August 2, 2021
Before signing off on any major projects, it is important to note the terms and conditions outlined in the contract. Performance guarantees allow solar contractors to ensure the quality and performance of their solar installations. Read on to learn more about performance guarantees and terms to look out for when agreeing upon a contract.
What is a Performance Guarantee Agreement?
A performance guarantee agreement is generally an agreement between the guarantor and consumer which outlines and acknowledges the obligations and limitations stated in the power purchase agreement (PPA). It essentially sets forth the terms and conditions of the agreement by the seller.
What is Capacity Testing?
Capacity tests are used to demonstrate the performance of solar systems to buyers or lenders to allow project owners to pass the risk of an underperforming facility to the contractor responsible for designing and/or constructing it. This serves as protection for the project owner to make up the revenue shortfall for under-performance so that the project company has sufficient funds to repay its lenders and earn back the expected return on equity. The energy yield is verified on an annual basis and depends largely on its geographic location.
What are Liquidated Damages?
Liquidated damages are fixed amounts of money settled by both parties in a contract, which cover the extent of injury or actual damages from a violation the contractor could cause for the consumer.
What is a Weather-Adjusted Performance Guarantee?
The Weather-Adjusted Performance Guarantee uses the solar resource index to adjust the initial monthly estimates for the solar resource patterns in the past years. This is calculated by multiplying the monthly system energy production for the baseline year by the solar resource index.
Types of Risks
There are various risks to keep in mind that may hinder your solar project and should be addressed in your contract. Such risks include equipment risks, installation risks, operations and maintenance risks, utility risks, and ground fault risks. Be sure to ask a trusted expert to explain these risks and how the guarantor would address these potential issues if they were to occur.
Interested in going solar? Reach out to YSG Solar today. We have been well established in the solar industry for over a decade now, developing everything from residential rooftop projects to large-scale solar farms. To learn how much you could save with solar, call now at 212.389.9215 or send us an email.
YSG Solar is a project development company responsible for commoditizing energy infrastructure projects. We work with long-term owners and operators to provide clean energy assets with stable, predictable cash flows. YSG's market focus is distributed generation and utility-scale projects located within North America.
Sources:
https://www.lexology.com/library/detail.aspx?g=6e43e5ee-b327-4159-abf9-E6f80de8ffe3
https://www.wsgr.com/images/content/2/3/232/braff-103112.pdf
http://www.cleanpower.com/wp-content/uploads/2012/02/078_WeatherAdjustedPerformanceGuarantees.pdf
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