The success or failure of complex projects is dictated as much by what the project is as how it is accomplished. In the case of onsite energy, or microgrids, how often involves numerous vendors. Most projects will need support from multiple niche specialists to achieve an optimal outcome. From design to equipment to installation, quality vendors influence the total cost of an onsite energy project, the longevity of its usefulness, and its ability to solve the problems or meet the sustainability goals of an organization. As your deployment plan is developing, utilize the advice below to begin researching and vetting vendors for equipment, development, and installation.
Factors to Consider in Microgrid Early Stages
Educate yourself as much as possible before contacting equipment suppliers or developers. You should have a clear picture of what you are looking to accomplish. Each question below links to a blog to help you determine:
- What are your sustainability goals?
- What do you expect your system to deliver?
- What do you expect your system to cost?
- How you would like to pay?
When you begin asking and answering the questions above, you’ll see how interlinked they are. Your best bet is to take a coordinated approach to capital, services, and equipment.
A Word of Advice
One thing we tell our customers is lowest cost, best design, and most appropriate specialist equipment don’t come from one supplier. You’ll need to weigh your options to determine your priorities, such as whether it’s your preference to have higher capital expenditures (CapEx) to enable lower operating expenses (OpEx) or vice versa. For example, unlike hydrocarbon generation, renewables have a high upfront capital cost and very low ongoing operating costs.
In our blog, Financing Sustainability Initiatives: Paying For An Onsite Energy System, we discussed utilizing outside capital to fund your project. This can be beneficial because, outside capital allows you to continue to pay your energy bills by the month, and someone else funds the project and takes the technical risk. In exchange, you make a long term commitment to purchase power from them. This isn’t for everyone, but it drives the implementation of an onsite energy project, so it must be decided early on.
Who Should You Approach?
Most project owners should consider more than one proposal before deciding to invest. The assets you build today will typically serve the business for decades to come. It is well worth the time and effort to seek competitive options and compare them before making a decision.
When seeking competitive proposals, having the right supplier mix can deliver dramatic improvements in project outcomes and project economics. We have observed some specialized and highly qualified suppliers reducing the cost of deploying an onsite energy solution by over 30%, on a like-for-like basis. So getting the right mix is critical; otherwise you will be paying the hidden cost of leaving a critical supplier out of your bid-list for the life of the asset.
We recommend considering both experienced local suppliers and proven national or international experts. The exact mix will depend on factors specific to your project, your business, and your risk appetite. If you have time to do so, we recommend conducting a pre-qualification process where you consider potential suppliers’ qualifications and track-records. That way you can invite only those suppliers well positioned to meet your needs, saving time in assessing too many proposals later in the process.
What Should You Ask For?
Once you know which suppliers you want to approach, the next step is to decide what you want to ask them for. Onsite energy projects can be deployed in a multitude of configurations, using a wide array of technologies. The more clear you can be about what you are looking for, the more likely you are to get a response from a supplier that meets your needs.
When approaching suppliers, bear in mind that suppliers are also qualifying you. Gone are the days of “free consulting”, where energy users can ask suppliers to propose a range of options and choose between them. The market is busy, and all suppliers have to assess how much business development resource to dedicate to you and your project. There are many competing priorities, and if you don’t know what to ask for, your request can get demoted to the bottom of potential suppliers’ inboxes.
What we observe when energy users’ requests end up on the bottom of the inbox is that they will typically still receive a response. No vendor wants to be rude, and after all, the client is royalty. But proposals are often rushed, can gloss over important details, and include excessive “risk allowances” to counter the uncertainty or unknowns in the request for proposal. All these factors contribute to a higher cost when the project is deployed.
Simply put, well thought out and thorough proposals lead to quicker and more accurate estimates. Poorly constructed, loose, or otherwise uninformed requests usually receive poor quality, delayed, and/or inflated responses.
How to Manage Sub-Supplier Selection?
Deploying an onsite energy project takes a village. There are niche specialist providers of each key technology being deployed and local contractors needed to provide “boots on the ground.” Different financing structures require different types of lenders to be approached for financing.
So energy users need to decide who is selecting these sub-suppliers. The approach depends on your goals, your internal resources (time/expertise), the scale of the project, and your personal preferences. There are three broad paths that companies commonly take:
- Select a single partner to manage capital, equipment, design, and construction.
- Have one company manage the physical asset (design, equipment, construction) and another company supply the capital.
- Utilize internal expertise to manage the project, and split capital, design, equipment, and construction into smaller, competitive packages.
VECKTA Makes it Simple and Easy to Engage Vendor Partners
VECKTA is a one-of-a-kind platform that supports the entire microgrid process from start to finish. Through our Marketplace, connect with the right partners to design, finance and build your microgrid or onsite energy system. Get transparent, competitive pricing, worldwide support, and an unmatched community of partners, suppliers, investors, and clients.
Here are some ways you can use VECKTA to find, vet, choose, and manage your vendors:
Works whether you are hands off or entrenched in the project.
- Deploying using VECKTAs tools allows you to remain as involved in decisions as you wish to be all the way through the project.
- VECKTA can support your project regardless of your experience and preferred path.
Access to niche specialists.
- The VECKTA Marketplace gives you access to the niche specialists you need to deploy successfully.
- Companies who gain support of the best suppliers get the best results.
- Missing a key supplier can mean an underperforming asset, that you have to live with for 10+ years, and that you overpaid for.
Efficient supplier engagement means less money wasted and more accurate proposals.
- Through VECKTA, you can engage the right suppliers (capital, design, equipment and construction) and work in a way that makes it easy for suppliers to respond.
- Suppliers expect energy users to know what they want, and know how to ask for it. The VECKTA Marketplace helps you to ask the right questions and presents your data in a way that makes understanding and responding to your needs effective and convenient for leading suppliers.
You can customize sub-supplier selection.
- The best approach to sub-supplier selection depends on your specific project, internal capabilities, risk appetite and the time you have available
- See and compare all your options, then select the right path.
- The VECKTA Marketplace allows you to make great decisions in a way that meets your needs – from working with business owners and executives directly to collaborating with internal procurement and governance functions.
Keep all your information in one system.
- All of your suppliers need to collaborate to achieve a great result for you. VECKTA enables one communication and planning point.
- Having all of your information in one system mitigates the risk of unexpected delays and variation caused by miscommunication, suppliers using outdated or different information, or suppliers not having clear records of what is required from other involved suppliers.
Written By Calvin Fine