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A photovoltaic (PV) system can change ownership several times throughout its 20-plus-year operational life. Each buyer and seller involved in these transactions may view the same project or portfolio through completely different lenses. To put it simply, the seller will aim for the highest possible price, while the buyer will push for the lowest. Ideally, the final sale price will land somewhere between the two parties' starting points. However, when it comes to negotiating the deal, the technical aspects of the system become crucial. This article offers a guide for buyers to adjust the price based on a technical risk evaluation of the PV system.
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Sellers usually initiate a Request for Proposal (RFP) to attract qualified buyers interested in purchasing either a single installation or a collection of projects. The RFP generally includes high-level details about the assets. Potential buyers are then filtered down to a smaller group, often referred to as the "shortlist." Members of this shortlist gain access to more detailed technical information and are given a limited timeframe to review the materials, request any additional data, and submit their final bid. Sellers don't provide all the necessary information upfront, so buyers need to ask for specific documents. It's essential for buyers to request site visits and access to the following:
| **Item** | **Details** |
|----------------------------------|--------------------------------------------------|
| Engineered Drawings | Electrical, Mechanical, Civil |
| Solar Yield Models | PVSyst Reports |
| Equipment Datasheets | Manufacturer specifications |
| Interconnection Approvals | Regulatory approvals |
| Construction Permit Approvals | Legal documentation |
| Commissioning Reports | Final inspections |
| Maintenance Logs | Historical upkeep records |
| Historical Energy Data | Performance metrics |
Time is always of the essence during the technical due diligence phase. Buyers must work efficiently to minimize costs if the acquisition proves unfeasible. Conducting a thorough review requires a multidisciplinary team that collaborates closely. This team might include electrical engineers, civil engineers, construction managers, O&M technicians, asset managers, and performance analysts. Many buyers find it advantageous to hire an independent third-party engineering firm with O&M experience to handle these urgent, cross-disciplinary reviews.
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### What to Expect from Your Third-Party Independent Engineer?
The IE should break down their services into stages, ensuring the process remains comprehensive yet flexible enough to stop if the buyer decides the asset falls outside their risk tolerance. Dividing the review into distinct tasks allows the buyer to review individual reports and discuss high-risk findings before deciding whether to continue with further due diligence. Here's a common outline of the technical due diligence process:
1. **Equipment, Construction Permit, and Interconnection Approval Review**
- Check if the equipment manufacturer is still in business.
- Ensure proper permits were obtained and closed out.
- Verify compliance with interconnection standards.
2. **Engineering Design Review and Solar Yield Assessment**
- Identify design flaws that could lead to costly repairs or higher maintenance fees.
- Highlight code violations that void warranties.
- Assess whether solar yield forecasts are realistic.
3. **Commissioning and Maintenance Log Review**
- Determine if manufacturers can void warranties due to insufficient commissioning or maintenance.
- Identify installation defects that increase operational expenses.
- Establish benchmarks for energy and power production.
4. **Historical Energy Production Analysis**
- Analyze system and component underperformance.
- Identify sources of system downtime.
- Evaluate accelerated degradation trends.
5. **Physical Site Inspection**
- Check for signs of excessive wear and tear.
- Compare the current setup with as-built drawings.
- Look for unexpected environmental impacts such as shading, dirt accumulation, vandalism, or pest damage.
An independent engineer's report delivers an impartial professional opinion on the risks tied to the acquisition. The buyer's risk tolerance must be clearly communicated to the IE so this perspective can be effectively used during negotiations. Every deficiency should come with a risk assessment rating and an estimate of the associated capital expenses to mitigate the issue. Most IEs struggle to provide these estimates unless they have practical experience with PV system repairs. Buyers need realistic figures for repair efforts, annual O&M budgets, and other capital expenditures to substantiate their offer price and negotiate fairly with the seller.
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This technical review isn't just about identifying problems; it's about finding opportunities to strengthen the deal. By understanding the system's true condition, buyers can make informed decisions, ensuring they don’t overpay for an asset that needs extensive repairs or undervalue one with hidden benefits.