First-of-a-kind energy projects carry a distinct set of risks for investors. The core technology has usually been tested at pilot scale only, the revenue often mixes public support with private sales, and the sponsor may never have built a project of this size. Reviews designed for proven technology may not capture all of these risks.
Independent assurance gives investors, lenders and offtakers an objective view of whether such a project is ready for a final investment decision. ENERMO’s experience of assuring first-of-a-kind projects through to that decision points to five considerations that apply across energy infrastructure.
Technology selection
By the time an assurance adviser is appointed, the sponsor has usually chosen its technology and begun negotiating with a preferred supplier. Repeating that selection rarely adds value. The more relevant test for investors is whether the selection process was sound.
Investors will want to know whether enough credible suppliers were considered and compared on the same basis for cost and performance. The selection criteria should also reflect how the plant must operate, including its availability and its fit with existing infrastructure. Gaps identified at the Concept Review can then be closed before they affect the investment case.
Scale-up from pilot to commercial plant
First-of-a-kind plants are usually designed from pilot or demonstration data, and the step to commercial scale can exceed a factor of a thousand. Standard equipment such as vessels and heat exchangers is built to established codes and carries little scale-up risk. While a pilot confirms that the process works, some behaviour appears only at full scale, such as how a catalyst or solvent performs over many years of operation, how quickly equipment fouls and how the new process interacts with the host plant.
Assurance should establish how the sponsor and its suppliers have scaled up the pilot data, what uncertainty remains and whether the design margins and contingency are sufficient to cover it. Where the data are limited, further testing or a performance guarantee in the supply contract may be needed. Both are far easier to secure before the final investment decision than after it.
Organisational capability
Technology risk tends to receive most attention in first-of-a-kind projects. However, experience on major capital projects suggests that many cost and schedule overruns start within the owner’s own organisation. An operator with a strong record of running existing assets may still have limited experience of building a project several times larger than its recent investments.
Assurance should therefore test whether the owner’s team has the project management and commercial skills the project needs, and whether its governance allows decisions to be taken in time. Senior roles should be held by people who have delivered similar projects. Gaps found at an early gate can be closed through recruitment or by appointing an owner’s engineer, whereas gaps found late are more likely to appear as cost growth and delay. Organisational capability is one of the five TECOP risk dimensions that ENERMO assesses at every gate.
Specialist benchmarking and independent advice
First-of-a-kind projects need a range of specialist expertise that no single adviser holds. Detailed cost and performance benchmarking is best carried out by specialists with deep data on the process in question, and it carries most weight when it comes from a party with no stake in the outcome.
Benchmarking alone, however, does not provide an investment view. Investors and offtakers need the findings read against the project’s commercial terms and turned into a clear view of whether the remaining risk is acceptable and what conditions should apply before capital is committed. The most effective arrangements combine the two, with specialist reviews feeding an independent assurance adviser who reports directly to the party committing capital.
Treatment of benefits under public support and private offtake
Many first-of-a-kind projects combine public funding with private revenue, such as a government contract or grant alongside sales of certificates or premium-priced product to private buyers. Each source of revenue has its own rules on what may be claimed and what evidence is needed.
Where those rules overlap, the same benefit may be counted twice, or the terms of public funding may limit what an offtaker can claim. These issues are far easier to resolve with the funding body and the offtakers during development than after contracts are signed. Assurance should confirm that each benefit is treated the same way in the offtake contracts and the support agreement, in line with the scheme rules, and that the monitoring needed to prove it will be in place when the plant starts operating.
Application within the stage-gate process
Each of the five has a set place in the stage-gate process. Technology selection is assessed at the Concept Review. Scale-up and the owner’s team are tracked at each gate up to the FID Readiness Review, and the way benefits are counted must be settled before any capital is committed. At every gate ENERMO assesses all five TECOP risk dimensions together, so that investors see the whole risk picture while there is still time to act.