July 17, 2023
Onshore Wind Farm Permits, Regulations, and Contracts for Construction – Part 2
This blog post is the fourth in a five-part series related to onshore wind energy. The series covers topics including onshore wind turbine and wind farm basics, planning and scheduling considerations for onshore wind farms, the permitting and approval process, and construction considerations for onshore wind farms. Offshore wind facilities will be discussed in a separate blog post series.
This is the second of two posts discussing the major permitting, regulatory approvals, and contracts associated with the development of an onshore wind farm.
An interconnection agreement is a contract/agreement for connection to an existing electrical grid and should not be confused with a Power Purchase Agreement (discussed in the third blog post of this series). An interconnection agreement may also include the requirement for any upgrades necessary to connect to the grid to accept power from the new wind facility. The cost of these upgrades (if required) should be considered in the overall wind farm feasibility study.
Prior to the official execution of the interconnection agreement, an interconnection study is typically conducted to determine if there is capacity on the existing three-phase transmission system. The interconnection study should also consider the process and required permits and approvals necessary to connect to the existing system. As discussed in the second blog post in this series, access to three-phase power lines is as important as the wind resource itself. The cost to construct additional three-phase power lines may prohibit advancing the project.
Another consideration in the interconnection study is the distance from the wind farm to the transmission lines. Feeder lines will need to be constructed from the wind farm to the three-phase transmission lines. These feeder lines typically operate at a higher voltage than the turbine produces, requiring each turbine to have a step-up transformer. The cost of these feeder lines is also a major consideration in the overall feasibility study.
It is crucial to research the interconnection process and requirements early in the planning phase. This process may take years, and the costs to connect to an existing system may be prohibitive to the project. Part of the time-consuming process is acquiring the regulatory approvals at the state and/or regional level. These approvals and the associated processes should be included in the interconnection study.
The interconnection process and approvals may be one of the most difficult and time-consuming processes in the development of the wind farm. This process will identify the feasibility and cost of utilizing the existing electrical grid, which are major considerations in the decision to move forward with the wind development project.
Similar to a PPA, experienced legal counsel is typically involved in the preparation and execution of the interconnection agreement.
Execution of Engineering, Procurement, and Construction (EPC) Contract
Concurrent with the permitting and approval processes, an owner will execute a contract for the design and construction of the wind farm. Many of these contracts are engineering, procurement, and construction (EPC) contracts. In these types of contracts, the contractor is responsible for all phases of the work. However, an EPC contract for a wind farm may be slightly different, as the owner will typically be responsible for the procurement of the wind turbine components, and the contractor will be responsible for procurement of the remainder of the materials necessary for construction. The owner’s procurement of the wind turbine components is discussed in more detail below.
Other owners may select another type of contracting method. For example, if an owner has familiarity with a local market, the owner may elect to execute an engineering, procurement, construction management (EPCM) contract, in which the selected contractor will serve as the construction manager and the owner will contract with the construction contractors to perform the work. With this type of contract, the owner maintains more control than in the EPC model, and the selected contractor manages the contracts under the direction of the owner.
Purchase Agreement/Contract for the Wind Turbines
Due to the long lead time of wind turbine components, the contract for the wind turbines should be issued as early in the project as possible. Of course, this cannot be completed until the engineering design is completed and the turbines are specified. Typically, an owner will execute the turbine supply contracts for the wind turbines and turn them over to the contractor for erection.
Due, in part, to the size of these turbines and the location at which they may be fabricated, the procurement time for towers, blades, and nacelles is often more than one year, depending on the source location and market demand. Additionally, the components may be manufactured overseas and need to be shipped to the site by boat, then by road and/or rail. Typically, contracts with turbine manufacturers stipulate that the turbine manufacturer will deliver each component to the pad location for its respective wind turbine. With this type of contract, the owner is responsible for the components until they reach the pad location. This requires detailed planning and scheduling, as the access roads and pads will be constructed based on the sequence of turbine component delivery.
Alternatively, an owner may elect to have the turbine components delivered to an overall laydown yard. In this case, the owner would then need to contract with a separate entity (possibly the construction contractor) to transport the large turbine components to their specific sites within the wind farm.
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Onshore Wind Turbine Basics: Parts, Power Generation, and More
This post on wind power basics and the components of wind turbines and wind farms is the first in a series about onshore wind energy.
Onshore Wind Farm Planning: Site Selection, Requirements, and More
This post on the planning and scheduling of wind farm construction is the second in a series about onshore wind energy.
Onshore Wind Farm Permits, Regulations, and Contracts for Construction – Part 1
This post discusses the major permitting, regulatory approvals, and contracts associated with the development of an onshore wind farm.