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Speaker
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Transcript
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Richard Adams, Partner, Burges Salmon
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[Music]
Hello and welcome to episode four of Risk Rewired, the energy disputes podcast from Burges Salmon. I am Richard Adams a partner in the Construction and Engineering team and deal with risk mitigation, avoidance and dispute resolution across a broad range of energy technologies. In episode two, Gregor Hayworth and I spoke about process, projects, solar and offshore wind, highlighting the different types of issues and disputes that could arise across these very different technologies.
In this episode we are going to focus on another three technologies: onshore wind, nuclear and battery projects. I'm delighted that Gregor is joining me again, together with Sarah Forshaw, a South African qualified associate in our Construction and Engineering team - welcome Sarah.
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Sarah Forshaw, Associate, Burges Salmon
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It's great to be joining you for this podcast!
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Richard
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And welcome back, Gregor.
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Gregor Hayworth, Director, Burges Salmon
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Thanks Rich, glad to be back.
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Richard
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[Music]
As we did in episode two, we're going to cover three technologies today, so shall we start with onshore wind?
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Gregor
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Sure, onshore wind is a hot topic at the moment, particularly regarding what's going to happen with the de facto ban on onshore wind development in England following the general election.
As you both know, the turbine technology itself is essentially the same between offshore and onshore, but with onshore you remove a lot of the variables that we were discussing last time so you don't have, you know, for example vessel availability issues, the weather window is less of an issue, and you don't usually lay the cables underwater obviously.
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Richard
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Unless it's particularly wet I suppose!
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Gregor
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Very true, it can be a bit like that in Scotland sometimes! Certainly site based challenges can be quite a big issue, for example access issues. Can you get the machinery to the site? Do you have the necessary access rights across the different parcels of land you need to cross? And how are you going to connect the project?
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Sarah
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Gregor, just by connection are you referring to connection to the National Grid? I know there's sometimes challenges with appropriate substations or grid connection and these problems can obviously be exacerbated when you have numerous wind farms all trying to connect to the grid. I mean I think the last stat I saw recorded that there is more than 1,500 wind farms across the country.
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Gregor
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That's right yeah, there's currently a big issue with grid capacity in the UK, given the number of projects trying to obtain a good connection. Grid issues in general can be really problematic. Developers have to interface with the relevant distribution network operator, or DNO, and sometimes National Grid themselves to achieve a good connection.
DNOs themselves own and control specific licensed areas of the electricity distribution network in the UK and they also undertake contestable and non-contestable grid connection works which allows energy projects to connect to the grid. And given the capacity issues of the grid and the frequent need for network reinforcement works as a result, this can lead to increased project uncertainties as delays to connection are largely to the hands of the developer and the main contractor.
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Sarah
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I guess that can also leave the contractor and the employer in quite a difficult position and focus would obviously turn to the construction contract to see whether it provides any relief to the contractor for delays in connection, and this might result in disputes I imagine if the parties are putting forward alternative views around the risk allocation.
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Richard
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Sarah, I think that's a really good point, I mean who takes the risk in any given situation is going to be a key issue. Another example is obviously where you have the usual two package contract for onshore wind, with a turbine supply and a balance of plant. You can find issues that could be argued as falling under one or the other or indeed both contracts, and that's something that our transactional colleagues try and address, but as contentious lawyers we need to be alive to all of this when advising in the disputes context.
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Gregor
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Yeah definitely. Another issue is the impact of protesters. Again, who takes the risk if access to the site is prevented because of local or environmental protester action? I've found that this type of disruption can affect onshore projects more than offshore actually, given the ease of getting to the site, and I've seen examples of delayed deliveries, labour being prevented from accessing the site because of these issues and that can inevitably delay progress.
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Richard
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And just to finish on onshore wind, I also thought it was worth mentioning some of the common delaying events that we frequently see, such as ground conditions for the erection of the turbine, the turbine supply issues as the equipment is usually supplied from outside the UK, and also some issues around commissioning, which sometimes depends on wind levels as well.
So shall we move on to our next technology: nuclear. A huge area and not something that we'll do justice to in the short time we have available on this podcast, but let's cover some of the key issues. Nuclear generally falls into different categories but to keep it simple, you've got nuclear fusion or nuclear fission, and whilst the technology challenges are different, for me there are a few things common across these types of nuclear project: complexity, cost and scale.
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Sarah
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I think it's probably also useful at the outset to just clarify that on scale and costs we will be talking about larger scale projects rather than small nuclear reactors or SMRs which will of course have their own challenges. And I think the other thing worth mentioning is just to clarify that we have both nuclear generation and nuclear decommissioning within this category.
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Richard
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Sarah, that's absolutely right, there's a lot to think about and different project and program drivers for each of these types of project. I thought for today we could probably focus more on the new build area of nuclear and bring out some of the issues arising in those types of project.
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Sarah
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Generally speaking, you're not going to find a main contractor willing to wrap a nuclear new build scheme, so you tend to find multiple work packages, in fact probably hundreds of work packages with some quite significant contract values. This immediately creates an inherent risk and workspace constraints meaning that careful programming is key. If one package becomes delayed, that could have a significant knock-on effect to the entire project.
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Richard
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It's also important to recognise the long-term nature of these projects and the fact that sometimes there are only a handful of contractors worldwide that might have the skill set and the capacity to do certain work, so collaboration and working through the project and delivery challenges takes on probably greater importance on nuclear projects, given the resource and relationship challenges if formal disputes were prevalent.
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Gregor
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Yeah I guess that's not to say disputes never arise.
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Richard
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I would agree with that!
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Gregor
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Taking one example and thinking about the complexity of the work itself and the need for it to be right first time, the level of quality assurance of nuclear projects is pretty stringent and this increases the checks and balances of works and there's simply no room for defective work. It's really important then that the contractual processes and procedures on approval and sign off are clear and align with the practical and regulatory requirements that are followed by the parties.
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Richard
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I think the oversight from the Office of Nuclear Regulation is also an important area to consider when looking at technical compliance but also with general site working arrangements. Inevitably the ONR provides very close oversight when operations and work occurs on nuclear licensed sites.
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Sarah
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And just to link back to the point that Gregor was making around defects, I would widen that to include non-compliance at any stage of the work as there really is a right first time mentality across nuclear projects which is largely safety driven, but also comes back to the time impact if a certain aspect is delayed. Where issues arise, the complexity of the technology or the underlying specifications sometimes drives debate on interpretation and who takes the risk. Largely it comes down to a financial impact on one of the parties.
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Richard
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And add to that the interface risk where you've got multiple parties sometimes working on the same or adjacent work faces. That in itself can lead to arguments as to which party is liable or responsible for a particular issue arising. You know, for me there are so many interfaces, risks and varying contracting structures and different approaches to liability, not to mention the more specialist subject of nuclear liability which could probably be the topic of a podcast in itself. We could talk about nuclear projects all day. I think there are there are lots of issues involved in this very, very specialist area, but conscious of time, let's move on to the last type of technology for today's discussion, batteries. Sarah, do you want to explain what I mean by a battery project? I'm assuming it's much more than your standard AAA.
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Sarah
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Very good, Rich! Yes, renewable energy sources are inherently intermittent and a battery energy storage system - or BESS - helps balance this by providing a steady supply of power when, say the sun isn't shining or the wind isn't blowing, and it's a brilliant way to allow excess electricity to be stored for later use. It is essentially a sort of larger scale version of the AAA battery where you store energy and use it at a later date, whether it is for peak demand or to help provide a regular flow to assist grid inertia.
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Gregor
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And like all the other technologies it's not without problems such as technology risk, supply risk and commissioning risk. So taking technology risk first the longevity and efficiency of batteries is obviously still developing and that can impact performance and ability to meet performance guarantee levels. From a robustness point of view, thermal runaway - effectively uncontrolled reactions within the battery cells that can lead to fires or damage - continues to pose a threat.
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Sarah
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That's right and picking up on the supply risk, the batteries themselves are predominantly lithium based, which has to be mined, processed and shipped. So with any international mineral, global supply and demand challenges can impact program and delivery.
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Richard
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And if I cover off the commissioning risk aspect. There will obviously be a need to align with whatever energy source is producing the energy and a connection outlet as well, usually to the National Grid.
One of the issues is the achievement actually of the appropriate frequency of the current to comply with grid requirements. Put very simply is the input coming from the battery sufficient so as not to impact the balance of the grid? All of these issues require careful calibration and bring in design, workmanship and testing issues which can ultimately lead to dispute
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Gregor
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Yeah, and with any new technology it's inevitable that risks are going to arise and with batteries getting bigger and bigger, and projects more ambitious, my suspicion is that we'll see more and more battery related disputes.
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Richard
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I suspect that's right, Gregor and it just demonstrates the need to really understand your project and where the risk areas may be, how to position yourself and the project to best mitigate, avoid, or ultimately resolve disputes.
Right, I'm going to call time on that discussion there. I appreciate that it was a very, very quick run through of those three technologies and there's lots more that we could talk about but thank you both for joining the podcast today. I thought it was a really interesting discussion. We only just scratched the surface of some of those issues and thank you for participating.
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Gregor
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Well thanks for having me back again, always a pleasure.
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Sarah
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It's been great and I look forward to future discussions.
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Richard
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[Music] Thank you to everyone for tuning in to episode four of Risk Rewired, the energy disputes podcast. If you would like to know more about our energy disputes team or discuss technologies on which you are working, you can contact me or the team via our website. You may also want to download our energy disputes guide, which provides insight into issues arising across energy projects. Risk Rewired is now taking its summer break, but listen out for our return in September for the next episode of the energy disputes podcast.
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