What should I know about contract negotiation for clean energy projects?

After selecting your provider, contract terms determine how conflicts are resolved, who bears risk, and how disputes are handled. Many building owners accept standard provider contracts without negotiation, leaving themselves unprotected. Understanding key negotiation points helps you secure terms that work for your organization.

Essential Contract Elements to Review and Negotiate

• Scope and specifications — Ensure the contract incorporates your RFP scope exactly. If the contract references a different scope or performance target, it creates ambiguity and dispute risk.

• Completion deadline — Include a specific completion date with consequences for delay (liquidated damages or the ability to terminate). "Reasonable efforts" or "best efforts" language is too vague.

• Warranty terms — Most solar equipment carries 25-year performance warranties, but does the provider guarantee workmanship? How are warranty claims handled? What happens if the provider goes out of business?

• Performance guarantees — If the provider guarantees energy production (e.g., "minimum 50,000 kWh/year"), what happens if production falls short? Are you entitled to compensation, or is the guarantee non-binding?

• Change order process — How are scope changes requested, approved, and priced? Require that any change be documented in a written change order before work begins.

• Insurance and bonding — Confirm the provider carries appropriate insurance (general liability, workers' comp, property damage). Bonding protects you if the provider fails to complete work.

• Payment terms — Most contracts tie payment to milestone completion (25% at contract, 50% at equipment delivery, 25% at completion). Withhold final payment until you've verified system performance.

Common Negotiation Points

• Warranty assignment — Some provider contracts limit or exclude warranties to building occupants. Negotiate to ensure warranties transfer if you sell the building, or at minimum, require the provider to honor warranties regardless of ownership.

• O&M and monitoring — Clarify who's responsible for system maintenance and monitoring. Does the provider offer a service contract? If you handle monitoring, does the provider provide remote access and support? Get this in writing.

• Workmanship warranty period — Equipment manufacturers typically provide 25-year warranties, but installer workmanship may only be covered for 5–10 years. Negotiate for longer workmanship warranty, especially for complex installations.

• Performance guarantee details — If the provider guarantees performance, specify: What is the baseline (historical weather data, standard test conditions)? What factors are excluded (panel degradation, weather, utility outages)? How is shortfall calculated and remedied?

• Termination for cause — What gives you the right to terminate the contract? Most contracts require "material breach," but define this clearly. Can you terminate if the provider misses a major milestone or falls more than 30 days behind schedule?

• When to Engage Legal Counsel — You don't need a lawyer for every contract negotiation, but engage counsel if the contract involves long-term financing, includes performance guarantees, is large (over $500K), or contains unusual terms. A lawyer can identify risks in standard contracts and help you negotiate protective terms.

• Documentation and Sign-Off — Ensure the final executed contract matches your understanding. Require the provider and your organization to sign all amendments and change orders. If the provider proposes changes after contract execution, document them formally before accepting them.