The value of performance guarantees and equipment warranties in energy storage projects is influenced by several key factors:
Key Factors Influencing Value
- Assignment and Enforceability:
- Performance guarantees and equipment warranties must be assigned to the project company before project operation to allow direct enforcement.
- These guarantees should be provided by creditworthy counterparties to ensure reliability.
- Technology Risks Mitigation:
- Performance guarantees and equipment warranties help shift technology risks from the project company to the technology vendors, providing assurances to lenders about equipment performance.
- Special focus is given to mitigating risks related to capacity degradation and safety issues, especially with lithium-ion batteries.
- Project Risks Assessment:
- Lenders conduct thorough diligence on project risks, including construction risks and operational limitations, which can be mitigated by robust guarantees and warranties.
- Maintenance and Operations:
- Operation and Maintenance (O&M) agreements are essential for ensuring system longevity and performance, which in turn impacts the value of these guarantees.
- Regulatory and Legal Compliance:
- Compliance with regulatory frameworks is critical for maintaining warranty validity and project financial viability.
- Supply Chain Reliability:
- The supply chain’s stability, including component warranty duration, affects overall project reliability and the perceived value of guarantees.
- Project Location and Environmental Factors:
- Environmental conditions and remote locations can complicate maintenance and affect warranty terms and validity.
- Market and Financial Factors:
- Economic incentives, such as government subsidies or tax credits, can enhance project profitability but require compliance and reporting.
By carefully addressing these factors, project developers can enhance the value and effectiveness of performance guarantees and equipment warranties in energy storage projects.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-key-factors-that-influence-the-value-of-performance-guarantees-and-equipment-warranties-in-energy-storage-projects/
