As first published by the South African Institution of Civil Engineering (SAICE) Magazine, August 2025 Issue

Unforeseen issues can arise in renewable projects despite their seemingly straightforward construction, as many components are prefabricated abroad. While it may appear that contractors simply assemble these elements, hidden complexities can exist, including contractual challenges and progress issues. In an environment of tight margins and time-sensitive revenue generation, the pressure to cut corners is high, but meticulous planning and quality assurance are crucial for plant performance.

The multi-party contracting environment between owners, contractors, end users, and network operators, creates a conflict-rich environment – a powder keg waiting for a spark.

South Africa is committed to renewable energy through the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which encourages private investment in solar, wind, small hydro, and biomass. The start of 2025 has marked significant progress for the country’s energy sector, with the Electricity Regulation Amendment Act (38 of 2024) coming into force. This act aims to shift South Africa from a monopolised energy model by national power producer Eskom to a competitive multi-market structure, which should enhance investor confidence. These reforms are essential as the latest Integrated Resource Plan analysis, released in November 2024, targets 26 GW of new renewable energy capacity by 2030. This requires an average deployment of 6 GW of wind and solar annually. For 2024/25, R46.3 billion has been pledged to the REIPPPP. An example is the Development Bank of Southern Africa funding for three large wind farms in the Eastern Cape, which are expected to generate 330 MW. According to the South African Wind Energy Association, wind energy is rapidly growing, comprising 4.9% of electricity production in the first quarter of 2024 and necessitating diverse skills in the sector. Project management is crucial for the success of renewable projects, as effective planning and risk management by project companies are vital for long-term investment returns.

Contractual structure and bankability of renewable energy projects

Energy projects, by their nature, have complex multiparty contractual structures. The project company will usually enter into agreements that cover the following elements:

• A power purchase agreement between the project company and the power purchaser.
• A construction contract.
• An operation and maintenance agreement.
• Financing and security agreements with lenders to finance the development of the project.
• Various connection agreements with the grid operator (Eskom).

An EPC (engineer, procure, and construct) contract is one contractual approach that can be taken to construct a renewable energy facility. The major advantage of the EPC contract is that it provides a single point of responsibility. In our experience, most utility-scale renewable energy projects use an EPC contract. Lenders to EPC projects focus on the ability (or more particularly, the lack thereof) of the contractor to claim additional costs or extensions of time (EOT), as well as the security provided by the contractor for the performance of its obligations. Recently, EPC contracts in renewable energy have faced criticism due to contractors experiencing significant losses from grid connection delays, site risks, and supply chain issues. Key clauses affecting time, cost, and quality are crucial in these contracts, which are more sophisticated than other construction contracts to meet lenders’ bankability requirements.

Key risks specific to EPC contracts in renewable energy projects

General interface issues

It is vital that the schedule of works interfaces with all other contracting parties and stakeholders on an EPC project. Major renewable energy project-specific interface issues are:

• Access for the contractor to the transmission grid to allow timely completion of construction, commissioning and testing (grid access), including generator performance standards and grid code compliance requirements.
• Consistency of commissioning and testing regimes.
• Warranty and design life requirements for key component parts.
• Issues between the relevant government agencies, landowners, local communities, the project company, and the contractor. In particular, while the project company must maintain a long-term or comfortable relationship with government agencies, the contractor does not necessarily need to do so.

Grid access

Clear grid access obligations in the EPC contract are of the utmost importance. Lenders seek clarity on the project company’s grid access obligations to prevent disputes with the contractor regarding grid load placement and time extensions due to access failures. Grid access concerns include:

• Ensuring infrastructure is established.
• Ensuring that the grid operator (Eskom) complies with its obligations in a timely manner.
• Allowing the contractor to export power to facilitate timely testing and commissioning.

Infrastructure obligations will be project-specific and outlined in the connection agreements. Existing grid infrastructure upgrades will be managed by the grid operator, with costs included in the project company’s connection fee. For new infrastructure, the project company typically assumes risk and passes requirements to the contractor via the EPC contract. Key considerations include:

• Construction facilities and their interface with contractor works.
• Project-specific infrastructure or availability to other projects.
• Infrastructure completion timing relative to the EPC contract.

Regarding the contractor’s capabilities and risk management, the EPC contract must address:

• Scope of grid access obligations.
• Timing of these obligations.
• Project company responsibilities for unreliable contractor commissioning.
• Grid robustness for testing.
• Compliance with national grid codes and generator performance standards.

As technology and connection requirements evolve, new stipulations may emerge between contract execution and project completion. The implementation of the new Electricity Regulation Amendment Act is a case in point, but more common changes could involve environmental or municipal bylaws, and design code amendments.

A comprehensive schedule of works is as indispensable on projects of this complexity as is a dependable compass on an ocean crossing. Considering all the parties involved, and the impact that their actions could have – individually or in unison – on the project timeline, it is essential to have a mechanism by which to record, track, and analyse such impacts. A working (and workable) schedule of works serves both as a crystal ball and a rearview mirror. To work effectively, it has to be of high quality. It is not uncommon for large and capable contractors to have experienced personnel who can create and maintain these schedules for their production staff. What is unfortunately less common is an equally matched capability in the ranks of the project company. This implies that the EPC contractor usually has the upper hand in the contractual EOT and expense claims and could dictate the narrative around their outcome.

Without the proper checks and balances in place in the project company’s camp, these matters have a high potential to turn into disputes or overpriced claim settlements.

Key general clauses in EPC contracts: Delay and extensions of time

Extension of time

One of the advantages of an EPC contract is that it provides the project company with a fixed completion date. If the contractor fails to complete the works by the required date, it is liable for delay, liquidated damages, or penalties. However, in some circumstances, the contractor is entitled to an extension of the date for completion. Failure to grant an extension for a delay caused by the project company can void the liquidated damages regime and set time at large. This is a highly risky and undesirable situation, as it means that the contractor is only obliged to complete the works within a reasonable time and might no longer be strictly bound by the contractual terms of project completion.

The contractor’s entitlement to an EOT is not absolute. It is possible to limit the contractor’s rights and impose preconditions on the ability of the contractor to claim an EOT. A relatively standard EOT clause would entitle the contractor to an EOT for any of the following causes of a delay on the critical path and for which the contractor has given notice within the period specified in the contract:

• An act, omission, breach, or default of the project company.
• Suspension of the works by the project company (except where the suspension is due to an act or omission of the contractor).
• A variation (except where the variation is due to an act or omission of the contractor).
• Force majeure (an event typically outside either party’s control).

It is permissible (and advisable) from the project company’s perspective to make both the necessity for the delay to impact the critical path and the obligation to give notice of a claim for an EOT conditions precedent to the contractor’s entitlement to receive an EOT.

Concurrent delay

A concurrent delay occurs when two or more causes of delay overlap, and the challenge is to determine who benefits in terms of an EOT from such an instance. It is important to note that it is the overlapping of the causes of the delays, not the overlapping of the delays themselves. In our experience, this distinction is not often made, which leads to confusion and sometimes disputes. Contracts often do not address the issue in sufficient detail, but more problematic is when the contract is silent on the issue of concurrent delay, and the parties assume the silence operates to their benefit.   In general, there are three main approaches for dealing with the issue of concurrent delay, namely:

• The contractor has no entitlement to an EOT if a concurrent delay occurs.
• The contractor does have an entitlement to an EOT if a concurrent delay occurs.
• The causes of delay are apportioned between the parties, and the contractor receives an EOT equal to the apportionment.

Concurrent delay is dealt with differently in the various international standard forms of contract. Accordingly, it is not possible to argue that one approach is definitely right, and one is definitely wrong. In fact, the right approach will depend on which side of the table you are sitting. It is extremely important to understand and follow the wording (and intent) of the EPC contract when assessing EOTs with an element of concurrency.

Completion and testing

Renewable energy facilities like wind and solar may have components completed at different times. Each wind turbine or solar array is typically constructed sequentially, allowing the project company to take over components as they pass tests. While this process is common, issuing a takingover certificate for each component must not affect the contractor’s EPC contract obligations. Analysing delays in EOT claims for staged handover projects can be complex due to potentially significant delay damages, emphasising the importance of a detailed work schedule.

Testing

Testing and commissioning occur at the tail end of the project and are difficult to compress or accelerate in terms of time management. This is mainly due to the number of interdependent role players involved in this phase.

Technical issues

Technical testing procedures should ideally be outlined in the EPC contract. However, they are often agreed upon during construction due to the inability to fully scope the testing programme until the detailed design is complete. For renewable energy facilities, testing procedures must specify tests for each component, such as per turbine or solar array, and these should be reflected in the schedule of works as they can significantly affect claims for damages or extensions of time.

Conclusion

In conclusion, the successful management of renewable energy projects in South Africa hinges on meticulous planning, robust contractual frameworks, and effective risk management. The complexities inherent in these projects, from grid access issues to the intricacies of EPC contracts, underscore the need for comprehensive scheduling and clear communication among all stakeholders. As South Africa continues to advance its renewable energy goals, understanding and addressing these challenges will be crucial for ensuring the sustainability and efficiency of future projects. By leveraging the expertise and experience of seasoned project managers, South Africa can navigate these complexities and capitalise on the opportunities presented by the growing renewable energy sector.

Acknowledgement

The author gratefully acknowledges the contribution and inspiration provided by HKA Partner, Timothy Harwin, whose expert insights and engagement have meaningfully informed the development of this article. His thoughtful input has enhanced the depth and rigor of the article, and his support is sincerely appreciated.

About the author

​​Quintin De Klerk​ is a seasoned Professional Civil Engineer with more than 25 years of experience in the construction sector. He is an experienced analyst of delays on construction projects with recent experience providing assessments for Arbitration and Adjudications on energy and infrastructure projects. Quintin possesses extensive and varied expertise in steel design and fabrication, as well as in construction and heavy industrial maintenance for the mining, mineral processing, and petrochemical sectors.