The ‘Can’t-Fail’ Project Is Failing: A Rescue StrategyBack to Top
There’s a dirty little secret in the industry that no one wants to talk about: A lot of utility-scale energy projects—perhaps as many as 10-20% of them—are in distress and may fail. These projects are in areas such as energy storage, renewables, substations, microgrids, and distribution automation.
We never actually hear about these issues because nobody wants to talk about projects that aren’t working well. But often these are high-profile initiatives. And especially with energy storage, renewable energy, and microgrids, these are test cases. The expectation is the project results will influence the customer’s strategy for a particular market going forward.
Projects become distressed when unforeseen problems pop up, such as systems tripping offline or chronically underperforming for no apparent reason. Put on the hot seat, the project manager then presses the company hired to do the project to come up with answers. That company, perhaps an Engineering, Procurement, and Construction (EPC) specialist or an integrator, often ends up in a finger-pointing contest with its sub-suppliers (e.g. the battery, inverter, and transformer suppliers). These are generally complex projects that use sophisticated products, which makes it virtually impossible for the customer to make sense out of the conflicting information flowing in from the feuding suppliers and sub-suppliers. After all, if the customer was an expert in this sort of project, it would not have hired a third party to perform the work in the first place.
That’s a big problem, but why does this happen so frequently? In our experience, customers often hire companies with an experience gap to oversee their projects. The customer may have picked a software and controls company, which tend to have no power systems experience. Or it could have been a packager, which typically understands only one or two parts of the system. Engineering-only companies lack the on-the-ground experience to put things together correctly, and construction-only companies lack experience in doing anything but follow preset plans.
When projects become distressed with no clear solutions in sight, there really are only two choices: scrap the program entirely, potentially wasting millions of dollars in money already spent, or seek out a second opinion from a third party that can close the experience gap to do a discreet and thorough project review. Such a third party needs a wealth of experience in all four key energy-project capabilities: software and controls, hardware, engineering and analytical studies, and construction. If the reviewer determines the project can be rescued, it will provide a list of viable options to correct the identified problems. But it also should be honest with the customer if it determines the project was done so inappropriately it can’t be rescued.
The cost of a second opinion is typically nominal, especially when compared with the cost of the underlying project. But fixing the problem and getting the project operating as originally planned typically pays for itself in a matter of months, and the strategic value to the customer’s management team can be ever more valuable.
I’d be interested in learning your thoughts on this issue in the Comments below.
August 21, 2019