The nature of the final approval will depend on the implementation route identified. Where the decision is for a design and manage or turnkey project, the approval process should largely follow established company procedures for directly funded projects. However, longer evaluation horizons are advisable for CHP projects than for projects involving market-related products, as the provision of energy to the site is a predictable on-going requirement. The plant and equipment that use the energy may change, but the need for energy is still there.
The ESCO contract, on the other hand, can be a complex one and is probably unlike other contracts that the company has experienced. The decision-making processes may, therefore, need to be significantly different from those used in other, more conventional projects. Issues of particular importance when considering this type of contract include:
- The impact of external finance.
- Security of energy supplies.
- Industrial relations.
- Default on contractual arrangements.
Furthermore, the concept of contracting out the provision of critical utility services to another organisation over which there is less direct control can be intimidating, although it will have been considered in depth earlier in the evaluation procedure. It is important for the company to have confidence in the abilities of the contractor. Furthermore, the incentives and deterrents built into the contract must be sufficient to ensure security of supply.
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