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UPS Frequently Asked Questions

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Not all generating technologies are designed, manufactured, and serviced equally. It is incumbent on the project owner to select prime movers, generators and ancillary equipment with an eye toward a track record of performance in similar applications.

While initial installed cost per kilowatt-hour matters to project success, proven reliability MANAGING RISKS, REAPING REWARDS THROUGH BIOGAS APPLICATIONS matters a great deal more. As part of due diligence, a project owner should ask all prospective equipment suppliers to offer references and data on successful projects of similar size and type operating on similar fuel. The technology provider should have both the ability and willingness to provide a performance guarantee for a term that is agreeable to the lender.

The best energy generating technology’s performance is only as good as the ongoing support it receives in the field. Improper maintenance or poor operating practices can lead to unplanned downtime that puts project financial results in jeopardy.

Project owners should expect an equipment supplier to have built a substantial product support infrastructure in-country. This can include remote monitoring and diagnostics, ondemand technical support, fully qualified service technicians able to respond in less than 24 hours, and a local parts stocking and distribution network that ensures prompt delivery of genuine original-equipment replacements.

Large expenses such as engine overhauls should be budgeted, and most project lenders will require a reserve account for major maintenance to be established and funded over time to cover these periodic costs. An attractive option is to enter a complete operations and maintenance agreement with the equipment supplier that covers all planned service at an annual fixed cost – this usually negates the need for a reserve account.

Each market has its own permitting regimen. Permits may be needed for environmental compliance, factory operations, construction, air space, noise, forestry, and various other requirements. The permitting authorities may be both national and local. It is essential to understand the permitting processes and to allocate appropriate time for them.

It is a common misconception that environmental permitting for such projects will be easy simply because they are “green.”

The engineering, procurement and construction (EPC) phase of a biogas project requires an experienced contractor and proven equipment and component suppliers. Critical guarantees of milestones, such as project completion date, net kilowatt power output and the fuel heat rate based on local fuel parameters, need to be secured up front.

Liquidated damages should be payable for missing any guaranteed parameter and should be sufficient to compensate for the resulting additional cost or loss of power output. For example, liquidated damages for failure to meet the completion date should be enough to cover the additional interest cost incurred during construction. Liquidated damages for heat rate should compensate the owner for the net present value of additional fuel that will be consumed for the duration of the contract. In addition, the project owner needs to have enough equity in reserve to cover a cost overrun and still complete the project.