Arbitration Regarding Defective Solar, Wind, Biomass, And Hydro Power Plants
Arbitration Regarding Defective Solar, Wind, Biomass, and Hydro Power Plants
1. Nature of the Disputes
Renewable energy projects—including solar farms, wind parks, biomass plants, and hydroelectric plants—require precision engineering, reliable equipment, and compliance with environmental and technical standards. Defects in these projects can lead to:
Reduced energy generation or operational inefficiency.
Safety hazards such as electrical failures, turbine collapse, or hydraulic leaks.
Breach of contractual performance guarantees or warranties.
Financial losses due to lost energy output or penalties under Power Purchase Agreements (PPAs).
Arbitration claims for rectification, compensation, and liability for delays or defective works.
Parties involved typically include project developers, EPC contractors, equipment suppliers, system integrators, consultants, and investors.
2. Common Causes of Defective Works
Substandard or defective equipment (solar panels, inverters, wind turbines, hydro turbines).
Improper installation, alignment, or commissioning.
Design errors or miscalculations affecting energy yield.
Failure to meet contractual Key Performance Indicators (KPIs) or energy guarantees.
Negligence in preventive maintenance or operation training.
Integration failures between mechanical, electrical, and control systems.
Illustrative Case Laws
Case 1: Solar Farm Developer vs EPC Contractor
Facts: Solar PV plant generated only 65% of the guaranteed energy due to faulty inverters and shading issues.
Dispute: Breach of performance guarantees under the EPC contract.
Outcome: Arbitration tribunal required contractor to replace defective inverters, optimize panel layout, and compensate for lost revenue.
Case 2: Wind Farm Owner vs Turbine Supplier
Facts: Wind turbines suffered blade failures and gearbox malfunctions shortly after commissioning.
Dispute: Breach of warranty and non-compliance with technical specifications.
Outcome: Supplier held liable; required replacement of defective turbines and payment of damages for lost energy production.
Case 3: Biomass Power Plant Operator vs System Integrator
Facts: Biomass combustion and feed systems malfunctioned, causing reduced output and safety hazards.
Dispute: Liability for defective integration and commissioning.
Outcome: Integrator required to repair systems, ensure operational safety, and compensate for production losses.
Case 4: Hydro Plant Developer vs EPC Contractor
Facts: Turbine and generator installation errors caused operational inefficiency and hydraulic leakage.
Dispute: Breach of contract and defective installation claims.
Outcome: Contractor ordered to rectify installation, replace defective parts, and compensate for lost electricity generation and delays.
Case 5: Renewable Energy Investor vs Equipment Supplier
Facts: Solar panels and inverters underperformed due to manufacturing defects within warranty period.
Dispute: Warranty claim and compensation for lost PPA revenue.
Outcome: Supplier required to replace defective equipment and reimburse lost energy revenue.
Case 6: Multi-Vendor Wind and Solar Project vs EPC Consortium
Facts: Coordination failures among turbine, solar, and electrical system contractors resulted in grid compliance failures.
Dispute: Apportionment of liability for non-performance and contractual penalties.
Outcome: Arbitration tribunal apportioned responsibility among vendors; remedial works undertaken and partial damages awarded.
Key Takeaways
Defective renewable energy projects can significantly affect energy yield, safety, and financial returns.
Contracts typically include strict warranties, performance guarantees, and KPIs to address such risks.
Liability is often shared among EPC contractors, equipment suppliers, and system integrators.
Independent technical audits, commissioning records, and energy yield reports are critical in arbitration.
Financial remedies include equipment replacement, system upgrades, compensation for lost energy revenue, and penalties under PPAs.
Proper installation, maintenance, and performance monitoring are key preventive measures.
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