HM Insights

Don't get blown off course: how to negotiate the negotiations in a renewable energy project

Having advised on every aspect of the renewable energy supply chain since 1994, members of Harper Macleod’s Energy Team have been at the cutting edge of wind power developments, advising on projects totalling almost 2GW of installed capacity with a further 1.5GW in the pipeline. Here, Edinburgh-based Partner Pamela Todd shares some vital tips on how to get a project over the line.

Edinburgh and the east of Scotland form an integral part of Scotland’s renewable energy industry, being home to many companies involved in the sector as well as being the home of Scottish Government and Leith Docks yet having potential as a base for manufacturing. The city itself is a vibrant hub with lots of activity and many new contracts being negotiated.

There is no shortage of advice on how to be a successful negotiator but as Scotland’s economy is edging into its recovery the scars of the credit crunch are still very apparent in the approach that some parties are taking to contract negotiations.
The construction industry has armed itself with standard contracts the terms of which have been designed to strike a reasonable balance between the parties and provide a known and well understood framework within which they can work. Many of the contracts involved in wind energy projects will have to be negotiated from scratch, however.

Four top tips to move towards a quick completion

No matter how proactively one behaves in a negotiation, the negotiation will proceed at the pace of the slowest and will only be entered into when the last of the parties is willing to commit. Indeed, one party appearing too keen may encourage the other party to pause to see what concessions may be extracted to secure the contract.
So what can you do to better your chances of concluding your contract quickly? Before you even start you should:

  1. Understand what it is that you actually want from the contract. As part of this, you will need to keep in mind what the alternatives to the contract are – in particular, if you can’t reach agreement what is your best alternative. Although occasionally one particular contract will genuinely be crucial, in most instances there are alternatives but they would simply be less convenient or would cost more; not proceeding at all may be a better alternative than entering into one contract at any costs.
  2. Bear in mind what the other part actually wants from the deal – understanding that will allow you to understand how far you can push the other party whilst retaining good will, and at what point she might simply walk away.
  3. Be realistic. Whilst achieving the most attractive commercial terms and avoiding any risk may seem like the ultimate goal, if you cannot get the other party to agree to those terms, you will have nothing and by starting your negotiation aggressively you may engender such ill-will that you may find your contract difficult to complete and problematic to perform.
  4. Prioritise. Some details in your negotiation are more important than others, and there is little sense in spending months negotiating unimportant details.

Get in touch

If you would like to discuss any of the issues raised in this article, or any other renewable energy matters, please get in touch with a member of our team.