Life of the third-party: Here’s why project-level due diligence is the BOM for solar EPCs

business man in party hat

For today’s top EPCs, a solar project’s success comes well before an RFP is even issued. It starts with vendor and product assessment. Often at the request of the buyer, manufacturers send their products — modules, inverters, batteries, trackers — to a third-party lab for extensive testing. The lab then sends the results to the buyer, who uses those results to qualify a manufacturer for their approved vendor list.

But that’s just a baseline qualification step in a never-ending cycle of requalification and reassessment of PV products and systems. For example, product quality evolves (or devolves) with each SKU or update. That structural issue you had with Version B of a racking system may be completely solved by Version X. The best practice here is to re-affirm your approved vendor list every 18 months or so.

“We’ve found that it’s typically true that the bill of materials [BOM] will change in that period of time,” says Tara Doyle, chief commercial officer for PV Evolution Labs, a third-party lab was recently spun out of DNV GL as its own separate entity. “With any change to the product, the buyer community wants it to be reassessed.”

And even that 18-month cycle isn’t enough. These days, true bankability comes from project-level due diligence in which EPCs and developers are specifically testing the BOM of the product before it ships to the site, every time. We asked PVEL to walk us through this stage of quality control and elaborate on why it should be built into normal operating procedures.

“We have seen improvement over time in the proven products, but we still see a fair amount of failures and less than ideal results making a very strong case for testing even proven technologies,” Doyle says. “But as new technologies become available, all of them need to be tested and thoroughly evaluated before hitting the mass market — PERC, half cut cells and bifacial — to name a few.”

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Who put the BOM on?

Getting the exact module you selected isn’t a given. Tristan Erion-Lorico, head of PV module business at PVEL, says you have to pay close attention to the specific factory. Different factories not only mean variability in processes and equipment but also potentially the BOM being used.

“The buyer should know where the modules are coming from and the BOM they are buying. This is part of project due diligence, reassessing where there are changes,” he says.

This is where the third-party comes in handy, to verify that what you spec’d is what you’ll get. Example: The developer has selected manufacturer XYZ’s BOM No. 1 to be produced for their project. During production, a PVEL analyst will go into the factory and witness the production to see if the BOM being used matches the agreed upon BOM in the supply contact. Some of the solar industry’s largest EPCs and developers will even take this task on themselves, going as far as to station a quality control person at a key manufacturing facility full-time. From there, samples are pulled off the production line and sent to the lab to verify that the quality of the products match the expectation.

Odds of failure

The cliché that the devil is in the details exists for a reason. In this case, failure to verify the quality of the products you procure at this level of specificity invites unnecessary, pitchfork-wielding risks through your door.

“For people that are just ordering module ABC 350M from manufacturer XYZ, that manufacturer is really open to use any cell or BOM item they have certified,” Erion-Lorico says. “The manufacturer has one data sheet, but that sheet could represent five different cell providers that they have certified. The temperature coefficient on the data sheet may not match the cells being used. Or they can use the cheaper backsheet that might not be the same as the one we’ve vetted through our extended reliability testing.”

PVEL reports that modules fail the basic certification batch testing about 7 percent of the time due to humidity freeze. Six percent of the time they fail thermal cycling testing. Those are concerning failure risks to a financier, which is why budgeting for batch testing to eliminate that risk often pays for itself in improved bankability and better interest rates.

“It’s not just about the selection of the products, it’s also about holding manufacturers true to their word and contracts so that they are delivering the BOM specified and continue to produce a high-quality product,” Erion-Lorico says.

Batch-level testing is most common for modules but is growing in importance for trackers as more manufacturers offer them.
When the BOM is wrong

Developers engaging in statistical batch testing will typically build terms into their contracts that stipulate what happens in the event of a failure. Something to the effect of “X number of samples will be provided, and Z level of financial recourse will trigger if any failures are detected.”

“We regularly prepare module supply contract appendices with a BOM listing, so the developers can specify certain modules with specific BOMs, as well as state the manufacturer’s recourse for project-specific batch testing failures upfront,” Erion-Lorico says. “This contract support is offered free of charge to developers and EPCs, as is accessing our detailed test reports and associated BOM listings.”

Annual checkup

Even after all of those assurances, a thorough due diligence plan keeps continual watch of the assets. In addition to a regular operations and maintenance (O&M) plan for a site, third parties like PVEL can also perform an annual checkup — whether a site is obviously underperforming or not — to look for issues like microcracks, snail trails, backsheet cracks and inverter outages among other field service operations.

“We have some customers who pay us to reevaluate their sites each year or send samples to our lab each year to check for degradation,” Doyle says.
I’m sure a portion of the people reading this think some of this sounds like overkill, but with new industries, investors, financiers and developers ready to jump into solar, maintaining the highest level of quality control and reducing risk is more important than ever.

“They want a clear sense that what they’re purchasing is of the highest quality,” Doyle says. “Some in the industry that do this find their cost of debt is less because there is less risk in the project. As a result, all of these activities pay for themselves and then some because you can show up to the bank with an extremely detailed procurement plan and due diligence versus some others that just say if it’s Tier 1, we will buy it.”


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