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Energy Renewed: COVID-19 impacts on developers of renewable energy projects

In episode 2 of Energy Renewed, Katie Janik of ICF speaks with Heidi Marie Larson, who leads the ICF technical advisory team within ICF’s Commercial Energy Division, and Kevin Christy, COO of North America at LightSource BP, to discuss the impact of COVID-19 on owners and developers of renewable energy projects. ICF developed a two-part series of podcast episodes to explore how COVID-19 is impacting renewable energy transactions. This episode is part 1 in the COVID-19 impact series.

Full transcript below:

Katie: Welcome to "Energy Renewed," a podcast by ICF. A meeting of the minds in renewable energy where people come together to discuss ideas and synergies to propel the industry forward. I'm Katie Janik from ICF and the host of "Energy Renewed." ICF provides technical advisory services to lenders, investors, and project owners for renewable energy technologies and processes. In this podcast series, we will consider varying viewpoints ranging from policy topics to equipment components.

Hi there. In this episode, we are discussing the impact of COVID-19 on owners and developers of renewable energy projects. We are in an unprecedented situation and, as consultants--and generally within the industry--we are asking how is COVID impacting operational projects and project sites. Today, we have Heidi Larson who leads the ICF technical advisory team within ICF's commercial energy division, and Kevin Christy who is COO of North America at Lightsource BP. We are going to talk about the current situation from the perspective of developers. Heidi, do you want to introduce yourself?

Heidi: Hi, Katie. Thank you. I'm excited to be here with you and Kevin today in sharing on this essential topic. As you mentioned, my name is Heidi Marie Larson and I lead the technical advisory practice. Our practice provides independent engineering and honors advisory support for investors, developers, and project owners. For the past 12 years, I've been involved in the renewable energy industry supporting development, construction, and operation of solar battery storage and wind generation assets. Across our team, we support all types of power and renewable fuels and fuel assets.

Katie: Great. Thanks for being here. Kevin, do you want to introduce yourself?

Kevin: Yeah, sure. Hi, Katie. Hi, Heidi. Hi Katie. Kevin Christy, COO of North America for Lightsource BP. Lightsource BP is a global developer, financier, and owner-operator of solar projects and we are 50% owned by BP and 50% owned by the Lightsource shareholders, employee shareholders of Lightsource.

Challenges navigating operations and maintenance

Katie: Great, thank you for being here. And so, taking the different phases of a project, right--if you have financing, construction operations--let's work a little bit backwards and start with operations and maintenance and O&M. Given the impact of COVID-19, what changes have you seen to project sites and to operations and maintenance from the project perspective?

Kevin: Sure, I'll take that first. As I might have mentioned before, we do comprehensive O&M in the UK, everything from the low voltage to high voltage, and when the UK first came out with their COVID-19 guidelines, we found that the guidelines for social distancing were pretty strict. You had to stay six meters apart from other people at all times. And we identified a handful of activities that could not be performed under those guideline conditions. So, there were a number of preventive maintenance routines and corrective maintenance routines that just had to be postponed because of those working rules. Subsequently, those have been modified, and we've been able to get out and get back to work, but that was probably the first big initial impact.

I'd say the second one was construction site shutdowns, and we experienced one on our 200-megawatt project in Spain. We also had a shutdown of three construction sites in Pennsylvania. Fortunately, that only lasted for a few days because we were able to approach the governor's office and provide additional assurances and context about the degree to which work could be performed safely in an outdoor environment--and also that the work that we were doing was part of infrastructure which they had initially said was inessential work. So, we were able to get to the project sites and the workers on those sites reclassified as essential workers. And you might recall that early on there were also pretty severe ravel restrictions. In Pennsylvania, people weren't even supposed to be on the road traveling if they didn't have a good reason, and so we had to provide a printed letter on company letterhead signed by our CEO giving our construction manager approval to travel around in his truck and visit various project sites.

Another issue that we had to navigate was state to state restrictions for a project that we had under construction in Kansas that was finalizing. It ultimately meant that, I believe, ICF couldn't go to the site, our director of engineering couldn't go to the site, our project manager, who was based in Colorado, could not go to the site, the data commissioning teams could not go to the site. And so we had to figure out how to do all of that work over the internet virtually. But we were able to get that done and the site ended up coming online a little early.

Katie: What were some of the impacts to preventative maintenance, site visits, and corrective worksite visits?

Kevin: So, that was in the UK, as I mentioned. I can't say that those lasted long enough so that they threatened, you know, warranties on any warranted equipment, but it did result in a lot of scheduling delays and [inaudible] workloads and such. I think it was more of a logistical issue in the longer term. It was a safety issue in the near term, but the safety guidelines have been updated over time. Katie: And so, when I hear logistical issues, I think force majeure. Have you seen an increase in force majeure notices?

Kevin: There certainly were. I wouldn't say a flood, but there was a spike in force majeure notices as the country started shutting down first in Asia-- Thailand, Singapore, China, and other places instituted manufacturing shutdowns that had knock-on effects in some of our equipment orders. So, we had to track anticipated delays on that front, and I feel like that has largely washed through the system at this point. But on a regular basis, we do track globally any material delivery concerns--any force majeure notices--that we've received. And I have to say right now, things seem to be flowing fairly smoothly. But we do have lingering concerns especially here in the U.S. and increasing as other countries who believed that they had largely defeated the virus are finding that it's resurging in places.

Heidi: Yeah. Kevin, Katie, that's certainly one area that has held more attention for our team lately. We've been spending significantly more time on force majeure and working through the interlinking technical requirements that may show up across various commercial agreements. Everything from the potential of equipment delivery delays for projects under construction to--as Kevin alluded, with this dynamic situation, and depending on how long it continues--impacts or effects on product warranty as preventative maintenance periods are missed or need to be delayed. And, of course, across to impacts that might occur in off-take agreements or credit agreements with regard to various milestones. I think clearly, there's the potential for cascading impacts. And one of our aims of late has been to let our technical expertise to evaluate what those impacts might be. Anecdotally, we have seen several projects that have sort of one of the most obvious occurrences of force majeure notices from equipment suppliers as kind of the primary example. But we've had also some projects where new construction utilities issued force majeure notices with regard to construction of the interconnection facilities for which the utility is responsible for bringing the project online, and concerns about getting those done and the impacts to the project schedule. We even have one project that had some unique permitting constraints in the timeline, and there was COVID-related delays that were bumping up against some of the deadlines and milestones related to permitting. So, we had to start thinking about how that could be adapted and what contingencies should be made. In most cases, Kevin, as you alluded to, we haven't seen issues that materialized into significant delays to the coronavirus just yet, but again, just a few examples of things that we're trying to help evaluate and manage with scenario planning and contingency evaluation.

Safety precautions, adaptations, and innovations

Katie: And shifting over to maybe earlier in the project lifecycle for construction and site visits--and Kevin already mentioned some impacts to getting to construction sites--what changes have you seen from the COVID situation for the construction phase and site visits? Kevin?

Kevin: Yeah. So, there's been a number of safety innovations we've seen out in the field, and I'd say it starts with having a single point of entry for the site. Doing symptom screening questionnaires, temperature checks, establishing handwashing stations throughout the site, having firm rules for how people congregate on the site. So, we've moved away from enclosed breakrooms, having people be outside as much as possible, mandatory mask-wearing across the site, social distancing rules, and then just basically trying to make the sort of safety accommodations that you have to make for doing your work as safely as possible. So, for instance, when you have to move people around the site, you have to violate the social distancing rules because it's hard to put people two meters apart inside an enclosed vehicle. But they'll be wearing masks and there's a whole site that people often move around in uncovered vehicles, open-air vehicles. Because we have come to understand, especially, I'd say in the last weeks and months, that the risk of transmission is much higher indoors than outdoors. And in fact, the only COVID infections that we've had reported on any of our job sites was several people who worked together in a construction trailer and they all became infected. They all recovered and came back to work, so that was fortunate.

Heidi: Katie, for us in our work, site visits have been one of the biggest areas where we've had to adapt, as Kevin alluded to earlier. Tracking and managing state and local requirements, balancing our corporate policies and restrictions, and then also honoring the protocols of our clients and their programs that they have in place to try to protect workers on site. In fact, going back to early March when it became pretty evident that this was something that was going to impact us in some way--though I don't think it was clear what--we started thinking through that and developed a virtual site visit protocol. And this is because sponsors that we were working with needed to be able to continue their construction, just as Kevin was talking about on their projects in Kansas and Pennsylvania, and draw down on their construction loans or meet other funding requirements.

And so, the plan we came up with is really two parts. The first outlines criteria and requirements for a successful virtual site visit--and it's evolved a bit over time as we've iterated and conducted some of these. The second piece being a site’s visit specific requests. So, depending on the project and exactly what we're trying to achieve with the visit, we developed a request with clear indications of documentation to photo or videos that we'd like to collect. If connectivity and data availability is good enough, we've even arranged for live site walks via a video conference platform which has been working pretty slick. So, we work through that in advance, both parts, and then we collaborate with our clients to collect the necessary information and review it and kind of carry on with our work. It’s been working reasonably well. I know it's going to sound cliché, but the safety has just got to be a top priority, not only for our team and our clients and other stakeholders. There have been projects that have had to shut down because they've had COVID outbreaks and whether or not that's from outside folks beyond the core construction group coming into the sites or not may or may not have been determined, but we certainly don't want to be contributing to that.

Busy in the time of COVID

Katie: Absolutely. And you both have mentioned different regulations and guidance whether it's by country or by state, whether it's by the client or internally, so it's a matter of balancing all these different regulations and guidance to figure out a path forward. What changes have you seen internally within Lightsource or, Heidi, within ICF, that have been a result of COVID?

Kevin: Well, we are all still working from home and have been talking for some time around how offices would reopen. It's a different story, not only for each different country that we're in, but each different locality that we're in. I think we've learned a lot about what we can actually do working remotely. That is definitely influencing the decision around how quickly and how big to come back to work and how to be thinking about commercial real estate--that's part of our business going forward, a part as I'm sure for a lot of people.

Heidi: Yeah, I mean, one change for us--just to bounce back real quick to the site visit--we've been leveraging ICF and our technical advisory practice have team members distributed throughout the country which we've found has been working quite to our benefit in many regards. We're able to instead of putting somebody on an airplane, dispatch somebody to rent a car or drive their own car to a site visit and limit that air travel. As far as, you know, the “day-to-day office work” our team started a pretty good place. Most folks had home offices or workspaces that we were just able to leverage into full-time work from home. For the foreseeable future, we'll continue to work that way, but the last few months have taught us some good lessons learned and I think we've hit a nice stride. I would say one of the things that I continue to hear comments about--and Kevin, I think you and I have discussed this before--is an increased level of busyness because people aren't traveling or we don't have that symbolic delineation to a commuter otherwise for starting and stopping the workday. In some cases, folks have shifted their schedule to start earlier and end earlier, or start later and end later, depending on personal needs and childcare and situations. So, there's sort of this everlasting workday.

Kevin: Yeah, I think we've all had a very similar experience in that regard, Heidi. I think just about everybody I talk to who's fortunate enough to still retain the job that they had prior to the COVID outbreak is saying that they're busier than they ever were before. And I think there's some dynamic, I'm sure, just around the inclination of people to schedule more meetings than they did before because they don't have the sort of chance encounters in the office. But I probably have five or six hours of the typical day booked out for meetings, and I have to squeeze my work in around those.

Heidi: Yeah, it's been, I feel like a steep learning curve and I have the impression that we're going to continue to be working through ever-adapting situation and scenarios as we are hearing news that the virus that is, you know, subsided in some areas is re-emerging. So, no shortage of opportunity for innovation, I suppose. Kevin: Yeah. And this virus is not done with us just yet. So, it's hard to predict the future both in terms of when is the vaccine going to be broadly available, is the virus going to mutate and what kind of, country-level, state-level, or local jurisdiction level role changes are going to impact us into the future, that might restrict our ability to travel or even our ability to do construction. We may not have seen the last of that as countries try to flatten new emerging curves.

Katie: And I think that this will be on the forefront of everyone's mind. I mean, this is part of our daily life now, and it will be for the foreseeable future. And so, thank you so much for being here. I'm glad that we were able to do this.

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