue, loans, grants, technical assistance, etc., which enables the World Bank to pre-empt an event that
could result in the materialization of a risk. In the event that a claim is made under a guarantee, the World Bank does not require an arbitral
award or any other formal decision from a court of law as a condition to pay. Guarantees are paid promptly upon recognition by the parties
that amounts are owed and are undisputed. More information on the World Banks Private Risk Guarantee group can be found at
http://web.worldbank.org/external/default/main?menuPK=64143540&pagePK=64143532&piPK=64143559&theSitePK=3985219.

Political Risk Insurance with MIGA

The Multilateral Investment Guarantee Agency (MIGA) provides political risk insurance to private sector investors on a commercial basis through
insurance products, with the exception of the Non Honoring of Sovereign Financial Obligations (NHSFO), which operates as a guarantee.
These risks include currency inconvertibility and transfer restriction, expropriation, war, terrorism, civil disturbance, breach of contract,
and non-honoring of financial obligations. MIGAs objective is to compensate investors in the event of a loss. The baseline relationship is
between MIGA and the private investor, with no government involvement. The government is required to provide a no-objection clause for
MIGA participation but does not provide specific support to MIGA or the project. Claims under MIGA insurance, including NHSFO, are paid once
the claimant has obtained the respective award from a judicial court or an arbitration tribunal, which usually takes several months or years
depending on the jurisdiction. More information on MIGA can be found at http://www.miga.org/investmentguarantees/index.cfm.

comfortable bearing certain risks. For larger projects, lenders 14.5 RE-FINANCING
may require insurance as a means of reducing the risk they
Once a project is operational, particularly after one or two
bear by transferring it to the insurance provider. Some types
years, the project risks, including construction, technology,
of insurance may also be required as part of the national
energy yield, and performance risk are significantly
permitting process. However, insurance is never a substitute
reduced and there is an opportunity to refinance a project
for quality design, equipment or contracts. Risk mitigation
by seeking debt at a lower interest rate.
products may be needed to increase lender confidence,
however the appropriate product or mix of products will Less risk means that banks will often accept less return
depend entirely on details of the specific project and context. from their loan, so it may be possible to negotiate better
Box 15 describes risk mitigation products offered by three debt terms, either from the original lender or another
institutions of the World Bank Group. lender. A rather new development in the area of solar PV
projects is the use of securitization, a process that enables
a developer to exit the investment, which is described in
Box 16.

170 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Box 16: Refinancing, Solar Securitization and the Rise of the Yieldco

Since 2013 there has been rapid development in securitisation of solar and other power generation assets. Securitisation is the process
of pooling multiple projects and packaging the portfolio as a tradable asset (a security). This can either be in the form of a project-
backed bond or a yieldco. A yieldco is an exchange-listed entity designed to hold cash-generating assets, generally with stable expected
dividends. While securitisation is common for other assets, such as mortgages and automobile financing, and for infrastructure in countries
like Australia and Canada, it is a relatively new tool for solar energy projects.

Solar projects are well suited for securitisation because they typically have predictable long-term revenues secured through a PPA and have
mitigated many project uncertainties and risks through their project finance structure. These stable, low-risk cash flows are desirable for
institutional investors, such as pension fund managers.

Once a project is operational, developers often want to exit the project so that they can focus on deploying their capital and creating
value with new projects. Securitization allows developers to create their own vehicle to hold projects so that they can sell the project to
the securitized vehicle and exit their investment. While this can also be achieved through sale to another buyer, by creating their own
securitized pool of assets, developers are able to retain more value. Securitisation is also attractive for large pools of smaller projects, as it
can reduce the transaction costs of selling these projects individually.

While these relatively sophisticated vehicles are still in nascent stages in developed markets, they may also become relevant in emerging
markets. For example, SunEdisons Terraform announced they will launch a second emerging markets-focused yieldco in mid-2015.

14: Financing Solar PV Power Projects 171

 Steps to Securing Project Finance Checklist

The checklist below sets out basic steps that developers and
owners must complete if they are seeking project finance for
solar PV projects.

Seek equity funding (if required).

Develop project to the point where it is ready for debt

finance.

Prepare due diligence documentation.

Mitigate risks to reduce debt interest rates.

Work with investors and lenders to achieve financial close.

172 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Financial Analysis Project Costs and Revenue 15
15.1 PROJECT COSTS AND REVENUES OVERVIEW

The commercial viability of a Project financing is only possible when a solar PV plant is capable
solar PV project is determined of generating enough revenue to pay for debt obligations and the
overall costs of O&M, and to yield a reasonable return for the
through a financial analysis that
equity invested. The decision to proceed with the development
takes into account the expected
of a solar PV project rests upon the commercial viability of the
costs, including investment project, as determined through a financial analysis. This analysis
requirements and O&M costs, as takes into account the expected costs, including investment
well as revenues. requirements and O&M costs, as well as revenues. The key
inputs are investment requirements and assumptions about the
future performance of the solar PV power plant. As such, they
should be based upon verifiable and objectively collected data,
and backed up by real-world experience and local knowledge.

The checklist at the end of this section sets out the basic financial
modelling requirements for developers of solar PV projects.

The following sub-sections provide information on the key

inputs to and outputs from the financial analysis that are specific
to solar PV, including a breakdown of typical project costs and
revenues.

15.2 SOLAR PV PROJECT CAPITAL AND OPERATIONAL

COSTS

Capital expenditure (capex) and O&M costs are site-specific and

should be assessed as part of the prefeasibility and feasibility
studies. Initially, these costs are established as evidence-based
assumptions, and they will only be finalized with the signing
of the EPC contract. Nevertheless, they are essential inputs for
the financial model. For illustrative purposes, some indicative
estimates for solar PV project costs (both capex and operating
expenditures, or opex) are provided in this section.

15.2.1 CAPITAL EXPENDITURE (CAPEX)

Figure 34 shows the historical and forecasted values for solar

PV project capital costs (excluding fees and taxes) for a ten-year

15: Financial Analysis Project Costs and Revenue 173

 Figure 31: Forecasted average Capex Costs for Multi-MW Solar PV Park, 20102020 (based on data from 2014)

4.00
3.42
3.50
3.00
2.64
2.50
$MLN/MW

2.00
1.61 1.58 1.57 1.47 1.39
1.50 1.33 1.27 1.20 1.15
1.00
0.50
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ModuleandInverter
Source: BNEF, SgurrEnergy, collected from project developer BoSincluding
installers. Not EPC developer
Other fees, taxes, legal costs,
corporate finance fees.

period starting in 2010. Note that significant module price also a result of differences in labour costs, local taxes,
declines were achieved from 2010 to 2012. As Figure 31 local content rules, and the level of subsidy or other pre-
illustrates, further price reductions can be expected going operating incentives provided to project developers within
forward. However, the developer should equally consider a specific policy/regulatory context.
that the rate of cost decline is impossible to predict with
complete accuracy. In countries where solar PV technology has been only
recently introduced, prices may vary widely as a result
The historical data referenced in Figure 31 comes of the early process of supply chain development in a
from larger, more developed solar PV power markets given market. However, greater pricing transparency
(principally Europe, North America, and Asia). Hence, and competition across the global supply chain, from
the forecasts for capex pricing are useful in other markets raw materials like polysilicon to inverters and balance of
primarily for benchmarking purposes. systems, has allowed developers to make more informed
assumptions about capital costs before hiring an EPC
Table 21 illustrates the variability of capex and opex contractor. This is advantageous to the developer, as more
based on actual project costs observed during 2013 and accurate cost-input assumptions will be reflected in the
2014. The spread in capex costs is explained on the low perceived accuracy of the financial model outputs from an
end by the inclusion of data from projects using low-cost, investors viewpoint.
domestically-installed, Chinese solar PV installations.
Values on the high end reflect the highest installed costs A breakdown of costs for a typical solar PV project is
in the U.S. solar PV market. Variations in capex costs are presented in Figure 32, which is based on a standard

Table 21: 2013/14 Solar PV Capex and Opex Cost Variations

Value $/MW Min Average Max Percent Variation
Capex $1.5 million $1.6 million: $2.2 million 47 percent
Opex $2,200 $4,200 $7,500 241 percent
Source: SgurrEnergy 2014

174 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Figure 32: Average Breakdown Costs for a Ground-Mounted Solar PV Project

6%

Modules

17% Inverters

Cabling
42%
Security

15% Grid

Frames

Project management
4%
1% 13%

Source: The dataset is extracted mainly from the mature markets of Europe and North America, 2014.

multi-megawatt, ground-mounted installation (excluding commensurately expanded. Compared to the EPC

trackers). Average installed costs in emerging markets process used for other forms of power generation, solar
are broadly similar, particularly the costs of PV modules, is relatively straightforward and local construction
inverters, and cables. Deviations from the average may companies have been able to build capacity quickly. This
occur due to local taxes, local content rules, and variable has resulted in competitive pricing for EPC activities and
labour rates for construction and project management. shorter construction and commissioning periods. As solar
PV project developers grow in size and number, their
In the example above, 55 percent of solar PV project processes are also becoming more efficient and they are
capital costs arise from modules and inverters, and able to reduce transaction costs, including costs related to
excluding local tax and content rules, these capex costs business development.
appear the most consistent over time for the majority of
projects. The cost of financing has also fallen in more established
solar PV markets as they have grown and proven to
It is widely recognized that economies of scale are be reliable sources of cash flow. A developers cost of
delivering lower pricing for modules, inverters, and financing has become a critical distinguishing factor for
balance of systems such as framing and support structures. success as the solar PV market becomes increasingly
There has also been a less dramatic, but still significant competitive.
reduction in soft costs, such as construction and
financing costs for new project development, as more local Total capital costs also include the cost of land and
service providers have developed their offerings. These support infrastructure, such as roads and drainage, as
cost reductions were first seen in more developed markets, well as the project companys start-up costs. The extent
but it is possible that they are representative of near-term of cost variation largely depends on the project location
trends in emerging markets. (reflecting host country costs), the project design (such
as the type of power cables), and the technology utilised
As opportunities for solar PV project development (i.e., use of a tracking system, or selection of mono-
have increased, the number of qualified installers has

15: Financial Analysis - Project Cost and Revenue 175

verses multi-crystalline modules). Solar PV technology must be adjusted for local duties and taxes and logistics/
in particular is a source of significant variation in system transport costs.76
component costs. A project with crystalline solar PV
technology requires less surface area per kWp installed It is advisable for developers to seek pricing for modules
capacity compared to thin-film modules. As a result, the and inverters from multiple vendors and to balance the
mounting structure and DC cabling costs are lower (other security of fixed prices and delivery dates against the
cost components should not change significantly). Grid opportunity for future price reductions and technology
connection costs are another element of capex and can be improvements. Also, during the past few years, module
highly variable; these costs should be investigated early oversupply and industry reorganization led to some
during the feasibility stage. inconsistency in module quality and concerns about the
value of manufacturer warranties. While the industry
Table 22 shows a typical breakdown of costs for a multi- has now stabilized, seeking modules from a reputable
mega-watt (MW) European ground-mounted solar PV manufacturer with a proven track record is still critical.
power plant at the time of writing in late 2014. Total
costs for a European solar PV plant average around US Further price reductions in solar PV technology are
$1.7 million per MW. However, European costs are only a expected in the future, yet project developers are advised
partial proxy for costs in other markets, and project costs to be cautious about making predictions. These price

76 Bloomberg New Energy Finance is a source of data on costs in emerging

markets: http://www.newenergyfinance.com.

Table 22: Average Benchmark Costs for Ground-mounted Solar PV Development

Cost Item Cost ($/MWp) Details
Land 8,300 It is assumed that 2 acres/MWp is required. This estimate will vary according to the technology chosen
and land costs.
PV Modules 720,000 Crystalline-based solar PV modules have an average global factory gate price of $550-930k/MWa and this
can vary depending upon the perceived quality of the supplier. An average module price of $720k/MWp has
been assumed based upon collected third-party data. Thin-film modules such as Cadmium Telluride are
available at an 8 percent to 10 percent discount to this price. However, this economic benefit is often lost
due to increased land and balance of system cost requirements.

Mounting structure 306,000 This is the cost assumed for the mounting structure irrespective of the type of technology.
Power conditioning 220,000 This is for the power conditioning unit/inverters, including the required controls and instrumentation.
unit/ inverters
Grid connection 255,000 This cost includes supply, erection, and commissioning of all cabling, transformers, and evacuation
infrastructure up to the grid connection point. This is a highly variable cost depending on the distance
to the point of connection.
Preliminary and 11,000 This cost includes services related to design, project management, insurance, and interest during
operating expenses construction, among others. Though it is expected to vary with project size, the cost assumed is for a
generic multi-megawatt site.
Civil and general 120,000 This includes general infrastructure development, application for permits and approvals, and prepara-
work tion of project reports per MW.
Developer feeb 100,000 This is an average figure for the EU and dependent on market conditions.
TOTAL 1,740,300
a PVinsights, 2014, www.pvinsights.com (accessed June 2014).

b SgurrEnergy compiled data sources in the EU around 2013.

Source: Source Data : SgurrEnergy, collected from project developers and installers in addition to PV Insights and Photon Consulting.

176 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

declines are being driven by improved manufacturing and if no local experts are available. It may be necessary
techniques, cell efficiency innovation, and cost reductions to reserve funds for this contingency.
in the balance of systems. However, short-term volatility
in pricing is likely to occur. In addition to labour, operational expenditure includes
comprehensive insurance, administration costs,
By following current and expected costs for major professional fees, and land rental. Insurance costs vary
components, developers will be better informed when considerably in new markets, and in some cases will not be
developing their financial model. The model should available as a standard product.
include a capex sensitivity analysis to account particularly
for the forward cost curve on solar PV equipment. The wide variation in opex costs between markets (shown
This will help the developer assess the potential impact in Table 21) reflects differing levels of market penetration
of project delays against the possibility of changing (and therefore pricing competition), costs driven by lack
equipment costs. However, it is important to remember of infrastructure, site transportation costs, subsidies, land
that it is impossible to accurately predict the magnitude or rental costs, and labour costs.
timing of price changes.
15.3 SOLAR PV PROJECT REVENUES
15.2.2 OPERATIONS AND MAINTENANCE COST (OPEX)
Electricity from a solar PV project is converted to revenue
Operation and maintenance (O&M) costs for solar PV by selling it to an off-taker. The amount of revenue will
projects are significantly lower than other renewable depend on the amount of energy generated and delivered
energy and conventional technologies due to the simple and the price per unit of energy. Having a strong forecast
engineering and relatively minor maintenance required. of both these inputs is therefore central to the strength
The average O&M costs in the developed European of financial model outputs and to obtaining outside
market are currently around $4,200/MW per annum.77 financing.
This figure will vary according to local labour costs, but
is much lower as both an absolute number and a relative 15.3.1 ANNUAL ENERGY YIELD
number than for other types of power projects. There are a number of factors that affect the annual
energy yield of a solar PV project, as discussed in detail in
O&M costs also depend on other factors, including the
Section 5 (Energy Yield Prediction).
project location and the surrounding environment. For
example, a site located in a dusty environment is likely to Annual energy yield directly drives the revenue line in the
suffer higher soiling and require more frequent module cash flow model and income statement. As such, accurate
cleaning. Given that wages are generally lower in most energy yield predictions are critical. Annual energy yield
emerging markets, O&M costs can be expected to be must be calculated by an experienced, independent, and
consistent with or less than the European norm. However, suitably-qualified solar energy consultant who is able to
early stage developing markets may not initially possess provide bank grade energy yield analysis.
the industry structure/supply chain and economies of scale
to fully exploit lower costs. For example, generally lower The confidence level of the yield forecast (or uncertainty)
country cost may be offset by the need to bring technical is also important, as the annual energy yield directly
experts from another country in the event of a major issue affects the annual revenue and therefore project viability.
A P90 assessment is typically required. However, utility-
scale projects that include a professional independent
energy yield assessment, produced and/or verified by an
77 SgurrEnergy compiled developer data and market provider quotations around
experienced consultant with a track record of producing
2013.

15: Financial Analysis - Project Cost and Revenue 177

bank grade data, are sometimes bankable with a 15.4 FINANCIAL MODELLING
confidence interval of P75. As mentioned previously,
A financial model is needed to assess the viability of the
additional sensitivity analysis may be advisable in markets
project. Such a model is requested by financial institutions
with less data and project history.
and it is an essential piece in the preparation of the project
for financing.
15.3.2 ELECTRICITY TARIFFS

The key revenue stream for most solar power plants is the Table 23 lists key inputs for the financial model of a
fee (tariff) paid for each kWh of electricity generated. As solar PV project relying on both equity and debt. Each
discussed in Section 12, sometimes there are other sources input described below should be supported by robust and
of revenue, such as renewable energy credits, tax credits, independently-verified evidence.
and other financial incentives available to developers.
The stability and durability of such incentives should be The financial model estimates the key parameters that
assessed carefully. are needed to decide whether or not to proceed with the
project. Such parameters include (but are not limited to):
At present, most utility-scale solar power plants sell economic and financial rate of return, return on equity
electricity to an off-taker (in most cases a power company) (equity IRR), payback period, etc. Also, the model should
through long-term PPAs. In many emerging economies, the prove that the project is able to service the debt.
power company is a state-owned enterprise. Increasingly,
there are also opportunities to sell power to large private 15.4.1 SOLAR PV PROJECT FINANCIAL ANALYSIS-
LENDERS MODEL
off-takers, such as industrial groups. The creditworthiness
of the off-taker should be assessed carefully, particularly Lenders are primarily concerned with the ability of the
when the price of power in the PPA is higher than the project to meet debt service requirements. The financial
average retail tariff in the respective power market. Off- model that a developer or their agent prepares for
taker credit risk and potential mitigation of those risks are lenders must address this concern and should include the
covered in Table 20 and Section 12. following metrics:

Cash Flow Available for Debt Service (CFADS) is

calculated by subtracting operating expenditure

Table 23: Key Inputs to the Financial Model

Inputs Comments
Project size (MW) Based upon feasibility/technical study reflecting the constraints of grid capacity and land, in addition to
energy yield prediction reference project capacity (e.g., MWs).
Energy yield/capacity factor Calculated to reflect module efficiency, lifetime degradation, inverter losses, module soiling, and the
potential for shading losses.
Tariff and other revenue streams The price for power in the PPA along with other incentives is needed to determine project revenues.
Capex costs One-off costs for the construction and commissioning of the project, generally based on an EPC con-
tract.
Opex costs Normally a 25-year view of costs, which are based upon initial contract agreements (e.g., O&M, land
rent/lease, and corporate overheads) that will be subject to adjustments for inflation and other vari-
ables.
Debt service and repayment costs This involves the repayment of debt interest and capital over a defined pre-agreed period with the
lender (debt length is normally equal to contractual period of the PPA).
Grid tolling costs Potential grid access fee, if applicable.
Taxes Payment of central and local government taxes.

178 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 (opex), working capital adjustment, interest, and tax 15.4.2 SENSITIVITY ANALYSIS
from revenue. It does not include non-cash items such
Sensitivity analysis involves changing the inputs in the
as depreciation or cash that is already committed
financial model (such as power tariff, capital cost and
elsewhere. CFADS is used as an indicator of how much
energy yield) to analyse how the cash flow of the project
cash the project will produce, and thus how much debt
is impacted. Lenders will conduct sensitivity analyses
can comfortably be serviced.
around these key variables in order to determine whether
Debt Service Coverage Ratio (DSCR) is a simple the project will be able to service the debt in a bad year,
measure of the ability of a project to meet interest for example if the energy yield is lower than expected,
and capital repayments over the term of the debt. or if operational expenditure is higher than expected.
It is calculated as CFADS divided by the amount of Sensitivity analysis gives lenders and investors a greater
expected debt service over a certain period. understanding of the effects of changes in inputs, such as
power tariffs, on the projects profitability and bankability.
Loan Life Coverage Ratio (LLCR) provides another
It helps lenders and investors understand the key risks
measure of the credit quality of the project, looking at
associated with the project.
the projects ability to pay over the total project life. It
is calculated by dividing the net present value (NPV)
Typical variables investigated during sensitivity analysis
of the CFADS over the project life by the remaining
include:
amount of debt owed.
Capital costs, especially on the panels and inverters.
Maintenance Reserve Account (MRA) is an amount
to cover operational contingencies, such as inverter Operational costs (less critical for solar PV projects).
replacements. Annual energy production.
Debt Service Reserve Account (DSRA) is a fund, often Interest rate.
equivalent to 6 months of debt service, designed to
cover any shortfalls in debt. If drawn on, it is then 15.4.3 FINANCIAL BENCHMARKS AND HURDLE RATES
replenished on an on-going basis. FOR INVESTMENT

The project financing structure generally comprises both

The most important measure to analyse is the DSCR. The
debt and equity, as described in Section 14 (Financing
average DSCR represents the average debt serviceability
Solar PV Projects).
of the project over the debt term. A high DSCR indicates
a higher capacity of the project to service the debt, while Solar PV projects typically have a debt-equity mix with the
the minimum DSCR represents the minimum repayment following broad terms:
ability of the project over the debt term. The lenders
Financing structureequity 30 percent (or higher) with
model should contain analysis on the minimum and
a corresponding debt element of 70 percent or less.
average DSCR over a range of scenarios, including over
discrete periods of time in the projects development. Equity levered IRRs in excess of 10 percent, and
A minimum DSCR value of less than 1.0 indicates the significantly so in higher-risk markets.
project is unable to service the debt in at least one year.
Debt repayment period of between 8 and 18 years.

Debt service cover ratio (DSCR) of at least 1.3, or 1.5

for merchant solar PV projects.

15: Financial Analysis - Project Cost and Revenue 179

15.4.4 CARRYING OUT A FINANCIAL ANALYSIS

A financial models output determines not only the

structure of the projects financing, but also the
project companys maximum supportable level of
debt. Performing financial modelling requires a highly
specialized skillset. In order to build a financial model, a
developer will require the services of a financial analyst
with advanced knowledge of Excel spread sheets, or
alternatively, someone with experience building models
in one of the several other sophisticated software tools
designed for this purpose.

Yet the ability to construct the mechanical aspects (e.g.,

the functions/calculations) of the financial model is itself
not the only or necessarily even the most important key
requirement.

It is critical that the developer understand the importance

of reliable inputs to the financial model, as well as
the significance of the models key outputs from an
investors perspective. The developer should have a
clear understanding of the probable degree of variation
for different inputs, as well as the cause(s) of variation.
Furthermore, a firm grasp of the terms used by investors
to describe key outputs from the financial model will
be necessary for the developer to enter into informed
negotiations on project financing.

180 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Financial Modelling Requirements/Procedures Checklist

The checklist below is for developers, and sets out basic financial
modelling requirements and procedures that investors in solar
PV projects typically expect.

Independently verify key assumptions in the financial

model, including EPC and O&M costs, energy yield, off-take
pricing, and terms of financing.

Prepare financial model covering full lifecycle of the

project.

Include stress tested results and scenario analysis for debt

service for potential lenders and equity investors.

Clearly present cash flow analysis and relevant indicators,

such as IRR, DSCR, CFADS, LLCR, MRA calculations, etc.

Provide a sensitivity analysis for key inputs on capex, opex,

and financing costs.

15: Financial Analysis - Project Cost and Revenue 181

 ANNEX

1 Common Construction Mistakes

The following images have been taken from megawatt-scale,

ground-mounted solar PV power plants constructed in the U.K.,
India and South Africa. The images show a variety of common
construction mistakes and issues that may arise under a variety
of environmental conditions during operation. They are intended
to illustrate topics that have been discussed throughout the
guidebook and inform readers so that the mistakes may be
avoided.

182 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Photographs of common construction mistakes
ID Picture Comment
1 Soiled pyranometers give conservative solar irradiation measurements,
which can lead to over-estimated performance ratio measurements.
Pyranometers must be well-maintained, kept calibrated and placed in
locations where they will not be shaded by nearby obstacles.

2 Soiled modules will result in lower performance and can cause

unexpected growth of vegetation, with associated shading loss.

3 Heavy rainfall, including monsoons, can restrict vehicular access and

delay construction. Effective planning will avoid construction during
heavy rain or incorporate mitigating measures such as sealing access
routes before construction begins.

4 Poor waste management can lead to environmental damage and

represents a risk to health and safety.

(continued)

Annex 1: Common Construction Mistakes 183

 Photographs of common construction mistakes (continued)
ID Picture Comment
5 Inadequate pre-construction design and due diligence can result in
sagging support structures with misaligned modules.

6 Inadequate pre-construction design and due diligence can lead to the

need for costly post-construction remedial design alterations, such as
on the pictured support structures.

7 Inadequate temporary security fencing can let livestock enter a site

with associated risk of damage.

8 Poorly designed foundations and improper anchor bolts can result

in mounting structures that are not properly bolted/secured and
therefore unstable under heavy load conditions.

9 Heavy rains can erode the construction site when the risk of flood has
been poorly assessed/mitigated.

(continued)

184 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Photographs of common construction mistakes (continued)
ID Picture Comment
10 Heavy soiling in desert conditions needs to be considered as part of the
O&M strategy. Shading of modules by adjacent rows can be avoided at
the design stage.

11 Poor DC cable management. DC cables should be kept neat and

secured with cable ties, respecting cable-bending radii.

12 All plastic glands entering primary combiner boxes should be properly

affixed to prevent slippage.

13 All plastic conduits should be filled with a suitable material, for

example expanding foam, to reduce the risk of water ingress and
rodents.

14 Cables should be protected from sharp metallic edges using

appropriate padding.

(continued)

Annex 1: Common Construction Mistakes 185

 Photographs of common construction mistakes
ID Picture Comment
15 Glands should be used for all cables entering combiner boxes, to
prevent cable movement and damage to cable insulation.

16 Drainage issues should be solved early in the construction phase.

Water is seen here jetting through the foam sealant in the flooded
inspection chamber.

17 Landscaping, re-seeding and vegetation control is required to remove

the risk of vegetation shading modules and reducing performance.

186 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 ANNEX

EPC Contract Heads of Terms 2

This Annex provides a summary of the key technical terms to be
discussed between a potential EPC contractor (the Contractor)
and the potential owner (Owner) of a megawatt-scale, ground-
mounted solar photovoltaic (PV) power plant. It is expected
that the term sheet that follows will be used to guide discussions
between the Owner and the Contractor. Throughout the term
sheet, [x] is used to indicate a value that needs to be determined
through an agreement between the Contractor and the Owner,
and in some cases an indicative value [such as 10 percent] is
provided in place of [x]. Once all the details have been agreed
upon, lawyers will typically use the term sheet to draft the full
contract.

It is assumed that all plant equipment will be sourced by the

EPC contractor and that the EPC contract has separately been
provided with Employers Requirements documentation,
which specifies minimum technical requirements for the plant
construction, including technical specifications for modules,
inverters, transformers, cables, civil works, and procedures for
safety, quality control, monitoring, and security.

Annex 2: EPC Contract Heads of Terms 187

 EPC Contract Heads of Terms

Topic Nature of Agreement

Project Name
Capacity
Owner
Contractor
Type of Contract Turnkey Engineer, Procure and Construct contract for implementation of a solar photovoltaic (PV) power plant
with a design life of [25] years.
Contract Price The Contract price is [XX].
Scope of Work The provision of all plant materials (including, support structures and PV modules).
Site preparation, ground and civil works including drainage.
Assembly and installation.
Grid connection infrastructure.
Equipment (including construction equipment).
Labour and the performance of all works and services.
Design, engineering, construction, commissioning, start-up, and testing according to industry standards.
Procurement and construction of fencing, security arrangements, and monitoring system.
Construction of all balance of plant.
Removal of debris.
Remedying defects.
Owner Responsibilities Owner shall be responsible for:
Ensuring that the Contractor has right of access to the site.
Obtaining all permits and consents required for the operation of the plant (including planning permission and
grid connection permits).
Owner shall provide Contractor with all existing site information for review. Contractor shall be responsible for
interpreting this data and for additional site investigations required.
Owner shall pay the Contract Price to Contractor according to the Payment Schedule.
Contractor's Contractor will review all relevant permits and authorisations obtained by the Owner and declare that they are
Responsibilities acceptable.
Works shall comply with requirements of the technical specifications as described in the Owners Requirements document.
Works shall comply with all applicable laws, consents, and permits (including regional and local laws).
All materials, equipment, and plant components shall be new.
The Works will be performed so as to ensure the safety and health of the workers.
The works/facility shall achieve the performance requirements and Guaranteed Performance levels.
Contractor will be responsible for:
All activities necessary for the completion of the PV plant.
Compliance with all applicable laws.
Technical design and specifications.
Quality control of PV modules, and ensuring they are installed in accordance with the module installation manual.
Safeguarding all equipment and materials, including transport and storage.
Engineering, technical design, drawings, and manuals.

The Contractor is responsible for obtaining and maintaining:

Consents and permits required to perform the works.
Export/import licences for materials, plant, equipment, and similar consents.
Consents and permits for transporting materials, plant and equipment to site, and unloading.
Labour necessary for the assembly and installation of all of the equipment, accessories, and materials provided.

(continued)

188 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

EPC Contract Heads of Terms (continued)

Topic Nature of Agreement

Quality Standards Contractor shall provide a comprehensive Quality Standards document describing plant acceptance criteria. This
shall be reviewed and approved by the Owner and will include a description of factory acceptance test procedures
and site acceptance test procedures for major plant components, including transformers and inverters.
Project Schedule Contractor shall provide a Gantt chart construction schedule. Contractor shall provide progress report updates on a
weekly basis during construction.
Subcontracting The Contractor remains fully responsible for all works completed by subcontractors. The Contractor additionally
confirms that the work of its subcontractors meets the specifications set forth in the EPC Contract and complies
with the law.
Implementation Contractor warrants ability to complete the plant, the electrical infrastructure and connection infrastructure in
accordance with the project schedule.
Liquidated damages will apply if scheduled completion dates are not achieved.
Contractor shall supply manuals, documents and records as per industry norms.
Contractor to be responsible for storage and disposal of hazardous materials and rectification of any
contamination caused by performance of the plant.
Contractor to provide spare parts and consumables.
Contractor to provide tools necessary for commissioning and testing and to make provision for commissioning
and testing to be witnessed by the Owners representative.
Site Conditions Owner is to provide Contractor with all available site information describing the physical characteristics of the
site.
Contractor to carry out further site investigations as required.
Contractor takes full responsibility and risk for further site investigations and ensures that it has studied and
inspected to its full satisfaction the geotechnical, geo-morphological, and hydrogeological studies and accessed
conditions and environmental characteristics of the site.
Contractor shall declare in the EPC contract that the site is suitable for the execution of the works but will
not be responsible for costs arising from the discovery of: a) preexisting toxic waste; b) artistic, historical
or archaeological findings; c) underground pipelines; or d) munitions, where these were not detected in the
information provided by Owner.
Completion Date The Completion Date (date of signing the Provisional Acceptance Certificate) will be achieved within [x] months
from the date of the EPC contract Notice To Proceed.

(continued)

Annex 2: EPC Contract Heads of Terms 189

 EPC Contract Heads of Terms (continued)

Topic Nature of Agreement

Acceptance Acceptance Tests
The Contractor will perform: a) tests required under the applicable law; b) commissioning tests according to IEC
62446; c) performance tests.
Performance tests will be carried out to determine whether the plant: a) has achieved the requirements for
completion; b) is compliant with quality standards; c) is compliant with technical specifications; and d) to ascertain
whether the guaranteed performance has been attained. The testing process shall be clearly described.
A test sample of modules shall be taken from the plant and sent to an independent testing institute for flash
testing.

Provisional Acceptance
The Owner shall provide a Provisional Acceptance Certificate when all of the requirements for completion have
been achieved and testing has been completed. A punch list of outstanding items will be prepared. To pass
provisional acceptance, the value of outstanding items must be less than 1% of the Contract Price. Items on the
punch list will be remedied within [x] months from signing of the Provisional Acceptance Certificate.
Signing of the Provisional Acceptance Certificate shall trigger the start of the Performance Warranty Period.

Intermediate Acceptance
The parties shall agree to requirements for Intermediate Acceptance. These will include:
A performance ratio test, averaged over one year of operation since provisional acceptance, taking into account
an agreed rate of degradation.

Final Acceptance
The parties shall agree to requirements for final acceptance. These will include:
A performance ratio test, averaged over the two years of operation since provisional acceptance, taking into
account an agreed rate of annual degradation.
The Owner shall provide a Final Acceptance Certificate when all of the requirements for completion have been achieved.
Transfer of Title The ownership of the plant, materials, equipment and warranties will transfer from the Contractor to the Owner
at provisional acceptance. The Contractor shall be responsible for any materials or other items delivered by the
Owner or by third parties up to provisional acceptance.
Warranty Periods The Performance Warranty Period will be 2 years, starting from the signing of the Provisional Acceptance
Certificate.
The Contractor shall transfer all the guarantees and warranties directly from suppliers and sub-suppliers in favour
of the Owner. This shall include:
Module Power Performance Warranty: [25] years [90% until year 10, 80% until year 25, or linear power warranty
according to the manufacturers specifications].
Inverter Warranty: [5] years.
Support Structure Warranty: [10] years.
The Defect Warranty Period will have a duration of [2] years from issue of Provisional Acceptance Certificate.
During this period the Contractor will remedy defects and omissions at its own cost.
The period will be extended by a further period of [1] year for any defect that is remedied during the initial period.
Guaranteed Performance A minimum Guaranteed Performance Ratio of [81]% will be achieved at provisional acceptance. The Performance
Ratio (PR) shall be measured at the export meter over a period of [15] days prior to issue of the Provisional
Acceptance Certificate. The PR measurement shall be temperature compensated and irradiation measured using
secondary standard thermal pyranometers. A minimum of [x]% of test time shall be at a measured irradiance above
[x]W/m2.
A minimum Guaranteed Performance Ratio of [80]% will be achieved during the Performance Warranty Period.
Liquidated damages for PR shortfalls will be provided by the Contractor, according to agreed formulae.

(continued)

190 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

EPC Contract Heads of Terms (continued)

Topic Nature of Agreement

Payment Schedule A schedule of milestones will be defined in the contract. The Owner will transfer a percentage of the Contract Price
to the Contractor when milestones are achieved:
Advance [10]%
Civil Works completed [10]%
Mounting System installed [10]%
Modules and inverters delivered [40]%
Inverters and modules Installed [10]%
Grid connection achieved [5]%
Mechanical Acceptance [5]%
Provisional Acceptance [10]%
Performance Bond At the signing of the contract, the Contractor will procure a performance bond (bank guarantee) of value [10]% of
the contract price. The purpose of this is to guarantee funds for the Owner in case: a) delay liquidated damages
are payable; b) Guaranteed Performance Ratio is not achieved at provisional acceptance; c) the Contractor has
defaulted in its obligations under the contract.
The performance bond will be returned to the Contractor at the signing of the Provisional Acceptance Certificate
Warranty Bond Upon signing of the Provisional Acceptance Certificate, the Contractor will provide a warranty bond (bank
guarantee) with a value of [5]% of the contract price.
The warranty bond will guarantee the Owner funds in case liquidated damages that are payable or the Contractor
do not meet obligations during the Defect Warranty Period. The warranty bond will be returned to the Contractor
at the signing of the Final Acceptance Certificate.
Liquidated Damages Delay Liquidated Damages: Delay liquidated damages of [0.25]% of the EPC contract price will be provided per
week of delay beyond the agreed completion date, up to a maximum cap of [10]%.
Performance Liquidated Damages: A price adjustment will apply if the Contractor fails to meet the Guaranteed
Performance Ratio during acceptance tests and does not rectify such under-performance. The liquidated damages
will be agreed as [1.5]% of the contract price for each [1]% shortfall in the PR below the Guaranteed Performance
Ratio. The cap on the performance liquidated damages will be [10]% of the contract price.
Maximum Penalty Cap The maximum aggregate liability of the Contractor for delay liquidated damages and performance liquidated
damages will be [20]% of Contract Price.
Insurance The Contractor shall procure insurance policies as follows: a) Construction All Risk Insurance; b) Marine Transit
Insurance; c) Third Party Liability Insurance; d) all other compulsory insurances according to the applicable law.
Termination The Owner shall be entitled to terminate the contract if:
The performance liquidated damages owed by the Contractor exceeds the agreed maximum cap.
The delay liquidated damages owed by the Contractor for late delivery of the plant exceeds the agreed maximum
cap.
In case of justified refusal of issuance of the Provisional or Final Acceptance Certificates.

Annex 2: EPC Contract Heads of Terms 191

 ANNEX

3 O&M Contract Heads of Terms

This document summarises the key terms to be discussed between

the potential Operations and Maintenance (O&M) contractor
(the Contractor) and the potential owner (Owner) of a
megawatt-scale, ground-mounted solar photovoltaic (PV) power
plant.When all the details have been agreed upon, lawyers will
typically use the term sheet to draft the full contract.

192 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

O&M Contract Heads of Terms

Topic Nature of Agreement

Project Name
Capacity
Owner
Contractor
Remuneration The Owner shall pay the Contractor a fixed remuneration of [x] per MWp installed capacity for each year of
operation. This will be escalated at an annual rate to be agreed upon by both parties.
Remuneration shall be paid monthly/quarterly in arrears.
Commencement Date The Contractor shall perform the services commencing on the date of issuing of the Plant Taking-Over Certificate
in accordance with the terms of the EPC contract.
Scope of Services The performance of all preventative and corrective maintenance required to ensure the plant achieves the
guaranteed availability level and/or Guaranteed Performance Ratio during each and every operational year of the
Contract term.
The Contractor shall monitor plant performance on an ongoing basis throughout the Contract term to detect
abnormal operation and implement appropriate maintenance actions.
Preventative maintenance:
The examination of solar PV plant components for operational and performance capability on an ongoing basis
during the contract term, and the performance of tasks that are aimed at preventing the possible occurrence
of future errors, disruptions or reduction in performance, in particular through the replacement of consumable
parts, or the maintenance of individual components of the solar PV plant.
Without exception, maintain the plant and its components in line with manufacturer guidelines (such that
third party warranty terms remain valid), the O&M manual and grid operator requirements. These shall be
communicated to the Owner by the Contractor within a preventative maintenance schedule held as an appendix
within the plant O&M Manual.
Preventive maintenance to be coordinated and scheduled in order to minimise the impact on the operation and
performance of the plant.
Corrective maintenance:
Shall be performed to ensure achievement of the Guaranteed Availability Level and/or Guaranteed Performance
Ratio.
When a failure or malfunction is detected that impacts plant operations, Contractor shall promptly commence
the required corrective maintenance actions in order to return the plant to operation under normal conditions of
service in accordance with agreed response times.
Monitoring The Contractor shall monitor the operation of the plant between the hours of [xx]am and [xx]pm every day,
checking its operational readiness and generation capacity. Monitoring will be performed using on-site monitoring
software and systems provided under the EPC Contract.
The Contractor will ensure that any disruption messages generated by the plant are received and analysed every
day. In particular the Contractor will carry out monitoring to at least the [DC combiner box] level. Measures
for correction of fault messages in the case of those which cannot be rectified remotely will be undertaken in
accordance with the severity of the fault and agreed upon response times.
Reporting The Contractor shall provide the Owner with the following reports, the contents of which will be detailed within
the O&M contract:
Monthly report to be delivered to Owner by the seventh calendar day of each month.
Annual report to be delivered to Owner not later than 21 calendar days following the end of an operational year.
Reports on Significant DisruptionsIf during monitoring or testing the Contractor determines serious
disruptions, damage or defects, the Contractor shall inform the Owner immediately and at the latest within 24
hours of the defect becoming known to the Contractor, detailing the type of the damage, and the anticipated
time and duration for repair.
Reports on any major maintenance to be delivered to the Owner within 7 days of completion. Report on the
rectification of defects or interruptions to the operation of the plant issued within 7 days.

(continued)

Annex 3: Operations and Maintenance Contract Heads of Terms 193

 O&M Contract Heads of Terms

Topic Nature of Agreement

Ground keeping The Contractor shall perform ground keeping and vegetation control at the plant such that plant performance
is not impeded through shading. Ground keeping shall be conducted in a manner and frequency that adheres to
permit and lease obligations and component manufacturers recommendations.
Security The Contractor will be responsible for plant security and surveillance provision during the contract term. This will
be provided on a 24 hours/day, 365 days/year basis.
Spare Parts Management The Owner will make available to the Contractor an inventory of spare parts for use in performing the Services
(The spare parts will have been previously provided by the EPC Contractor.)
The Contractor is responsible for providing all other material, equipment, tools and consumables necessary to
perform the Services.
The Contractor shall ensure that all Spare Parts are labelled and maintained in a log when received into or
withdrawn from the inventory. Contractor shall, at its own cost, replace any Spare Parts that it uses with new parts
of equal or better quality and warranty levels.
All Spare Parts remain the sole property of the Owner and shall be returned to Owner at the end of the Contract term.
All Spare Parts shall be kept by the Contractor on the Site or within an acceptable distance for prompt
transportation to the Site.
The Contractor warrants to Owner that each installation or repair performed shall be free of defects in material or
workmanship for a period of 12 months following the date of its installation or repair
Availability Guarantee The Contractor guarantees that the Availability Level of the Plant shall be at least [99] % (Guaranteed Availability
Level) during each operational year of the Contract Term starting at the Commencement date. Plant availability
shall be calculated at the [inverter] level in accordance with the methodology contained within the O&M Contract.
Measured Plant Availability shall be compared with the Guaranteed Availability Level. If Measured Plant Availability
falls below the Guaranteed Availability Level, liquidated damages shall be payable to the Owner in accordance with
the O&M Contract.
Performance Ratio The Contractor guarantees that the Performance Ratio (PR) of the Plant shall be at least [x]% (Guaranteed
Guarantee Performance Ratio) during each operational year of the Contract Term starting at the Commencement date, taking
into account an agreed upon rate of annual degradation.
For the purposes of calculating PR, plant energy output will be measured at the utility meter and plane-of-array
irradiation will be measured by at least two secondary standard pyranometers, both in accordance with the
methodology contained in the O&M Contract.
Measured Plant PR shall be compared with the Guaranteed PR value. If Measured Plant PR falls below the
Guaranteed Performance Ratio, liquidated damages shall be payable to the Owner in accordance with the O&M
Contract.
Liquidated Damages If it is established that the plant is performing in deficit of the Guaranteed Availability Level and/or Guaranteed
Performance Ratio during the Contract terms, the Contractor shall pay to Owner liquidated damages by way
of compensation. Both parties agree that liquidated damages will be sized at a level that represents a genuine
pre-estimate of losses that may be anticipated from failure to achieve the Guaranteed Availability Level and/or
Guaranteed Performance Ratio.
Limit of Liability The Contractors liability under the Contract is limited to the Contract price.
Health and Safety The Contractor shall be responsible for the safety of all Contractor and Subcontractor personnel at the Site. The
Contractor shall be responsible for ensuring the safety of all maintenance activities performed at the Site.

194 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 ANNEX

Rooftop Solar PV Systems 4

A4.1 ROOFTOP SOLAR PV SYSTEMS OVERVIEW

Rooftop solar applications A4.1.1 INTRODUCTION

are a substantial part of the Rooftop solar PV systems can significantly vary in size from
deployment of PV technology kW-scale systems on domestic properties to multi-megawatt-
and are expected to grow scale installations on non-domestic buildings such as commercial
warehouses, factories or office parks. The modular nature of
substantially in the future.
solar PV modules makes them highly adaptable for use on roof
spaces. Benefits of roof-mounted solar PV system for a developer
can include reduced land cost, the opportunity to offset
electricity consumed on site and reduced connection cost due to
close proximity to a connection point.

From a public benefit perspective, rooftop solar PV technology

is a source of distributed generation that is by its nature close
to the source of load demand. It also reduces stress on use of
scarce ground surface, especially in urban settings. With the
benefits come additional challenges in the design, construction
and operation. These additional complexities are explored in the
following sections.

While this guidebook makes mention of aspects relating to small-

scale residential systems, the main focus is on larger-scale systems
for non-domestic rooftops. The guide focus is on the grid-
connected sector and therefore does not address the additional
challenges of off-grid systems, for which battery or other energy
storage systems are required.

A4.1.2 SYSTEM SIZES

A4.1.2.1 Small-scale Residential Systems
A typical small (kW scale) residential system might consist of a
single string of PV modules connected to a single string inverter
as illustrated in Figure 33. The grid connection for a residential
system can often make use of existing infrastructure (for example
the existing power box) at the building.

Annex 4: Rooftop Solar PV Systems 195

 Figure 33: Small-scale PV System Schematic

d.c. a.c.
disconnect isolator
Inverter

LABEL
LABEL
LABEL LABEL

Installation in loft DISPLAY UNIT

0123 kWh
0123 kW
0123 kWh
Generation meter 0123 002

Main isolator
(double pole)
securable in o
position only LABEL

New a.c. installation

Example domestic system DNO

Main Consumer Unit supply
PV array - Single inverter 0123 kWh
Series connected - Single PV string Utility meter
Single string
- Connected into dedicated LABEL + SCHEMATIC
protective device in
Installation on roof existing consumer unit Existing house a.c. installation

A number of design considerations are common across designed to local and international standards (e.g., IEC
all rooftop solar PV applications. However, some aspects 62548: 2013Design Requirements for Photovoltaic (PV)
are simplified for small rooftop systems. For example, Arrays, or local equivalents) and installed by experienced
the electrical design for small systems is less complex professionals. In a number of markets, incentives require
than for large systems because small systems can often a contractor to be certified and this helps to promote the
be connected to a single phase at low voltage (LV). This quality and safety of PV design and installation.
means the need for complexity in transformer and switch
A4.1.2.2 Medium to Large Scale Non-domestic
gear design is reduced or avoided.
Systems
The project structure can be simple, as small-scale Non-domestic solar PV rooftop systems can vary in scale,
residential systems are often funded by building owners and may range from tens of kW to multi-megawatt scale.
who wish to offset their electricity use or export energy to A medium to large non-domestic system would typically
the grid to benefit from incentives such as a FiT scheme. incorporate several strings of PV modules, combined into
In some markets third party leases or loan structures numerous string inverters, as illustrated in Figure 34.
offered by solar system supply companies or banks help
residential owners overcome the high upfront cost of a While large-scale, ground-mounted PV systems can
system. utilise central inverter systems, this is not common on
rooftop arrays. Instead, string inverters are favoured in
In a number of global markets, the design and
the interest of minimising DC cable runs from the roof
installation of residential systems can unfortunately
space to the inverter, and thus minimising DC cable losses.
attract inexperienced contractors and therefore there
When compared with a small residential system, the grid
have been cases of poorly designed, ineffective or unsafe
connection for a non-domestic system is likely to involve
installations. It is important that residential systems are
additional infrastructure, including marshalling boxes,

196 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

 Figure 34: N
 on-domestic PV Rooftop Schematic

PV distribution board
d.c. a.c.
disconnect isolator L1 L2 L3 N E
Inverter

LABEL
LABEL LABEL LABEL

d.c. a.c.
disconnect isolator
Inverter LABEL + SCHEMATIC
LABEL
LABEL LABEL LABEL

d.c. a.c.
disconnect isolator
Inverter
Inverter

LABEL
LABEL
G59
LABEL LABEL LABEL
relay
4 pole protection
contractor

Installation on roof Installation in

plant room sense AC Supply
Main isolator
(4 pole)
securable in
o position only LABEL
DISPLAY UNIT
0123 kW
0123 kWh kWh
0123 002 data
AC Supply
Remote display unit Installation in main plant room
Example larger system
- Two PV strings for each inverter
- Three inverters (split across three-phase supply) Feed to 3 pole MCB in
main distribution board LABEL + SCHEMATIC
- Connected via G59/1 relay protection to 3 phase Existing Installation
MCB in main distributioin unit

transformer(s), and more substantial electrical protection. BIPV systems can make use of a number of versatile PV
The grid connection process is likely to be more lengthy module types and mounting options including:
and detailed. Recent advances in inverter technology
Flexible PV roofing.
have introduced the possibility of using micro-inverter
technology, transforming DC current to AC at the module PV used to create the facade of a building.
level, and thereby avoiding the need for central inverters. PV used to create awnings for buildings (therefore also
Other benefits include module-level controls that allow benefitting the passive solar design).
for instant adjustments to a string should any module be
Integrated glass/glass PV sky lights.
affected by debris or other performance reduction factors.
PV tiles or slates, which can be used as substitute
A4.1.3 SYSTEM TYPES roofing materials.
Rooftop solar PV systems generally fit into two categories:
Building Applied PV (BAPV) and Building Integrated PV panel-covered parking spaces/car ports are a popular
PV (BIPV). Figure 35 illustrates the difference between a way of integrating PV panels into a functional structure
BAPV and BIPV system. and while not covered here in detail, can be used in
combination with electric car charging stations.
BAPV is applicable for an existing building, while BIPV
can be utilised for new buildings incorporating a solar PV BIPV can be a good way to achieve desired aesthetic
system as part of the design. outcomes on building facades. Some commercially-
available PV modules even allow custom PV cell colours
(such as purple, yellow or green). BIPV applications

Annex 4: Rooftop Solar PV Systems 197

 Figure 35: BAPV (Left) and BIPV (Right) Systems

Source: SMA Solar Technology AG

however, are more expensive than applied PV and result in (maintenance time to repair). The safety of personnel in
sacrificed energy yield due to a reduced module efficiency gaining rooftop access should also be considered.
or compromised tilt/orientation. BAPV is simpler and
easier to install than BIPV. A greater number of building A4.2.1 SYSTEM TILT AND AZIMUTH
spaces are available with the potential for BAPV because Wind loading and rooftop dimension constraints may limit
BIPV is predominantly applicable to new buildings. For the tilt angle that can be used. Tilt angles are therefore
these reasons, the majority of systems installed globally often lower for rooftop systems. While some system
are BAPV. designs may aim for higher tilt angles to increase the yield,
greater utilisation of the available roof space is possible
A4.2 ENERGY YIELD with lower tilt angles. This is because it is possible to
There are a number of considerations for rooftop solar PV reduce the inter-row spacing of modules for a lower tilt
system energy yields. These include: angle without adversely affecting shading from row to
row.
Non-optimal tilts and orientation (azimuth).80

Potential for increased module temperature losses. For countries near the equator, such as Indonesia, a low-
tilt angle coincides with the optimal for annual energy
More complexity near shading elements.
yield.81 However, with increasing distance from the
Potential for snow cover/bird droppings/dust build up. equator, low-tilt angles can reduce the overall specific yield
for the system.
The potential for a rooftop installation to be more
difficult to access than a ground-mounted plant should Rooftops themselves are also often oriented with non-
be considered in the energy yield prediction with optimal azimuth and tilt angles. The reduction in total
respect to cleaning (soiling losses) and plant availability annual irradiation can be calculated on a site-by-site basis

80 The azimuth is the location of the sun in terms of north, south, east and west. 81 Tilt angles below 10 are not recommended as natural rainwater run-off has a
Definitions may vary but 0 represents true south, -90 represents east, 180 less effective cleaning effect leading to increased soiling losses.
represents north, and 90 represents west.

198 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

using knowledge of the diffuse and direct components
of irradiation and the albedo of the ground. In general Figure 36: Reduction in Module Efficiency with Average
the reduction in annual energy yield is usually within Temperature Coefficient
acceptable limits if the azimuth remains within 45 degrees
of the optimum orientation.

A4.2.1.1 Module Temperature Losses

Compared to a ground mount system, integrating a solar
PV system on a roof space can increase the temperature
of the PV modules, due to a reduction in wind cooling
and absorption of heat emitted by the rooftop surface
and other building surfaces. The range of temperature
loss corrections on solar PV plants could range from a
14 percent loss to a 2 percent gain, depending on the
climate, and therefore this consideration is significant. PV
module efficiency decreases as the temperature increases. It is important to model shading accurately prior to
This effect is more pronounced with crystalline silicon as construction, incorporating all shading objects so that
compared to thin-film technologies. A typical temperature the expected energy yield and financial return may
co-efficient for silicon modules is in the order of -0.43 be accurately assessed. Developers should conduct
percent power loss per degree Celsius above a 25C site inspections of the rooftop to determine current
module temperature. Figure 36 shows the relationship obstructions and gather feedback on potential nearby
between module efficiency at Standard Test Conditions high-rise buildings to be constructed. In case of negative
(STC)82 and temperature for a standard multi-crystalline feedback, such sites should be given a low priority for
silicon module. development.

To ensure that rooftop systems do not reach excessive A4.2.1.3 Snow Loss
temperatures, suitable spacing between the roof and PV
For solar PV energy yield predictions in regions that
modules must be considered in the design specifications to
experience snow fall, it is important to consider the effect
allow ventilation.
of snow on system performance. For a rooftop solar PV
A4.2.1.2 Near Shading Losses system, roof objects such as gutters, vents or adjoining
roof spaces can act as traps where snow accumulates.
Near shading losses can be significant for rooftop PV
Due to the internal wiring of typical solar PV modules, it
systems due to the location of nearby buildings, chimneys,
may be advantageous to mount modules in a landscape
air vents, trees, adjoining roof spaces, overhead lines
profile in situations where snow may build up along the
and other potential shading objects. Such shading should
bottom edge of the array. This allows by-pass diodes to be
be avoided. If shading is unavoidable, the use of string
effective and therefore reduces losses.
inverters rather than central inverters is one way to
minimise the impact of shading loss on the overall system
A4.3 PLANT DESIGN
performance.
Some design risks are elevated for rooftop PV systems
because of their potential to impact rooftop integrity,
personnel or contents within a building. The plant design
should adhere to local and international standards (such
82 Standard Test Conditions: 1,000 W/m2, Air Mass 1.5, Module Temperature 25C as IEC 62548: 2013, and the International Building

Annex 4: Rooftop Solar PV Systems 199

Code). The following sections explore plant design aspects UL2703 form the basis of grounding requirements.
that are particularly relevant to roof-mounted systems. Buildings may already be fitted with a lightning protection
Electrical designs must consider appropriate cabling system (LPS), in which case the PV installation will need to
layouts, lightning protection, and inverter selection. The be integrated into this system. This may require bonding,
civil designs must safely and effectively secure the system provision of earth tape, and surge arrestors, subject to the
to the roof, while considering maintenance requirements arrangement of the installation.
for the PV array and the roof. Waterproofing is an
important installation consideration. It is important to As with ground-mounted systems, an earthing or
avoid negative impacts on roof longevity, which can in grounding system should be applied to a roof-mounted
turn have negative impacts on roofing warranties and solar PV system for safety and to allow proper functioning
insurance. This is discussed further in sub-section 3.2 of of the system. As there is no direct connection to earth
this Annex. via ground piles, a bonding system to earth the mounting
structures should be considered. All earthing requirements
A4.3.1 ELECTRICAL DESIGN of the PV installation will need to be integrated into
the building earth requirements. The design of earthing
Many of the electrical design ratings required for ground-
systems should avoid breaching the building envelope and
mounted systems, such as voltage and current sizing and
damaging either the waterproofing system or building
isolation protection levels, are applicable for rooftop
electrical systems.
systems. However there are some additional issues that
should be considered in the electrical design phase.
For system designs incorporating multiple tilts and
orientations, it is important to ensure that, in the inverter
Minimising cable runs is more difficult for large-scale
design, only identically oriented sub-arrays are allocated
rooftop systems and this may lead to slightly higher
to a single maximum power point tracker83 (which
cable losses due to longer cable lengths or increased
usually implies the use of a single string inverter). Each
costs from thicker cables. Cable placement needs to be
PV array tilt and orientation will have its own unique
carefully considered with appropriate cable ties holding
output characteristics and therefore needs to be tracked
cables in place. Loose cables are a hazard and may suffer
separately to maximise yield.
from damage during windy conditions. Cables may also
reach higher temperatures for rooftop systems due to
Reactive power control may be required by a grid
less ventilation, increasing the resistance and, hence,
operator, with power factors lagging to leading at levels
cable losses. It is recommended cables meet or exceed the
below unity. Most PV inverters have the capability to
following requirements defined in IEC 61730-1:
supply reactive power support. If reactive power is
Size: minimum 4.0 mm2 (12 AWG) for modules incorporated into the system design then it is important
connected in series. that electrical component and inverter sizings are
conducted appropriately (generally higher ratings required
Temperature rating from -40C to +90C.
for all electrical balance of plant and inverters).
Type PV-wire, USE-2 or equivalent.
Consideration should be given to other works on
The correct fuse specification is also very important for the building that could interface with the PV system
rooftop systems, as failure to appropriately size a fuse can installation. Cable runs inside buildings may need to be
lead to a significant fire risk.

Lightning protection may be required for locations with

83 A maximum power point tracker is a component of a PV inverter (some larger
a high risk of thunderstorms; standard IEC 62305 and inverters have more than one) that varies the current and voltage of the PV
array to achieve the maximum power output.

200 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

installed in heavy duty conduits for mechanical protection issue for slopped roofs but the design of fixed systems on
and marked as solar to avoid confusion with other flat roofs, which are particularly attractive for utility-scale
wiring. solar PV use, will need particular care. Existing warranties
relating to the roof should also be checked because
A grid connection application is typically required for making any penetrations risks invalidating the warranty.
the system even if all of the energy generated by the Water damage from a punctured rooftop can lead to rot
plant is consumed in the building itself. In particular, in buildings with wood foundations and loss of structural
grid operators often use a grid connection application to integrity.
verify that anti-islanding and other safety mechanisms are
appropriate. Grid connection applications should be made A number of different fixing approaches are available
well in advance of the installation date and ensure that the depending on the roof type. Examples include standoffs
maximum export capacity is greater than or equal to the welded or screwed in place, curbs integrated into the
proposed plant installed capacity. roofing or steel grids suspended above the roof surface.
In the case of ceramic or slate tiles it is not considered
A4.3.2 CIVIL DESIGN appropriate to drill through the tile from a water-proofing
The civil design of a roof-mounted system must carefully perspective, and therefore custom-made clips or hooks
consider an appropriate mounting concept that secures the can offer a solution. It should be ensured that fixings
PV array, minimises adverse effects on the water proofing are made to structural components that are designed to
of the roof, and resists uplift. In addition, a careful accommodate extra weight.
assessment of the added roof load must be made.
A4.3.2.2 Ballasted Foundations
There have been a number of systems globally which have A ballasted foundation holds down solar PV systems with
failed due to the incorrect design and sizing of the support heavy materials such as concrete slabs. This is a relatively
structure on rooftop systems. These failures tend to be simple approach; however the roof load capacity needs
high profile as there is a significant risk of endangerment to be considered due to the additional weight of the
to humans compared to ground-mounted systems. ballast. As a result, the tilt angle of the system is normally
limited to 20 because a higher title angle increases the
There are three main foundation options in securing a PV wind loading and therefore increases the ballast weight
system to a roof: required.
Structural fixing.
Wind pressure distributions vary with location on the PV
Ballasted. array structure. Corner and perimeter arrays tend to be
Hybrid of ballast and structural attachment. loaded the highest and so require much more ballast than
interior arrays. One method of reducing the effect of this
A4.3.2.1 Fixed Foundations is to interconnect the support structures so that the ballast
A foundation with structural fixing normally consists of weight can be better distributed across the roof. The
penetrations in the roof surface and connections to the foundation system must be adequately designed so that it
module framing. is rigid enough to spread any such forces.

Fixed foundations are beneficial as they reduce the dead The ballasted system relies on the friction between the
loading to the structure and are often more flexible than roof surface and the array in order to prevent it from
other solutions. The main disadvantage of a fixed system sliding. The level of friction can have a significant impact
is that penetrations into a roof surface can interfere with on the amount of ballast required. It is possible to test the
waterproofing materials and cause leaks. This is less of an

Annex 4: Rooftop Solar PV Systems 201

potential friction of a roof using specially designed tools in Corner zones experience the highest wind loads, while
order to optimise the ballast design. interior zones have the lowest wind loads.

A4.3.2.3 Loading Assessment Generally, there are national or international standards,

A qualified engineer should conduct structural load such as the International Building Code, which can be
calculations; this should be done for every rooftop solar used as a basis for structural calculations for loading on
PV system. The structural integrity of the existing roof buildings. Examples include the Eurocodes in Europe and
space should be assessed by means of design drawing the ASCE codes in the United States.
review and visual inspection. Visual inspection can reveal
Existing design guides and codes can be used to estimate
damage or degradation of existing structural members.
these forces, but as the wind load acting on the array
Load assessment calculations should consider: is specific to the particular array and mounting system
used, the loads derived by these codes tend to be very
Assessment of the loads acting on the PV array and
simplified. If optimisation is required, as is often the
roof, including wind, snow, and seismic loads. The
case for ballasted systems where ballast weight must be
existence of the array will cause additional vertical
kept to a minimum, then wind tunnel testing tends to be
wind loads onto the roof.
undertaken and used alongside the relevant country design
Assessment of the roof structure to determine its spare codes. A number of solar PV foundation providers have
load capacity. already undertaken wind tunnel tests on their products. A
qualified structural engineer can apply these to site-specific
Comparison of the roof structure capacity with the
conditions.
new and existing applied loads.
A4.3.2.4 Monitoring and Security
Load assessments may reveal that the roof structure
cannot accommodate the added weight of the solar PV As is the case with large ground-mounted systems, a
system. In this case, structural reinforcements should be comprehensive monitoring system is required on roof-
incorporated into the system design. mounted systems. Because building systems are located
close to end users, there is the opportunity for education
The solar PV system should not allow water to collect at and marketing. Real time displays inside the building,
certain areas of the roof because this will cause additional which inform building users of the amount of electricity
loading. Water should be rapidly distributed to the overall generated and other environmental attributes, can be a
building drainage system. good way to promote an organisations green credentials.
Faults and downtime can also be monitored without
The wind loading can cause sliding, uplift, and downward having to inspect the rooftop system. There are also
loads on the PV array and roof structure. The load remote tracking systems, which allow a developer with
magnitude tends to be dependent on a number of site- many rooftop installations to monitor generation from
specific factors, such as distance to sea, character of the multiple locations.
surrounding terrain and location of the array on the roof.
A rooftop solar PV system may be split into three areas for Generally, system security against module and inverter
wind loading considerations: theft is increased due to roof spaces being generally
inaccessible to the public. Where rooftops are accessible
1. Interior zone.
from other rooftops, additional security measures can be
2. Perimeter zone. considered, such as security bolts.
3. Corner zone.

202 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

A4.4 PERMITS, LICENSING AND AGREEMENTS maintenance of a rooftop solar PV system as workers may
not be experienced in dealing with working at height.
Planning requirements for large-scale rooftop solar PV
systems differ from those for ground-mounted systems.
When assessing the risks associated with working at height
For small systems, there is often very little permitting
and developing control measures, the following hierarchy
required, other than perhaps residential construction.
should be followed:
Aspects of the approval process are generally less onerous
due to the PV array having zero land impact, and therefore 1. Avoid: working at height unless it is essential.
less effect on fauna or flora. A BAPV system may have 2. Use existing platforms: if there is an existing
minimal or no visual impact. Construction activities and purpose-built platform, then it must be used.
site access impacts still need to be assessed, however,
3. Prevent: falls by using work equipment that protects
and some environmental assessments may be required
all those at risk (e.g., access equipment with guard
depending on the location and the requirements of
rails, use mobile elevated working platforms, use
the consenting authority. There may be restrictions to
scaffolding).
development within historic districts to preserve aesthetic
harmony, which should be investigated prior to any 4. Prevent: falls by using equipment that protects the
project development. Similarly, installers should note individual (e.g., harness with a fall restraint lanyard).
the impact of glare from PV modules on neighbouring
5. Mitigate: minimise the distance or consequence of a
businesses or residences.
fall by employing personal protective equipment, fall
arrest systems, nets or soft landing systems.
Building permits are likely to assess structural designs
and potentially the roof upgrade design if structural
Training, instruction and supervision should be provided
reinforcement is required to accommodate the additional
to the workforce at each stage of the hierarchy.
weight of the PV system.

A4.6 COMMISSIONING
The ease with which any consents can be obtained
will vary from country to country and depend on The commissioning requirements for rooftop PV systems
the complexity of the planned installation. Central are similar to ground-mount systems. Standards such as
government renewable energy targets can feed down to the IEC 62446: Grid connection photovoltaic systems
local level and impact the approval process positively. Minimum requirements for system documentation,
commissioning tests and inspection should be used for
A4.5 CONSTRUCTION guidance. Further specific national requirements vary
between countries and grid operators.
PV modules are live as soon as they are exposed to
daylight, and as such, pose a hazard to installers. Due
A4.7 OPERATION AND MAINTENANCE
to the location of installation, particular consideration
should be given to ensuring that personnel accessing roofs Fixed solar PV rooftop systems, such as fixed, ground-
for maintenance and other activities are not exposed to mounted PV systems, are low maintenance in nature; they
electrocution hazard. The design of the system should have no moving parts and PV modules have a design life
limit open circuit voltages and ensure that live parts are of in excess of 25 years. All solar PV systems require some
suitably insulated from contact. maintenance, which includes regular checks of wiring and
components, replacement of faulty modules and inverters
There is additional complexity due to the awkward size and in some cases, module cleaning.
and weight of modules while working at height. Therefore,
extra care needs to be taken during installation and

Annex 4: Rooftop Solar PV Systems 203

A detailed O&M manual for a rooftop PV system should generation, smart metering could add value to solar
outline the procedure for carrying out maintenance power generated during peak demand times, and this
activities safely at height. There are operational can support the business case for projects.
considerations pertaining to the roof space. A problem
such as a leak in the roof can be exacerbated due to the Net metering has been controversial in the United
difficulty of maintaining the roof integrity with a solar PV States because, though it provides a successful
system in place. Therefore, the operation and maintenance incentive for distributed generation, it ignores the
plan, in combination with the lease, should define ancillary benefits the transmission and distribution
responsibilities and procedures for maintenance for the system provide. In countries where the grid operator
roof space and PV system. does not have the option of charging for the benefits
of transmission, a net metering scheme may not be
A4.8 ECONOMICS AND PROJECT STRUCTURE wise from a public policy perspective.

Installing PV systems on rooftops allows a direct feed into 2. Gross metering: All of the PV generation is exported
a nearby load (often the building on which the system to the grid. This is common where governments offer
itself is mounted) or fed into the grid. Both have the a FiT to PV system owners. The building energy
potential to reduce transmission and distribution losses, requirement is drawn from the grid, and metered
thus utilising the rooftop PV generated power efficiently. separately on regular (non-FiT) rates.
Because of the ability to offset electricity purchased to
FA4.8.2 FEED-IN TARIFFS (FiTs)
supply the building, the system has the opportunity to
compete with residential and commercial electricity rates. In some markets, governments offer FiT schemes that
provide a premium price for solar generation. Often FiT
A4.8.1 METERING schemes offer a higher premium for rooftop systems over
The electricity generated by a solar PV rooftop system ground-mounted systems, which recognises the additional
can be exported according to a number of metering complexity as well as operational costs of rooftop
configurations, depending on the specific project design and installation. The FiT is usually regulated by
requirements and power purchase or FiT arrangements. government and executed by a government electricity
Two common and distinctly different metering retailer or utility.
arrangements are:
A4.8.3 POWER PURCHASE AGREEMENTS
1. Net metering: The PV system supplies the building
There is the opportunity to sign a PPA with the building
load and exports any excess energy to the grid.
user, in which case the system would typically be designed
When there is insufficient sunlight to generate power
to supply an amount less than or equal to the building
(e.g., at night) the building load needs are met by
load. Alternatively the building owner may also be the
energy imports from the grid. A bi-directional meter
system owner and a PPA could be made with an electricity
is installed to measure and record the net result. If
retailer or utility, which would not limit the design system
there is a PPA in place for the solar power, a second
size to the building load.
dedicated meter might be used to record the energy
generated and exported by the solar array. Smart
A4.8.4 LEASE AGREEMENTS
Meters or time-of-use meters are more commonly
being used by retailers and utilities, and determine If a third party owns the solar PV system, leasehold with
the value of the energy based on the time of day. the rooftop owner is required for the project term. The
If peak demand occurs at the same time as solar project term is dictated by the project financial business
case and is commonly defined in a power purchase

204 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

Box 17: Lessons Learned from a 1 MWp Rooftop PV Array, India

As the market penetration of larger rooftop solar PV installations increases, the issues and differences between rooftop PV systems and
ground-mount systems become more apparent. The siting, physical integration, interconnection and installation of rooftop PV systems
all typically require more detailed field work, analysis, and planning compared to ground-mount systems. Several of the issues may be
categorised as follows:
Siting to maximise generation.
Roof loading and method of attachment.
Interconnection.
Construction requirements.
Access and safety.

Experience with rooftop arrays in India has yielded solutions to many of these issues.
Siting to Maximize Generation
Location is often a trade-off as the roofs are not oriented optimally to the solar resource and adjacent structures can shade the array
for significant periods of the day. A detailed site visit and measurement of dimensions are required for input into a shading model for
the yield analysis. Large periods of shading can significantly alter the economics by reducing yield. Shading models require effort and
expertise, but can prevent underperforming installations. Beyond failing to meet profit goals, contractual obligations can come forth
where the building owner may not be receiving the output that was warranted in the PPA. An instance was highlighted in a project
where shading from a building structure shaded half the array for several months each year. While there was not an easy solution, the
energy yield prediction could have identified this.
Roof Loading and Method of Attachment
The building structure design must be reviewed to ascertain its ability to accept the additional dead weight loads and potential lifting
loads of PV arrays during high winds. While there is typically a margin in the roof load capacity, one must consider the individual
frames and various sheathing and membrane on which the array will rest. The choice to use a ballasted array versus a mechanically
secured frame utilising penetrations avoided concerns of leakage and the need to seek approval for the attachment method from the
architect and the roof membrane provider, thereby saving on cost and reducing risk.
Interconnection
Building power and facility areas are often built with minimal future expansion in mind, and require codes for access and open space.
When a PV system must run power conductors via conduit and establish correct disconnects, metering and entrance into the main
power panel, the job is often more difficult and requires preplanning and design. While one project had wall space for the correct PV
system disconnects, there was no available space on the main panel and a larger panel had to be incorporated.
Construction Requirements
Rooftop installations require clear and practiced planning for items such as:
Any required roof penetrations as the underlying substrate must be known.
C
onduit runs to the power room and potential to interrupt fire blocks by the conduit installation, and assessing the run to not
damage other conduits/services.
An outage may be required in the building, and interrupt services.
Precautions to protect the roof membrane and related structures.
Access for cranes or material lift equipment, including a material storage plan during installation.
Roof space was tight on one project and this made construction in a small area more difficult. Because the crane was only available
for a short period of time, all of the modules were delivered onto the roof space at once. This became problematic as it left very limited
room for assembly activities. While there may not have been an alternative, further planning would have been beneficial.
Safety
Safety is paramount because working at height, working with live modules, and working with high voltages present multiple hazards.
As with the installation planning, safety is an integral part of any job and the various hazards must be inventoried, reviewed, and
discussed with all personal.
With multiple workers on the roof, various staff were working concurrently on the DC array string wiring. This led to uncontrolled
voltage and current rises. Working practices had to be changed to reduce the electric shock risk.

Annex 4: Rooftop Solar PV Systems 205

agreement (typically 1525 years). It is important that the system owner is responsible for capital and maintenance
lease terms are well defined and that they ensure: costs and benefits from the lease payments and any tax
incentives to achieve an overall savings compared to not
All construction activities can be undertaken.
having a solar PV system.
Solar access is maintained i.e., activities that shade the
array are not permitted for the duration of the project. The uptake of third-party leases is most successful where
the host saves money as compared to paying their normal
Access is granted to the array, inverters, monitoring
electricity bill, i.e., in situations where PV generation
equipment and electrical balance of plant.
is at grid parity or has been brought to grid parity84 via
A clear definition is established for responsibilities government renewable energy incentives. The system
and roof membrane impacts and roof maintenance depends on hosts being creditworthy off-takers, and
requirements. therefore, credit checks are a prudent pre-requisite for the
A clear definition is made for what happens at the owner when selecting appropriate hosts.
end of the lease term. The system might be de-
commissioned or offered for sale to the building owner. A4.9 CONCLUSIONS

Rooftop solar PV systems offer an attractive option for

Legal and technical advisers may be required to ensure
future development. While using a roof space introduces
the system design is compliant with the terms of the lease.
some degree of complexity to a project, there are
Rooftop solar PV systems are generally designed for a
also technical and commercial benefits. Commercial
2530 year lifetime. The lease should therefore consider
benefits for developers include avoidance of land costs,
the building requirements during this period including
offsetting electricity consumed on site at a higher value
re-roofing and maintenance. It should be noted that
than exporting, and the opportunity for an onsite grid
some module warranties are voided if a PV system is
connection point.
moved, and therefore any plans to move modules should
be discussed with the manufacturer to ensure warranty Consenting timeframes and costs for the project may be
requirements are met. reduced due to avoidance of land impact. There are also
educational, marketing, and entrepreneurial opportunities
A4.8.5 THIRD-PARTY LEASES AND LOANS
introduced by implementing renewable energy at the point
For smaller residential systems, FiTs, capital grants or of use as well as local job demand.
simply lower electricity bills might provide economic
justification for a system. In global markets, in particular It is paramount that qualified professionals carry out
the United States, innovative loan or third-party lease design work, particularly with regard to structural
schemes are becoming more common. These schemes assessments and energy yield. Waterproofing is an
can be offered by solar PV system providers, financial important design and installation consideration for
institutions or utilities as a means to address the capital rooftop systems. It is important to avoid negative impacts
cost barrier to homeowners installing PV systems. on roof longevity and existing warranties and insurance.
A number of project financing structures and metering
In the United States, third-party lease structures are arrangements are available which can help to support the
very common. The host does not pay for the electricity business case for rooftop solar PV installation.
produced by the solar PV system, but instead pays a lease
payment to a PV system provider. This may be a regular
payment, which increases annually, although typically
below the rate increase of grid-supplied electricity. The 84 Grid parity occurs when the levelized cost of electricity is less than or equal to
the price of purchasing power from the electricity grid.

206 A Project Developers Guide to Utility-scale Solar Photovoltaic Power Plants

ifc.org
June 2015