Articles

Key trends to watch in project delivery: managing interface risks in clean energy projects

By Aliki Zeri, Hayley Steel, Mark Greatholder

4 Mar 2026 | 5 minute read

Introduction

2026 will be the year of execution, as an increased number of clean energy projects move from development to construction. With this in mind, we are launching today our 'Key Trends To Watch in Project Delivery' series. Across the next few weeks, we will share with you the key changes that we anticipate to see in the market in 2026 and beyond and provide you with some practical advice on how to navigate these.

Our team are experts in this field and would be happy to have a no obligation initial conversation with you on any of the topics covered in this series. Get in touch here to find out more.

In the first article of our series we are looking at ways to manage interface risks in clean energy projects.

The end of an era

We expect to see the way projects are delivered in 2026 and beyond to be different from prior years, with a significant shift from a 'full-wrap' EPC (where, broadly, the contractor takes full responsibility for delivering the construction of a project right the way through to commercial operation) to EPC 'light' (with equipment supply being decoupled from design and delivery and the project delivery being divided into multiple separate contracting packages). A reduction in cost (due to contractors not pricing in as much 'risk premium') and a shift in contractors' risk appetite are the key drivers behind this change.

Whilst not an unusual approach to contracting (it is a well-trodden path in a PFI context), it is not an approach that clean energy investors (particularly debt investors) are traditionally familiar or 'comfortable' with. A split-contracting approach (such as the one illustrated below) carries significant inherent risk for the project, the developer and by extension the investor. Poor management of interface risks can lead to significant project delays, have an impact on the implementation and performance of a project and increase liability exposure for the developer and its investor.

What is interface risk?

Interface risk can take many different forms and can refer to technical interface (how different parts of equipment and materials work together), contractual interface (the way different contracts 'fit' together), organisational interface (this is more obvious in joint venture arrangements where different businesses need to work together to deliver a project for a customer) and geographical and regulatory interface (these are more obvious in international, multi-million pound projects that span a number of different geographies and are more exposed to legislative change).

In this article, we predominantly focus on managing the contractual interface risk, recognising that other professionals will need to address matters around technical and organisational interface and that all these risks exist, to some extent, in all clean energy projects.

An example: constructing a ground-mounted solar pv project

A developer ('ABC Limited') has secured all the necessary land rights, grid connection and planning permission to build a large-scale ground-mounted solar pv park in England. ABC Limited has an established relationship with a solar pv module supplier and has decided to procure the solar pv panels directly from said supplier. This allows ABC Limited to leverage its existing relationship to secure a competitive price and at a time of supply chain constraints, secure an order for its project ahead of construction. ABC Limited intends to 'free issue' the solar panels to a contractor ('BOP Limited') for incorporation as part of the project's design.

ABC Limited engages BOP Limited under an engineering procurement and construction contract. Under the scope of its contract, BOP Limited will also be responsible for procuring the remaining material and equipment that is required for the project.

ABC Limited separately d engages an independent connection provider ('ICP') for the contestable grid connection works (i.e., the elements of the new electricity connection that do not need to be carried out by the Distribution Network Operator (DNO)). The ICP will be responsible for procuring the material and equipment that is inherent in its scope of work.

Following commissioning of the solar pv park, ABC Limited intends to also enter into an operation and maintenance agreement with BOP Limited for a period of at least two years (to coincide with the defects' liability period under BOP Limited's delivery contract, following which ABC Limited will look to bring the O&M activities in-house. A sister company of BOP Limited ('BOP 2 Limited') will also provide asset management services for an initial five year period post commissioning.

In this example, ABC Limited will need to be a party to a minimum of three agreements that are key for the delivery of the project:

A module supply agreement;
An EPC contract with BOP Limited; and
A grid connection works' contract with ICP.

Under each of these agreements, the supplier or contractor has a defined scope of work and defined responsibilities. When viewed in isolation, each contractor may be able to perform the part of the project that has been assigned to them.

However, these agreements do not operate in a vacuum and ABC Limited needs to consider these holistically considering the overall project and the key objective, which is the construction of a ground-mounted solar pv project that meets certain availability and performance requirements. It is not uncommon for some developers to further separate out the delivery scope in a greater number of contracts (where specialist contractors carry out defined elements of the work), which further increases the interface risk.

What happens when interface risk is not managed properly?

Where the EPC contract and the ICP contract have been negotiated separately, there is a risk that there may be gaps in the scope of each of these contracts. Where such gaps are identified after the start date, there will need to be dealt with by variations to the scope, which have the potential to result in increased cost and affect the project’s programme. In some instances these gaps might not be identified until they arise, which might compound their impact;

Where the works undertaken by the ICP contractor are dependent upon completion of the works by the EPC contractor, any delay on the part of the EPC contractor will have a direct impact on the ICP contractor’s work and programme delivery. It is not uncommon for a contractor to be provided with relief for delay events that are attributable to the project owner or its contractors (in our example ABC Limited and/or BOP Limited);

Assuming that the works completed by BOP Limited are defective, BOP Limited will typically have the right under the EPC contract to rectify the defects during the defects’ liability period. Any actions that BOP Limited takes and the timing of such actions, could have a direct impact on the ICP’s ability to complete their scope of work. Where ICP is prevented or delayed from completing their scope of work on account of BOP Limited’s action, it is likely that they will have a claim against ABC Limited for additional cost and an extension of time. Consideration also needs to be given to the proposed operation and maintenance arrangements and the potential for any manufacturers’ warranties provided under the module supply agreement to be invalidated in the process of BOP Limited trying to rectify defects in the works.

Additionally, it is possible that a BOP Limited and the ICP have a different view on the root cause of the defect, with BOP Limited claiming that the defect has arisen because of the ICP’s poor workmanship. In such situation, ABC Limited (and its investor) will be ‘caught’ in the middle and will be unable to progress the project the completion pending resolution of this dispute. This issue is further exaggerated where there are systemic defects that arise through a combination of the actions of different parties, as opposed to being attributable to a single cause.

Where a swift resolution of the dispute does not appear likely, ABC Limited may be directed by its investors, to seek to exercise its rights under the relevant contract against BOP Limited or the ICP, which could result in the termination of the relevant contract, resulting in further delays in the need to integrate a new contractor in the contractual matrix.

Where the solar pv modules are defective, ABC Limited will, most likely, seek the replacement of the products under the module supply agreement. Any delay in the delivery of replacement products is going to have a direct impact on BOP Limited’s construction and commissioning programme. This delay is not attributable to BOP Limited and BOP Limited will seek relief from ABC Limited for any associated delay.

Managing interface risk in project delivery

For the reasons outlined above, it is understandable why investors tend to take a more cautious approach when considering projects with as complex a contractual matrix as the one described above and are willing to pay a premium for de-risking project delivery in this way.

How can ABC Limited manage interface risk effectively?

From a health and safety perspective identifying and appointing a single contractor as a principal designer and principal contractor will be key in managing the planning, managing, monitoring and coordinating health and safety issues during the pre-construction and the construction phase of the project;

ABC Limited could consider appointing an interface manager, who will responsible for managing both the technical and contractual interface. This manager will also be responsible for organising regular meetings between ABC Limited, BOP Limited and the ICP to ensure that each contractor remains on track and is able to deliver their part of the agreed project;

Incorporating contractual provisions obliging each of BOP Limited and the ICP to actively co-operate with one another and coordinate their work (including by coordinating the sequencing of activities, site access and usage of different areas and the provision of security at the site), would provide a contractual basis for ABC Limited to ‘force’ the contractors to work with one another. Industry standard form of contracts, such as the NEC4 engineering and construction contract, already include such provisions, but these could be further enhanced depending on the circumstances of the case;

Each of the EPC and the ICP contracts will include wording to the effect that BOP Limited and ICP Limited shall undertake their respective scope of work in a manner that: (i) takes into consideration the existence of the other contract and (ii) does not put ABC Limited in breach of its obligations under the other agreement. Such provision ought to allow ABC Limited to recover (on an indemnity basis) any costs or liabilities that arise for ABC Limited as a result of the failure of one of the contractors to comply with this obligation.

That said, it is our experience that this position is often resisted by contractors, as it could open them up to unknown liabilities that have not necessarily been priced at the outset. Even if a contractor was minded to accept the position outlined in the earlier paragraph, it is likely that the contractor would look to agree a ‘freeze’ point for liability, such that if a third party agreement is amended after that point, that would give the contractor an opportunity to renegotiate the contract price and/or obtain an extension of time (as relevant);

Consideration needs to be given on the list of ‘delay events’ that will be included in each of the contracts and the nature of relief that will be afforded to the relevant contractor. Ensuring that the project owner’s liability is capped at a ‘comfortable’ level and that each contract is robustly drafted and allows the project owner to enforce its rights in a manner that would avoid the need for a contractor to seek relief, will also be key in this context.

As an alternative to the above options, ABC Limited could explore the possibility of concluding a tri-partite interface agreement (between ABC Limited, BOP Limited and ICP). Such agreements are common in PFI and offshore wind projects but have not been as common for other renewable energy projects. The purpose of such agreements is to create a direct contractual link between different contractors (in our case BOP Limited and the ICP) and to safeguard the interests of the project owner (ABC Limited). Contractors may be reluctant to consider such an arrangement, as it would result in increased liability exposure for the contractor (to both the project owner and other contractors involved in the project).

How can we help?

We have a team of experts who can support with the drafting and negotiation of the various contracts to ensure that the interface risk is managed effectively and that any risk is mitigated to the extent possible. We are also able to support with any stakeholder management, such as preparing interface risk reports which can be shared with investors as part of their due diligence and financial modelling. These sorts of legal interface reports will typically supplement the technical interface report that will be prepared by the employer's technical advisors and will identify any potential contractual interface risks and the manner in which these are (or ought to) be mitigated. Please do get in touch if you would like to discuss how we can support you and your projects.