Independent engineers play a crucial role in assessing the creditworthiness of energy storage projects, particularly in the context of project financing. Their primary function is to provide a third-party assessment that validates whether a project is technically sound and financially viable from a lender’s perspective. Here are key aspects of their role:
Key Responsibilities of Independent Engineers
- Technical Due Diligence: Independent engineers conduct thorough technical due diligence to ensure that the project design and intended operation are appropriate. This includes examining the project’s ability to meet commissioning testing requirements and minimum performance standards under applicable offtake agreements.
- Technology Risk Assessment: For energy storage projects, especially those using lithium-ion batteries, independent engineers assess technology risks such as capacity degradation and safety issues related to overheating. They help lenders understand these risks and how they are mitigated by performance guarantees and equipment warranties.
- Financial Viability: Independent engineers help assess the financial viability of a project by analyzing its ability to generate reliable returns over time. This involves evaluating the project’s economic model, revenue streams, and operational costs to ensure it can meet debt service obligations.
- Bankability: Their reports serve as the cornerstone for project bankability, providing lenders and investors with the confidence that the asset will deliver reliable returns. Without a positive assessment from independent engineers, projects often struggle to secure funding.
- Risk Mitigation: By identifying potential risks and recommending measures to mitigate them, independent engineers help project companies secure financing by ensuring lenders that the project meets baseline technical and financial standards.
In summary, independent engineers are essential for assessing and confirming the technical soundness and financial viability of energy storage projects, which is crucial for securing project financing.
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