Energy + Natural Resources

Renewable Energy


Engineering, Procurement and Construction Agreements for Utility-Scale Battery Projects

June 22, 2020 Articles
PV Magazine

The negotiation of an engineering, procurement and construction (EPC) agreement for a battery energy storage systems (BESS) project typically surfaces many of the same contractual risk allocation issues that one encounters in the negotiation of an EPC agreement for a solar or wind project. However, there are several issues that merit special attention in the context of an EPC agreement for BESS projects.

Equipment Procurement and Warranties

Full-wrap, turnkey EPC agreements – where the EPC contractor takes full responsibility for the engineering, equipment procurement, construction, commissioning, testing and turnover of a completed project to the owner – have historically been favored by energy project owners and their project finance lenders, due largely to the benefits of having a single, creditworthy counterparty responsible for all delivery aspects of a fully completed and properly performing project.

That said, as the project finance market for BESS projects is still developing and equity remains the more typical source of financing, alternatives to the full-wrap, turnkey EPC agreement have been utilized on BESS projects, largely to reduce equipment procurement costs to the owner.

EPC agreements providing for owner-supplied equipment will need to address the allocation of responsibilities as between owner and EPC contractor that would typically be borne by the EPC contractor in a typical full-wrap EPC, with respect to all such owner-supplied equipment (most typically the batteries themselves for BESS projects) – including delivery, risk of loss, title transfer, installation in conformance with supplier guidelines/recommendations and equipment warranties. In addition, issues of creditworthiness and/or credit support with respect to the equipment supplier will need to be addressed in a similar manner as the credit of the EPC contractor is resolved in the EPC agreement.

To the extent equipment warranties are provided directly to the owner by the equipment supplier and not wrapped by the EPC contractor in its project-related warranties, care needs to be taken to properly structure the EPC contractor’s warranty obligations such that, together with the equipment supplier’s warranty obligations, they provide full warranty coverage to the owner.

Performance Tests and Guarantees

Whether acquired from the EPC contractor in an EPC agreement or an equipment supplier in an equipment supply agreement, typical performance guarantees for BESS projects include round trip efficiency, capacity, speed of charge/discharge, availability, ramp rate/response time and noise.

An EPC agreement containing BESS project performance guarantees will contain detailed testing procedures as well as provisions for liquidated damages in the event that a constructed BESS project is unable to pass applicable performance testing. As with most EPC agreements, provisions related to the amount of such liquidated damages and any applicable caps on such liquidated damages can be expected to be a point of heavy negotiation. EPC agreements may also provide the EPC contractor the ability to permanently “buy down” BESS project performance via payment of agreed liquidated damages, subject typically to specified minimum levels of performance required to be met or exceeded under all circumstances.

Decommissioning and Disposal

The costs of decommissioning a BESS project and disposing/recycling battery equipment at the end of a BESS project’s useful life is currently a material cost item, particularly in connection with lithium ion batteries, which will be classified as a hazardous waste, with the owner being considered a hazardous waste generator liable for proper disposal under applicable EPA rules. Thus, the EPC agreement should explicitly address which party bears this burden. Sometimes the obligation to decommission and dispose of the batteries for a BESS project is retained by a third party O&M provider.

To the extent decommissioning is addressed in the EPC agreement and the obligation allocated to the EPC contractor, a specific decommissioning plan will often be attached as an exhibit to the EPC agreement. Given the evolving nature of rules and standards for the decommissioning, disposition and/or recycling of energy storage projects, it is recommended that any such decommissioning plans retain a reasonable degree of flexibility to accommodate potential changes to such rules and standards after the date of execution of the EPC.


An EPC agreement for a BESS project would be expected to contain concepts of force majeure and/or excusable event pursuant to which events beyond the reasonable control of the EPC contractor (force majeure) and/or certain specified events (excusable events) may entitle the EPC contractor to an adjustment to the EPC agreement’s milestone schedule and/or an increase in contract price to account for such changed circumstances. As for the foreseeable future COVID-19 and related governmental shutdowns and/or supply chain disruptions have the potential to affect the EPC contractor’s performance, the EPC agreement for a BESS project should carefully define the “status quo” vis-à-vis COVID-19 as of time of execution of the EPC agreement and specifically address the extent to which subsequent changes in circumstances related to COVID-19 from and after the date of the parties’ entry into the EPC agreement do or do not entitle the EPC contractor to any schedule and/or cost relief.

Firm Highlights


Farella Represents Catalyze in Its Acquisition of Sol Alliance

Northern California legal powerhouse Farella Braun + Martel represented Colorado-based independent power producer Catalyze  in its acquisition of Sol Alliance , a leading Northeastern commercial-scale solar developer, as part of the company's plan to expand...

Read More

Top 10 Practical Business Implications Arising From the Passage of the CPRA

California’s Proposition 24 passed as expected, and the new California Privacy Rights Act will change the privacy landscape created by the California Consumer Protection Act (CCPA), which went into effect only months ago. While...

Read More

Farella Represents Swinerton in Sale of Renewable Energy Division and SOLV, Inc.

Northern California legal powerhouse Farella Braun + Martel represented Swinerton Incorporated in its agreement to sell its renewable energy division Swinerton Renewable Energy (SRE) and wholly-owned subsidiary SOLV, Inc. to private equity firm American...

Read More

Farella Braun + Martel Attorneys Named to 2021 Northern California Super Lawyers and Rising Stars

Thirty-seven Farella Braun + Martel lawyers were named to the Super Lawyers and Rising Stars lists of top attorneys in Northern California for 2021. 2021 Farella Northern California Super Lawyers: George Argyris – Estate...

Read More

Ashley Breakfield Appointed to 2022 CREW SF Board of Directors

Read More

51 Farella Lawyers Listed in The Best Lawyers in America© 2022 and Best Lawyers: Ones to Watch

Forty-six Farella Braun + Martel lawyers were selected by their peers for inclusion in the 2022 edition of The Best Lawyers in America © .  Five Farella lawyers were named to Best Lawyers: Ones to...

Read More

US Govt. Promises Additional Offshore Wind Lease Sales, Offers Greater Certainty

John Ugai spoke to  Net-Zero Business Daily for the article "US Govt. Promises Additional Offshore Wind Lease Sales, Offers Greater Certainty." Read his commentary and the full article here .

Read More

US Urged to Overhaul Public Land Rents, Siting to Bridge Renewables Gap

David Lazerwitz is quoted in the  Reuters Events article, " US Urged to Overhaul Public Land Rents, Siting to Bridge Renewables Gap." In the article, David said BLM needs to bring the cost of developing on federal...

Read More