Solar Industry
Since the start of the COVID-19 outbreak across the world, governments have begun enforcing numerous mitigation measures to combat the spread of the disease. This, in turn, caused the disruption of the supply chain for various sectors, including the solar industry.
This came as no surprise at all as most of the raw materials for hardware and equipment used in solar industry projects are provided by Chinese manufacturers.
Considering that the majority of the factories were either closed or on partial operations and travel restrictions have been strictly imposed, the supply of materials were drastically delayed as a result.
This disruption has caused major problems for Engineering, Procurement, and Construction Contracts (EPC Contracts) working in solar industry projects. Since EPC contractors are responsible for keeping track of the project’s progress and ensuring that the project timeline is followed, any unexpected delay will likely cost them money.
Thankfully, contractors can claim for an extension in the project in the occurrence of pre-agreed events (Delay Events). This can fall under force majeure events, change in law, delay by authorities, and delay by the Project Owners and their officers, contractors, and consultants.
The COVID-19 pandemic likely falls under the Force Majeure Event, but the terms to qualify this as such depends largely on the contract. Alternatively, the disruptions caused by the outbreak can fall under the Change in Law. However, this will still be dependent on the definition of ‘Law’ in the contract.
Either way, participants in the solar industry project should consider adopting a measured approach to mitigate the impact of the ongoing pandemic to the business and the project. Several steps that can be taken include the development of a mitigation plan, where parties asses the consequences and risks that may occur. Another is the assessment of the contractual options, where relevant clauses can be amended.
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