Cost-effective decarbonisation: How to procure Renewable Energy Systems (RES)

Renewable Energy Systems can include different technologies such as solar PV, battery or thermal storage, electric vehicle charging, and smart meters¹. System specifications will depend on your needs, capacity, and preferences. Using the checklists and toolkits provided, you can assess your requirements and constraints to determine which RES technologies might be right for your business. Before you begin, ensure you have identified the key internal stakeholders to support the procurement process and provide you with the necessary information.   

Actions

Additional details

You may choose to conduct this assessment for a pilot site or group of sites before doing so across your entire business. But bear in mind that there are efficiencies to be gained by sourcing RES across sites: labor and installation efficiency, increased purchasing power and leverage, and reduced administrative processes. Regardless of the approach, the principles remain the same: each site should be assessed for the suitability of each RES component. 

When completing the RES feasibility checklist, you may require input from other business stakeholders or external experts. If you do not have sufficient information to fully define your RES solution at this stage, your potential suppliers will be able to assist with determining which system components are suitable for your sites in Step 3. 

It is helpful to be aware of any landlord/lease owner approval or planning permission timelines and potential roadblocks, as these may impact the project’s feasibility and implementation. Review your local planning authority website to understand what’s needed in your region. 

The costs from the calculators are a starting point and will vary depending on location. These should only be used for initial budgeting and should be updated with supplier costs once available.

Once you have identified suitable RES components for your site(s), the next step is to gather the information you need to prepare a draft specification and tender requirements. We have provided templates to help with gathering the required information, as well as references to online toolkits to help with system sizing.  

Actions

Additional details

If you don’t have access to all the required information to complete the technical specification and tender requirements, simply start where you can with the signposted sizing toolkits and benchmark calculators. These will give you an indication of a system size for your high-level business case, which can then be updated as you go through Steps 3 and 4. 

When defining the specification and requirements, consider what level of performance you would like the system to achieve. Standard RES components may be more cost-effective; however, components with optimized performance outputs may be preferred. For example, tracking monocrystalline PV modules that maximize generated electricity and DC electric vehicle chargers with empty-to-full charging times of less than one hour.  

The business case for each RES component and the system as a whole will be driven by the benefits associated with fuel switching from your current scenario to the RES solution, taking into account any impact on business operations. Non-financial considerations such as energy security and commitments to reduce pollution and address climate change may also factor into your business case.  

Once an outline of the costs is established, financing options need to be considered: in particular, whether the system will be procured outright, leased, or contracted on a ‘servitization’ model. The latter two options are useful where available capex is limited. 

With a constantly growing renewable energy supplier base offering a variety of products and services, it can be difficult to know where to begin. It is important to filter potential suppliers based on accreditation and ability to deliver technical requirements, as well as the different contracting options they offer if financial flexibility is important.  

The process for identifying suppliers provided here will help to streamline your RES market research and quickly identify local suppliers with recognized capabilities. 

Actions

Additional details

Start by identifying a list of suppliers that are accredited by relevant bodies in your jurisdiction. For example, suppliers in the UK should be certified with the Microgeneration Certification Scheme (MCS), whilst Reconnu Garant De L’Environnement (RGE) would be the equivalent in France. Next, investigate suppliers listed by publicly sponsored independent sources and specialist RES organizations and consultancies. Some links to example lists are provided here: these resources are only a starting point, and you may require additional research depending on your region. 

Take some time to review supplier websites to understand their offerings and capabilities and only engage suppliers that are accredited with the relevant bodies within your region. Your business stakeholders may also have some recommendations for you to include in your supplier RFI. 

The site assessment will be crucial to verify the final requirements that go into the tender document. Work with the supplier to minimize potential surprises during the installation phase. Ensure you cross-reference feedback from suppliers and standardize your request to keep your supplier options open ahead of requesting a formal supplier bid. 

When shortlisting suppliers to invite to tender, consider ones that can deliver the full RES solution, as well as others that may only deliver some of the RES components. This will enable you to review responses from both generalist and specialist technology providers. If you are interested in a leasing or ‘servitization’ model for your RES installation, this will inform your shortlist as not all suppliers offer these financing options.  

Selecting the right supplier is as much about the commercial value they provide, as it is about their ability to deliver high-quality work. This is particularly relevant for long-term installations such as renewable energy systems, which should last 15 years or more with good installation of quality systems and regular maintenance. The tender and analysis templates provided will enable you to easily compare supplier offerings and select the most suitable one. 

Actions

Additional details

For smaller tenders, you can issue a tender with the pricing template and a shorter capability questionnaire that addresses the relevant topics for your business.  

The evaluation would normally be carried out jointly between procurement and stakeholders in Facilities Management, Sustainability & ESG etc. Do keep stakeholders engaged throughout the tender evaluation process as their insights will be key to selecting suppliers with the right capabilities and working practices, to ensure a successful RES implementation. 

Consider appropriate demand and supply levers when negotiating with suppliers⁴, ensuring all costs associated with the RES design, installation, and maintenance over its expected life (i.e., total cost) are accounted for. Businesses considering RES installations across several sites may take advantage of volume consolidation, while others seeking installation as well as maintenance services from the same supplier may choose to offer longer term contracts. 

Before beginning any work, it is important to have a contract that is fair to both parties and simple to understand. To help with this, we have signposted some example contract types as well as things to consider within your contract. The type of contract you opt for will largely be driven by your project financing model, such as upfront expenditure, leasing, or servitization. 

Actions

Additional details

Seek approval from your legal teams, as you would normally do, to ensure the contract is in line with your business standards. Contracts should include guarantees for equipment failure; these are typically passed onto the manufacturer by the installer.  

In the energy services company (ESCO) model, energy efficiency projects such as RES installations are sometimes financed based on their energy and cost saving potential. These are usually governed by energy performance contracts, of which two types exist – guaranteed and shared savings contracts. Energy savings insurance (ESI) contracts offer a reduced-risk savings guarantee in the event that projected savings are not achieved.  

For ‘servitization’ agreements where your RES is procured as a service, the contract is for the duration of the service, at the end of which the RES assets remain the property of the service provider. Ongoing RES performance and maintenance is the responsibility of the service provider; terms of service and termination clauses should be clearly defined in the contract. 

The implementation plan should clearly set out key activities and sub-activities, duration, and key milestones as well as governance structures to enable effective project delivery with regards to quality, time, and budget. Also align with the supplier on expectations for required support from business stakeholders. 

To drive mutually beneficial value, work collaboratively with your supplier to manage their performance beyond the contract requirements by monitoring KPIs and identify renewable energy innovation opportunities that can help meet your business’s ESG goals.