Cost over-runs and delays hit more solar projects and contractors

The big hit suffered by companies contracted to build the boom in solar farms in Australia has extended to three newly completed solar projects in NSW, where owner Neoen says it received more than $22 million in damages because of the loss of revenue caused by connection delays.

Talk of cost-over-runs, and contract disputes between developers and EPC contractors have been widespread through the industry over the last year, with at least some of the issues caused by strict new rules imposed by networks and the Australian Energy Market Operator.

The listed contracting giant RCR Tomlinson last month revealed it had a $57 million cost-over-run at two Queensland solar projects – Daydream and Hayman – and had to take a major hit to its accounts, and issue new shares to raise money to deal with its losses.

Concerns about cost over-runs and contract disputes at solar projects were first raised by RenewEconomy earlier this year, with most solar farms suffering delays because of stricter requirements imposed by the Australian Energy Market Operator and delays at the local network level.

RCR Tomlinson cited “external” delays, and local issues such as bad ground conditions – which resulted in greater piling needs and costs – and poor weather.  Most other solar projects have connected much later than planned, and much of this has been blamed on tough new connection requirements, and delays caused by networks in some cases.

Now French-owned Neoen has also revealed details of two contract disputes over its 116MW (AC) portfolio of solar farms in New South Wales  – Dubbo, Griffith and Parkes – and the Degrussa off-grid solar and storage project in Western Australia.

In documents published for its initial public offering that aims to raise some $850 million, Neoen says it received €14 million ($A22.5 million) in “lliquidated damages” related to lost revenues from delays to connection for the 55MW Parkes, 36MW Griffith and 25MW Dubbo solar farms.

The Neoen document does not mention the counter-party, but the individual web sites for the solar projects name Bouygues Construction Australia as the EPC contractor.

Neoen notes the new rules being imposed by AEMO. “Some projects have encountered difficulties with construction contractors, who may have difficulty assessing connection risk, due to the uncertainty in that regard.”

Neoen also has a claim against Germany’s Juwi over problems at the Degrussa solar and storage plant at the copper mine of the same name owned by Sandfire Resources in Western Australia.

The 10MW solar and 6MW/1.4MWh battery installation is the largest off grid installation of its type in the world, the document says, but a “blackout” in October 2016 meant that the plant was offline for most of the first half of 2017.

Neoen says it received a claim for $A600,000 from Juwi for the cost of extra work not covered by the EPC contract, but Neoen has made a counter claim of $A2.9 million for the loss of revenue from the project. It says the dispute is still not resolved.

Concerns about solar projects first surfaced when AEMO clamped down on what is known as the “continuous uninterrupted generation”, meaning that many solar farms needed greater inverter capacity to ride through events.

Newly enforced power system strength requirements have also caused delays and added to the costs of many projects. Some unsuspecting project owners have also been caught out by changes to marginal loss factors and warnings that they could be curtailed because of lack of grid infrastructure.

Some developers have criticised AEMO and the networks for being heavy-handed. AEMO CEO Audrey Zibelman recently admitted the stricter rules were causing delays, but also complained about the quality of some developers.