As commercial solar and energy storage continue to grow in popularity, most public agencies and many businesses have formal procurement processes in place for soliciting competitive bids for projects and managing multiple bidders — often through a Request for Proposal (RFP) or another bidding process.
The most responsible procurement teams are managing multiple bidders to ensure they choose a company that will help them meet their project goals. Asking the right questions early in the process can help align the scope of the project with the financial goals. Here are some of the most overlooked aspects of preparing for and evaluating a solar RFP.
1: What are THE internal considerations a customer should address before issuing a solar RFP?
One important question to ask is what internal resources are available to manage the RFP — from writing it to managing the bidding process and evaluation? Is there someone dedicated to the RFP task, like an internal procurement team, or is the RFP simply getting lumped onto someone’s other core responsibilities? It’s not uncommon to see the latter scenario, with someone unfamiliar with solar or construction projects managing the RFP process. They’re often surprised by how much work and detail it takes to find qualified companies then manage and evaluate the bidders.
A second aspect to consider is whether internal resources have the solar expertise to manage the RFP process. Commercial solar is all about energy production and energy savings, so there should be a basic understanding of solar technology and performance. Do they understand the mechanics of energy billing, and the financial expectations for solar installations? Previous experience managing other construction projects can be helpful, but familiarity with at least the basics of solar energy and the economics of energy production are critical to the success of the overall project.
2: What should the internal RFP team know before writing an RFP?
From the beginning it’s critical for the internal team to have a clear understanding of the financial and strategic goals of the solar project before writing an RFP. There are several reasons entities are choosing solar energy and the internal team should understand the company’s goals before writing the RFP. Some questions to consider around those goals are:
- Is the company adopting solar or energy storage to save money on their energy bill?
- Do they expect to generate revenue from the project?
- Is the goal to offset a specific kilowatt hour energy load?
- Will they install solar at every site across a corporate portfolio because they want their customers, community, or students and teachers to drive up and see solar onsite, regardless of the economics of the system?
- Is the company adopting solar or energy storage primarily for sustainability reasons?
There’s also a set of questions to ask around system financing, such as whether they want to own the system outright or finance the system. Having the context for these answers helps set realistic expectations in terms of what the project will achieve.
3: What are the most important questions an RFP should include?
RFPs typically require bidders to provide the same baseline qualifications to demonstrate they have enough experience doing similar types of projects. It’s important to look for a history of on-time delivery and performance, along with specific project references. There’s also a range of technical questions related to any project, from complex engineering questions to more basic questions about the project schedule, deliveries, and impact on parking access and day-to-day operations. It’s important to ask a bidding company how they’ll approach a specific project from a logistics and execution standpoint.
Beyond these standard questions, one of the most important considerations is related to the financial health of the bidding company. Commercial solar and energy storage projects necessitate a 20- to 30-year relationship, therefore it’s important to work with a company that can fulfill the long-term obligations of the contract. If a solar company is on shaky financial ground or can’t adequately scale, that can directly impact their ability to finish a project. If the construction company goes bankrupt, which we have seen a lot in our nearly 40 years of installing solar, there likely won’t be a counterparty to fulfill the obligations for the life of the system.
Another important item to include in the RFP is insight into the basic underlying assumptions the bidding companies are using to create their energy production analysis and energy savings analysis. Stated more simply, ask bidders to explain how they are calculating their numbers. Even better – build in a specific set of assumptions for the utility rate (or escalation rate) on an annual basis to calculate the savings and ask bidders to specify what interconnection costs may be if the utility must make upgrades.
Level-setting these assumptions up front standardizes the bids across all the bidders and helps entities make realistic, apples-to-apples comparisons between the proposals. Of course, not all the financial and technical details can be answered on the front-end of the RFP, and some will have to be refined after site discovery and due diligence. But there should be a consistent set of assumptions that all bidders are using, or there will be massively different bids that might not adequately represent the risk or the cost of the project, particularly around utility interconnection, underground issues and geo-tech, and structural issues with the roof.
When writing an RFP, the key is to find a balance between building in enough technical requirements to make a fair comparison, while also asking enough open-ended questions to see how a company will approach the solar project. Be careful not to be too prescriptive in the RFP, especially with technical requirements and construction specifications that may not be applicable to solar and energy storage projects. A project could become overburdened, or more expensive or difficult than it needs to be. And since every single solar project is a custom-designed and -built project, it’s key to see how the EPC’s technically optimized solution will work for the project site and business needs.
4: Who should be on the internal team that reviews the RFP responses and awards the project?
First and foremost, it’s important to have the actual decisionmakers in the organization involved in the RFP process. It’s best to gain high-level buy-in early on. Whether it’s the CFO or some other high-level decisionmaker who is ultimately writing the check for the system, that person should be part of the internal review team. Solar and energy storage projects involve lots of moving parts, and decision makers should not be learning about the proposal the day it’s being reviewed.
Here’s a comprehensive list of stakeholders who should be part of the internal RFP team:
- Chief decision-maker(s) for the company
- The procurement manager, who will understand the nuances of the project and what they’ve asked the bidders to bid on
- Someone who understands energy, energy procurement, the energy needs at the site, and overall what the company is trying to accomplish with solar
- A facilities or operations manager who will work closely with the solar company during the construction and will oversee the day-to-day operations
- Any stakeholders in charge of the financial performance of the system
5: What are the most important financial metrics to consider when comparing proposals?
All proposals for solar systems will include overall system size and cost/watt, so these two attributes will be included in the comparisons – but they aren’t financial metrics. System size doesn’t matter if it’s not performing well in terms of utility bill offset. And finding the lowest $/watt doesn’t always mean it’s the best deal.
We recommend looking at financial metrics of economic performance when comparing RFPs. Levelized Cost of Energy (LCOE) is probably the best financial metric to compare because it will calculate cost, performance, and overall savings over the life of the system. Two other important metrics companies should compare are Internal Rate of Return (IRR) — especially if the company is investing its own money — and Net Present Value (NPV).
6: What other qualitative information about a bidding company is important to consider?
One area often overlooked in RFPs is the bidding company’s safety record. This should be very high on the list of considerations. Interconnection expertise is another area that’s important, especially if the system is complicated, such as a non-export system, or a large project with complex interconnection timelines. In these cases, the best option is to work with a company that really understands complex interconnection timelines and regulations.
7: What service offerings of the bidding companies should entities look for when evaluating a solar RFP?
For starters, it’s best to look for a company with an in-house team who can manage the entire process of design, engineering, procurement, project management, construction, scheduling, interconnection, and financing through the project lifecycle. There are inevitably things that come up during the design and engineering phase that weren’t contemplated in the RFP. Entities should look for an experienced team that has worked on a wide variety of solar projects, has the internal resources to deal with any issues that come up, and can value engineer and customize each to be the right solution for that application.
There are also a variety of additional offerings that a customer may be interested in, whether it’s energy storage, EV charging stations, or O&M services. There is a lot of value to finding these services in-house, under a single company. It can be a lot more complicated working with a contractor that is piecing these services together through different vendors.
8: When should a company consider working with a solar consultant to manage the RFP process?
A consultant helps manage the RFP process by providing clarity on construction timelines, expected economics and savings, and requirements that the customer is going to have in terms of site access and execution of the project. If a company or public agency doesn’t have a dedicated resource for procurement who can adequately manage and resource the RFP process, they should consider hiring a solar consultant. Also, if the internal procurement resources don’t have at least a manageable understanding of solar and the financial diligence involved with planning a solar project, they should consider hiring a consultant. This is not uncommon when a company is just getting started with solar – or might only be planning to install solar one time and doesn’t want to staff this role long-term.
9: What should a company look for when considering a solar consultant?
The ideal consultant should have a consistent track record working within a similar customer type: schools should work with a consultant that works a lot with schools; manufacturing companies would want to work with a consultant that’s done private sector work. Similarly, if a company is planning a big ground-mount system with a significant environmental permitting timeline and complex interconnection issues, work with a consultant that’s done this work before — not a consultant that only specializes in roof-mounted installations, for example.
10: What’s the best advice on issuing a solar RFP?
There are three things that pull this all together:
- Know what the goals are for solar. Knowing this makes it easier to evaluate performance against goals, and help get executive buy-in.
- Know what the RFP is asking for. Have someone involved internally who understands energy procurement and the company’s energy needs.
- Set some key assumptions. Having the same key assumptions in the technical questions will enable an apples-to-apples comparison. The process will be easier if all bids are equal for the project scope.