Renewable energy projects, is it time to repower?

It’s been over thirty years since the first onshore wind farm was commissioned in Cornwall and over ten years since the commissioning of the first ground mounted solar project in rural Leicestershire. Whilst we have seen a flurry of renewable generation projects commission in the intervening years, the sector has also enjoyed enormous levels of innovation in the technical efficiency of the components used to power these projects, meaning that as assets age a natural question for asset managers to consider is: is it time to repower our project? 

This is a question we are being asked to advise on regularly. But what does it mean and what needs to be considered from a legal perspective when deciding whether to embark on a potential repowering exercise?

What is “repowering”?

The term “repowering” is used to refer to the process of removing old components of a generation asset which are used for power production and replacing these with new parts, which are designed to increase project lifespan and enhance the production of the facility, such as larger turbines or more efficient solar panels. The scope of a repowering exercise in practice depends on a variety of factors including the type of generation technology and the extent of the enhancement the asset owner is seeking to achieve. At its most radical, repowering could involve removing and rebuilding one or more complete wind turbines, but it may be confined to a more discrete replacement of certain components to drive efficiencies. 

Whilst repowering conversations have often focussed on asset degradation and improving efficiency, planning restrictions around new build assets and the challenge of grid constraints are now also key drivers behind decisions to repower. 

Do the project rights enable repowering without amendment?

An important initial step for an asset owner to consider when looking to repower is whether the existing rights which have been obtained for the project are adequate for the envisaged repowering, or whether these rights need amending to facilitate the contemplated works. This initial review will include consideration of the adequacy of the project’s land rights and particularly whether they capture the scope and term of the repowered project. 

The project’s planning permission will also need to be reviewed to determine whether, as with the underlying land rights, any revisions are required. Areas we commonly see needing particular attention include the term of the planning permission and the generating capacity of the project post repowering. Generally, we see planning permission for repowered projects being approached more favourably than for new assets, particularly in the case of onshore wind projects. 

The project’s grid connection agreement will also need to be scrutinised against the technical repowering plans. Although a grid connection agreement with a local distribution network operator does not generally have a defined term, a key area of focus here is again whether the capacity of the repowering can be accommodated – early clarity should be sought as to whether there is sufficient headroom in the connection agreement or whether the export capacity requires revision.

Third party consents

If the initial project has been financed, then funder consent to a repowering exercise is likely to be required. Depending on the ownership structure of the project, there may be initial third-party consents which also need to be sought. We would recommend having these conversations early on in the process.

Undertaking the works

Asset managers embarking on a repowering exercise should give careful consideration to how they will procure the requisite works. The intention may be to approach the existing contractors, however repowering does also present an opportunity to revisit the market and undertake a fresh tendering exercise.

Route to market implications 

Repowering also presents the opportunity to revisit the power offtake arrangements, particularly where the exercise coincides with the end of the term of the project’s initial power purchase agreement (“PPA”). Where this is the case, a new PPA can be entered into, and repowered projects could be ideal candidates for corporate PPA arrangements.

In addition, the government recently ran a consultation (outcome pending) on amending the Contracts for Difference (“CfD”) regime to allow fully repowered onshore wind projects to apply for a CfD. This would provide an alternative long-term price hedge for these assets. Repowered onshore wind projects can also participate in the Capacity Market, opening up another potential consistent revenue stream. 

Ongoing maintenance

An effective repowering exercise should also consider how the repowered works will be maintained – in particular whether the existing O&M contract will be sufficient to enable this, or whether it requires revision. Assessment of whether the repowering will impact the existing manufacturers’ warranties should also form part of this exercise, including a review of the adequacy of the new warranties which form part of the repowered works.