Co-investing in growth and capability building. Players along the solar value chain can deepen partnerships through joint capability building and capacity expansion. For instance, a developer could co-invest with an EPC to build a workforce-training center to address the shortage of construction labor. The developer could use its community ties to assist with talent attraction, securing a skilled workforce to install its renewables projects. Meanwhile, the EPC could implement a training program that is compatible with the intended project pipeline and offer consistent, localized work to program graduates by collaborating with the developer on an efficient installation process and project sequencing. Joining forces with local government, unions, or a community trade school could also strengthen the partnership. Risk ownership and contracting EPC availability has become a tighter bottleneck on project pipelines, pushing owners to engage EPCs earlier, consider less-experienced players, and absorb greater pricing risk for labor and materials. Stakeholders, including the owner, developer, EPC, and suppliers, can shift their contracting approach to reduce disruptions to their agreements and promote more-efficient project delivery. These stakeholders can revisit the allocation of responsibilities and risk, as well as engaging in more collaborative contracting. Adapting to new responsibilities. The line between the responsibilities of the EPC and those of the developer is already blurring as some developers have shifted away from turnkey contracts. Our survey and interviews with industry experts indicate that an increasing number of owners are expanding in-house procurement capabilities over the next five years. Developers are already delivering projects with engineering, procurement, and construction management (EPCM) and project management contractor (PMC) models that enable more owner oversight and control, and some utilities are expected to follow suit. Revisiting the allocation of risk. Risk ownership is another aspect of contracts that is ripe for revision. Recent contracts with EPCs have tended to shift more risk onto the project owner. However,
Forming partnerships will continue to be a winning strategy in solar project delivery, but the landscape of partnerships is expected to change going forward. First, the industry could shift to include a broader set of stakeholders vying for committed partners. Second, new approaches to joint business growth and capability building could deepen partnerships and promote collaboration across larger and longer-term project portfolios. Expanding the industry. Incumbents will expand their businesses to take advantage of IRA tailwinds, but rapid market growth also opens the door for other players to build a presence in renewables. For example, it has become potentially more attractive for regulated utilities to self-develop renewables, since they could not efficiently monetize the Solar Investment Tax Credit but can take full advantage of the alternative Solar Production Tax Credit created by the IRA. New types of EPCs could also enter renewables. A few large, diversified EPCs that serve other industries have begun expanding into solar. And as owners look for available talent pools to get projects in the ground, local or regional contractors could also be reskilled to install solar projects. Shifting to portfolio partnerships. Contracting across a larger pipeline of projects can create flexibility to reallocate labor and materials to the projects that are ready to go. Shifting from one-off projects to larger pipelines also helps align incentives for partners to support each other’s growth and productivity improvements over time. For example, to establish a multiyear solar portfolio, a utility developer might contract an EPC that currently serves the developer’s other transmission assets but has ambitions to expand into renewables. The utility could procure equipment in-house—such as panels, inverters, trackers, and racking—to manage long lead times and leverage economies of scale across multiple projects while the EPC focuses on building the labor and technical skills to install solar. Greater cost transparency could allow the utility to monitor efficiency gains over time and set realistic expectations for the first few projects. The project load could also ramp up in stages, allowing the EPC to streamline the installation process and implement learnings on future projects.
Accelerating the journey to net zero
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