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When it applies to a wind turbine, the term “commissioning” generally refers to the process by which the erected turbine is inspected to make sure it was assembled properly, run through a series of standard operational tests, synchronized to the electricity grid and certified as safe for continuous and reliable operation.

In the wind industry, wind turbines are almost always commissioned by the wind turbine vendor or manufacturer. The standard pre-operational tests for each model of wind turbine are different, as are the steps required to correct any problems.

The manufacturer, as the party most familiar with the type of machine, is the party best able to conduct the commissioning process. Furthermore, if there are problems found with the wind turbines, the manufacturer will be obligated to make the required repairs in order to permit the turbines to be commissioned. In some wind turbine supply agreements, commissioning is coupled with the requirement that the turbines satisfy certain performance or run tests over a short period of time as well.

The commissioning and acceptance test provisions in the turbine supply agreement are of keen interest to both the turbine vendor and the developer. For the turbine vendor, commissioning is usually the basis for collecting its final payment under the turbine supply agreement. For the developer, commissioning is both the point at which the developer can put the turbines into service and start producing revenue and a chance to have any final problems with the turbines corrected before the developer releases the final payment to the vendor.

In most instances, the commissioning obligation is part of the turbine supply agreement and is included as part of the purchase price of the turbines. In some instances, commissioning is under a different agreement and is paid for separately.

However, even when a separate agreement is used, the turbine supply agreement typically ties a final turbine payment to the commissioning of the turbines.

The first issue to address in the turbine supply agreement or separate commissioning agreement is one of timing. Because the wind turbine vendor delivers the turbine components early in the construction process and then must return to the project site to do the commissioning, the gap between component delivery and commissioning can be several months.

Additionally, it is difficult to set a fixed date for the turbine vendor’s commissioning crews to arrive at the site. Construction could take longer than anticipated, there could be lengthy weather delays, the interconnection to the electrical grid could be held up or several other setbacks could occur. As a result, the vendor will require a long notice period (usually 30 to 60 days) before its commissioning crews arrive at the site.

Developers are anxious to get their turbines commissioned as soon as possible after erection so that the machines can be put into service and begin generating revenue. Thus, developers tend to provide notice during project construction based on an estimated start date for commissioning. This can be somewhat dangerous since “stand around” days or “owner-caused delays” will be charged separately to developers and can add up quickly.

Furthermore, a commissioning crew must be allowed to work continuously from the date of arrival until completion, or developers will be required to pay for extra days of having the crew on-site. Therefore, any delays caused by bad weather, a turbine not being assembled and erected properly or grid-connection issues could all be considered owner-caused delays and may result in charges of several thousand dollars per day to developers.

The next issue is what commissioning and acceptance test requirements will be required of the turbine vendor. Most vendors will suggest that merely running the turbine through their standard set of pre-operational tests and ensuring that the turbine is synchronized to the grid will satisfy commissioning obligations.

Many developers, however, may find that approach inadequate, especially if the final payment under the turbine supply contract is tied to commissioning, as it almost always is. Developers and their lenders are often concerned, especially with newer turbine designs or turbines installed in areas with weak grids, that the turbines, although commissioned in accordance with their tests, will not properly operate either individually or as a group. To address this concern, the turbine supply agreement – or commissioning agreement if commissioning is handled by a separate agreement – will include both a requirement that the turbine pass its standard pre-operational tests and be synchronized to the grid and a requirement that the turbine satisfy certain operational or run tests before it is deemed commissioned.

A typical acceptance test might require that the turbines, both individually and as a group, run at a level of at least 95% availability for seven consecutive days and that each turbine and all or a large percentage of an entire project run for at least six hours at full power without faulting off. This will show the developer and its lenders that the turbines can both operate as advertised and that the machines are properly synchronized with the electrical grid.

Obviously, in order to complete these tests, adequate wind must be available. Some vendors rightfully complain that if they accept these tests, but there is no wind, the tests (and the vendors’ final payment) may never occur. Thus, many developers and lenders include a clause in the test procedures that provides that if the tests cannot be completed due to low wind for some period of time (e.g., six months), the developer would, nonetheless, make the final payment to the turbine vendors.

Another type of acceptance test that is sometimes also used is a limited power measurement test that measures the power output based on a particular wind speed. This is different from the more formal power curve test that is required in most turbine supply agreements, which can take several months. This limited measurement test is sometimes used with newer machines or turbines that have not yet undergone a full power curve test. Under this test, the power output is measured and compared to expected output. If the deviation is significant, the turbine vendor is obligated to repair the turbine or pay damages.

The final issue in the area of commissioning is what happens if the turbines are not commissioned on time or fail to meet the agreed acceptance tests. Under a typical turbine supply agreement commissioning provision, the turbine vendor is obligated to return to the project site with one or more commissioning crews and continuously commission turbines over a set time frame (assuming no owner-caused delays).

The length of the commissioning time frame is subject to negotiation, with the vendor seeking as much time as possible to correct defects or other issues that may delay commissioning and the developer pushing to have the project become operational as soon as possible. If the vendor is unable to meet the deadline for commissioning, either because it is late getting commissioning crews to the site or because the turbines are found to have problems or defects that do not allow them to be commissioned within the agreed time frame, the developer will demand and expect compensation for its lost revenue. Usually this takes the form of liquidated damages for each day that the turbines are late being commissioned.

However, these liquidated damages can be expanded to cover other damages, such as damages under the power purchase agreement or lost tax benefits if the commissioning delays result in additional damages to the developer.

If the turbines are delayed in passing their specified acceptance tests, the turbine vendor may need to pay liquidated damages to the developer, as long as the delays are not caused by insufficient wind in which to conduct the tests. The failure to meet run tests or similar tests may demonstrate that the turbines are not ready for “safe, continuous and reliable operation,” and such failure is generally treated in the same manner as the failure to meet the vendor’s standard commissioning tests.

However, whereas late-delivery damages will seek to compensate the developer for the additional construction costs associated with the delays in component deliveries as well as lost revenue, late-commission damages generally seek to compensate for only lost revenue. Theoretically, late-commissioning liquidated damages should be at a lower amount than late-delivery damages. In practice, however, the amounts are often the same. w

 

Edward Zaelke is co-chair of the project finance practice at law firm Akin, Gump, Strauss, Hauer & Feld and is an expert in the legal aspects of wind energy development and finance. He can be reached at (213) 254-1234 or ezaelke@akingump.com.

Industry At Large: Commissioning

How Commissioning Impacts Turbine Supply Agreements

By Edward Zaelke

Even though a series of standard operational tests is all that stands in the way of turbine certification, the process to stamp the machines as reliable can be problematic.

 

 

 

 

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