Aidan Steensma, Philip Duffield, Louise Dalton and Jay Randhawa
A Commercial Court decision earlier this month has considered a number of significant issues surrounding the application of liquidated damages for delay in a renewables context. In addition to upholding the validity of the clauses in question, the court allowed liquidated damages to accrue after termination and also permitted a separate claim to be made for general damages in respect of reduced ROCs accreditations suffered due to delays in commissioning. The decision is likely to be of particular interest to those involved in renewables projects but also has implications for construction projects generally.
ROCs explained The Renewables Obligation was introduced between 2002 and 2005 principally to support the construction of new renewable energy generation in the UK. Projects that are accredited under the scheme receive a certain number of Renewable Obligation Certificates (ROCs) for each MWh of electricity that is generated for a period of 20 years. ROCs are tradeable and had a value of around £42 per ROC in 2013/2014. The number of ROCs awarded per MWh of electricity produced varies according to the type of generation, and according to the year in which the project is commissioned. Ground mounted solar PV projects that were commissioned between 1 April 2012 and 31 March 2013 received 2 ROCs per MWh for 20 years, whereas ground mounted solar PV projects commissioned the following year (i.e. between 1 April 2013 and 31 March 2014) would only receive 1.6 ROCs per MWh for 20 years. A small difference in commissioning date could therefore have a significant impact on project revenues for the life of the project. GPP Big Field LLP & Anor v Solar EPC Solutions SL GPP entered into five EPC contracts with Prosolia UK Ltd for the construction of solar power generation plants at various locations in the UK. The projects ran into problems and Prosolia was ultimately placed into liquidation. GPP subsequently claimed against Solar EPC Solutions SL, Prosolia’s Spanish parent, under guarantees given in relation to each of the projects.
GPP primarily claimed for delay related losses in relation to the five projects. The EPC contracts all contained liquidated damages provisions covering delays in commissioning. A number of issues arose as to the application of these provisions, including:
-Whether the amount of damages specified was excessive and unenforceable as a penalty.
-Whether liquidated damages continue to accrue after termination.
-Whether a separate claim in addition to the damages specified could be brought by GPP in respect of a reduction of in the ROCs tariff achieved for certain projects as a result of the delays in commissioning.