Developing On Call Energy & Capacity Security - Part 3


As provided in Part 1 and Part 2 of this three-part series, there are industry proven power project development and asset management processes which can be utilized to effectively develop, own, and manage a natural gas fired generation resource. The last of a series of three articles, this article outlines the process and provides a framework that can be followed when a joint development and joint ownership structure is put in place to develop, build, and operate the project.

JOINT PROJECT OWNERSHIP STRUCTURE figure-1-Dec-04-2023-03-06-25-2894-PM

Depending on the power project’s ownership structure, a joint ownership and development strategy can require a level of talent resource engagement that is the same as or similar to that of a sole ownership strategy. That is, the lead owner would likely provide the required talent resources, either internally and or externally. However, this level can be impacted by the terms of the joint development, ownership, and operating agreements agreed to by the owners. Further, the need for joint ownership agreements creates additional complications and considerations relative to those issues for sole ownership. 

Figure 2 represents the implementation functions and the required talent resources needed for power project development under a joint project ownership structure. In cases where all the owners lack the experience and/or resources, or for reasons such as conflict of interest, the owners can agree to outsource these activities and define the roles and responsibilities within the joint project agreements. Under a joint project strategy, owners’ legal and owners’ representative support will need to be well versed in joint project agreements that will be required.                                                               figure-2-3

Owners who are not leading the development efforts will require their own support services to help protect their interests during the project development process and after commercial operation. These services can be sourced in-house or contracted separately by the non-lead owner. Such owner representative services would not be part of the project nor be a joint project expense. The ability of any owner to monitor and challenge, if necessary, project management directions and decisions based on experts’ reviews would need to be outlined in the joint project agreements.


Joint ownership will require internal talent resources during both project development and commercial operation. The breadth and depth of the internal talent resources will depend on the terms of the joint project agreements in place to manage the project development and operations. The project development and operations resources are generally housed within the project’s lead functional organization. Existing internal resources are often relied on by the lead owner to drive functional activities that can be viewed as outside the plant fence such as power transmission and fuel procurement, but it is not uncommon for such expertise to be outsourced. The degree of engagement will depend on the joint agreements in place to manage the project.

The project-lead organization will design the outsourced talent resources’ reporting relationships that best fits their managerial situation. A development lead or project manager will be required to coordinate and oversee their team of engaged internal and outsourced resources. In addition, the project lead will be the organization’s project “go to” person. Although this individual would report to the lead owner's senior management, they would be accountable to other owners as well.

callout-1-Dec-04-2023-03-06-25-4468-PMSUMMARIZING THE EFFORT

Natural gas fired power project development includes a range of implementation functions. These functions require both technical and commercial skillsets. The development and implementation resources must be qualified to support the execution of each function. It will be critical for these internal and acquired resources to meld the development activities so that the project can be commercialized to meet its goals.

Regardless of the chosen development strategy, the resulting structures will generally include the same types of technical and commercial talent, but the level of engagement of these resources will differ.

Best practices require the formal engagement of an owner’s engineer when an EPC contract or developer arrangement is the determined approach. This is an expected requirement for funding approval. It is best practice for a co-owner not experienced in power project development and operations and with limited internal project development talent, to engage an owner’s representative to act as an extension of the co-owner’s development and operations staff.

Organizations without the power project development, ownership, and operations internal resources and experience have successfully evolved while also maintaining a lean approach to fulltime internal staffing. The required high level of project development and operations proficiency can be successfully acquired through outsourcing. Organizations will acquire power project internal talent and outsourced talent resources and design reporting relationships that best fit their organization’s managerial situation. During the development phase, the reporting relationships will need to operate much like a matrix organization with dual reporting to both the organization’s internal leads and the project’s development lead to be successful.


Paul-Wielgus-PhotoFor more information or to comment on this article, please contact:

Paul Wielgus, Managing Director
GDS Associates, Inc. - Marietta, GA
770.799.2461 or