How can you progress construction whilst awaiting confirmation of grid connection dates?
Recent delays in issuing Gate 2 grid connection offers have put renewed pressure on project timelines. First tranche offers, namely 26/27 protected transmission and large embedded projects, are now expected by mid-April 2026 and protected 26/27 distribution projects by end of May 2026. However even these projects may ultimately have their protected connection dates delayed.
In the meantime, what can developers do to ensure that a project is in the best possible state when offers land and connection dates are confirmed?
There are various possible ways to “get ahead” with a construction project before main contracts are signed. Site set up, enabling works, surveys, initial designs, engineering and advance ordering are all activities that may be under consideration. In this article we set out some contractual approaches to consider along with some of the risks to be aware of.
Early contractor involvement
Early contractor involvement really is as simple as engaging with a contractor early. There is a huge amount of industry comment on the subject including the pros and cons. Early contractor involvement takes many forms and could fall into the categories under the headings below. It also goes without saying that market engagement and a robust tender process can also help to better understand key project risks and opportunities.
The NEC4 forms of contract (commonly used in the UK and which UK civils, enabling works and ICP contractors may prefer) have their own optional clause for early contractor involvement, X22, which contains some helpful inspiration for early contractor involvement. X22 divides the contract into two stages which are to be defined in the contract’s Scope (specification document). During Stage One the contractor submits designs for acceptance and progresses other matters including budget. Progress to Stage Two is covered by a notice to proceed.
Whilst it is difficult to provide a one size fits all for early contractor involvement (if using NEC4 X22 consider consequences of termination during Stage One), X22’s approach to design development and an overall budget for the project is worth bearing in mind.
Letters of intent
If used appropriately, Letters of Intent (“LOI”) can play a valuable but limited role in allowing works to commence earlier than would otherwise be practical. They can enable early mobilisation and procurement, helping parties manage inflationary pressure and secure materials.
Key risks include scope creep, unclear liability caps and uncertainty over duration, all of which should be tightly controlled through a defined scope, a clear financial limit and a realistic expiry date linked to execution of the main contract. Any extensions or variations should be formally recorded to reflect the contractual status of the parties’ arrangements.
LOIs should always be treated as temporary arrangements whilst the main construction contract is finalised and should never replace it. If your lawyer shudders at the mere mention of a LOI, the reason is that case law contains many examples of where they can go wrong, as seen in the 2018 Arcadis case where parties inadvertently created a binding contract through a LOI and subsequent performance and then went to dispute over whether the LOI included a liability cap.
Limited notice to proceed
Many projects with protected offers may also be about to commence or already made progress on contract negotiations. These could include EPC, BOP or other contracts. A good option in such cases will be to consider a limited notice to proceed (“LNTP”) in order to instruct a contractor to begin key activities.
The benefits of a LNTP include that any works provided can be made subject to a full set of contract terms, including all health and safety requirements, design and construction standards and warranties and insurance requirements for example. The disadvantage of LNTP is the time that it may take to appropriately ringfence the initial LNTP activities from the remaining works and negotiate all the terms that apply only to LNTP.
LNTPs may be helpful where the actual contract negotiations are close to finalised, or where the LNTP approach has been considered in the project programme from the outset.
Enabling works agreements
An enabling works agreement or early works agreement generally refers to initial actual physical works. For example, site roads or site access roads, construction of swales, or more intrusive site works or surveys such as pull out tests.
Enabling works agreements do not need to cover the same level of complexity as a full EPC or BOP contract and so may be quicker to negotiate and implement. The NEC4 engineering short construction contract may be a possible option for simple site works.
An enabling works contract is however a full working construction contract. The terms must include for all the appropriate provisions, requirements standards and policies for carrying out construction works, in contrast to a pre-construction services agreement (see below).
Pre-construction services agreements
As the name suggests, Pre-Construction Services Agreements (“PCSA”s) are typically used for the provision of services prior to the main works contract being entered into. PCSAs may form part of a two-stage tendering procedure for larger, more complex, projects where design, buildability, programming, technical advice and detailed costs information from a prospective contractor are required before signing the main contract. PCSAs may take the form of a relatively simple consultant appointment which envisages the parties continuing to work together under the later EPC contracts or they may be more detailed in order to fix the terms of the main construction contract.
Long lead items ordering
Arguably the most challenging issue in respect of external early project delays is equipment ordering and lead times. When can you commit to ordering panels, battery modules, inverters, transformers etc if you don’t know when a project can be commissioned or reach commercial operations?
The impact of lead times on the construction programme and market competition for equipment will both apply pressure to place orders sooner. On the flip side, bear in mind that when equipment is ordered, the lead times start to tick down which could lead to additional costs of storage and may even lead to warranty periods starting when equipment is delivered - even before it is commissioned.
Long lead items arrangements may be covered in construction contracts or standalone long lead item procurement contracts. From a developer perspective advanced ordering likely means paying in advance. To cover the gap of having put down monies before goods are received, typical protections are advance payment security, vesting certificates and assignability of supply contracts. A contractor placing orders with its supply chain should consider the same issues. Contractors will also want to ensure cash flow under main contract aligns with payments for goods and materials and should ensure that they avoid the fate of a contractor in a recent case in Trinidad and Tobago which was on the hook for 30% equipment cancellation charges.
The right approach to early project development, particularly in the context of grid connection challenges, means considering and carefully addressing the risks and issues noted above as well as many others. A strong procurement and contracting strategy can reduce these risks and increase the chance of project success.
How we can help
Our Construction team advise on all aspects of clean energy projects, including procurement, construction, operations and maintenance. Please contact Jon Baker and William Woods if you have any questions or for further information.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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