Clean Energy Project Requests for Proposals
NREL offers guidance on requests for proposals (RFPs) to procure products and services for U.S. state and community clean energy projects.
An RFP is a process used by agencies looking to obtain products or services from potential providers, most often through bidding. A clean energy project RFP outlines the product or service requirements, the proposed contract terms, and the bidding process mechanics. Once the proposals are received, they are evaluated according to the goals of the issuing agency, and a vendor is selected.
Prior to launching the procurement process and issuing an RFP, government agencies need to work through project development steps to identify potential projects, collect the data to make an informed choice on which projects to pursue, and then select one or more projects to implement. Agencies can issue both a request for information (RFI) or request for qualifications (RFQ) as precursors to the RFP. Once those project development steps are complete, information needed to issue an RFP is assembled.
Procurement Process for Clean Energy Systems
The procurement process for clean energy systems involves six steps:
- Developing an RFP
- Issuing the RFP
- Administering the RFP (e.g., responding to bidder questions and concerns, site visit, receiving the bids)
- Assembling a qualified review team
- Evaluating bids based on predetermined criteria
- Selecting the winning bidder.
Some government agencies that have experience in this area may handle the process on their own, while others may decide to hire a consultant to assist with or manage the process.
Direct Buy Versus Power Purchase Agreement Request for Proposals
Many local government agencies choose to directly purchase their clean energy projects, especially if they are pursuing a single, small-scale project and have the capital available. When these agencies decide to direct fund, they issue an RFP to select a developer that will design, procure, install, and commission a project. The contract that is signed is often called an engineering, procurement, and construction contract. The agency will likely base its selection decision on who can provide the most competitive price and meet other predefined criteria (e.g., development timeline, demonstrated financial strength, previous experience).
Purchase Power Agreements
It is also very common for government agencies to enter into power purchase agreements (PPAs) where, rather than directly buying the clean energy system itself, the agency contracts with a developer to purchase the electricity produced from the system. This is most often the case with solar projects. In this instance, the agency will request bids that are based on the PPA price (on a per-kilowatt-hour basis) for electricity, the rate at which this electricity price increases over the life of a contract (i.e., the escalator) along with things such as productions guarantees, buy-out options, and end-of-term options. Once a PPA provider is selected, it is the provider/developer that will contract and pay for the actual installation of the system. It will take any available tax incentives and remain the owner of the system until it is sold or transferred to the government agency (the "host").
Request for Proposal Best Practices
No two projects are exactly alike. Projects vary by size, location, equipment, and goals. Likewise, the creation of clean energy RFPs varies from project to project. There are, however, a few best practices that should be kept in mind as an RFP is developed, issued, and managed. First, start with a clear goal; this will help both in the development of the RFP and the evaluation of proposals. Second, develop outcome-based RFPs focused on system performance rather than specific technical or equipment requirements. This will give all respondents much more leeway to design a system that will meet the local agency's needs. Note, however, this does not mean that the RFP shouldn't require that the vendor select equipment that has been certified. Third, it is important that the agency provide the respondents with as much information about the site or sites proposed for the installations as possible. This will help potential respondents be more specific in their proposals. Finally, the issuing agency should disseminate the RFP as widely as possible. This will allow for the greatest number of respondents and give the agency the greatest number of options.
A common misstep when issuing an RFP for a PPA is to burden the RFP with requests for the underlying cost of the project. Developers that enter into PPA contracts are reluctant to share their internal cost information as what is really germane to the PPA RFP process is the per kilowatt-hour price and the other aforementioned criteria, not what the developer's costs are.
Request for Proposal Elements
As already mentioned, RFPs can be as varied as the project themselves. However, there are certain elements that should be included in most, if not all, clean energy-related RFPs. These elements include requiring:
- Contractors to obtain required permits, interconnection agreements, and any other regulatory approval
- Copies to be provided of applicable county or city ordinances or unique regulatory requirements, detailed information on local permitting practices, and any permit application forms
- Experience and qualifications of the respondent (e.g., past projects completed, letters of reference, training, licenses)
- Equipment used in the system meet applicable product codes or standards
- A timeline of major project development milestones against which progress can be measured
- Systems to meet both the national electric code and international building code as they apply
- Technology warranty information
- Any applicable labor and resourcing requirements (e.g., locally sourced products, union labor)
- A training session for maintenance or O&M manuals if a local government is planning to assume operational responsibilities
- A provision under operation responsibilities that the respondent provide some sort of performance monitoring program if a local government is using a third party-owned system through a lease or a PPA..
Project outcomes are tied to project goals. This is why it is important to have clearly defined goals before issuing an RFP. Individual project goals will affect how each proposal is evaluated. For example, if the project goal is to use as many local resources as possible, more weight will be given to respondents that source all materials from within the community than respondents that bring in many outside resources. In contrast, if the goal is to complete the project as quickly and cost-effectively as possible, less weight may be given to local sources if outside sources can be found at a lower cost. In either case, the most important aspect of proposal evaluation is correlating a local government agency's goals to the selection criteria.
Writing Solar Requests for Proposals (RFPs): Lessons from NREL's University PV Implementation Assistance Program, NREL Technical Report (2016)
NREL provides assistance with developing an RFP for a clean energy project.