5 Strategic Imperatives for Project Execution

May 2021 | Hover Energy

5 Strategic Imperatives for Project Execution

Rajiv Pandya

5 Strategic Imperatives for Project Execution

Why do some renewable energy capital projects succeed while others fail?  More often than not, the answer is having a repeatable approach to Project Execution and Project Management. While this may sound basic, being able to execute with distinction every time is hard, especially for start-ups who oftentimes have been spending their energy on product development and not their plan for deployment. Having a consistent approach not only allows for a solid foundation to start from – but it’s crucial when it comes to scaling the business while ensuring customer satisfaction, safety and profitability.

At Hover Energy, we have the benefit of a management team that brings decades of experience running successful product launches across a wide range of industries. The following are what we believe are the top five strategic imperatives for successful project execution, and hope they’ll provide useful insight, whether you’re a startup looking for best practices, or an established company seeking to streamline your processes.

 

1. Separate core technology and project execution decisions.

This may sound intuitive, but all too often, in the spirit of client customization, the lines between the core technology and product execution can blur. In the case of Hover, our core technology is our microgrid, consisting of our wind turbine array with solar and storage and an associated control system to tie everything together. As we think about project execution, we are focused on how to make the installation successful for each particular client – decisions such as the location of the installation on the roof and structural/electrical modifications needed, location for assembly of each turbine before being lifted on the roof, the sequence of installing each element and the lifting itself.

 

2. Utilize EPC Industry Methodologies and Best Practices

Using industry best practices has several advantages. Oftentimes it serves as a “common language” between the supplier and customer, which streamlines communication and minimizes potential confusion. It also provides a repeatable template, which is critical for scaling as the company scales. As is standard for capital projects within the Engineering, Procurement, and Construction (EPC) industry (per the table below), each project follows four stages from beginning to end – Project Feasibility, Project Definition, Project EPC, and Project Operations

  • Moving between each Stage requires a “stage-gate” authorization from Business Leadership to ensure cost, safety, schedule, and quality priorities are met
  • Stage 1 “front end” feasibility scope definition must be locked in to ensure all major projects decisions during Stage 2 Project Definition can be fixed

It is critical to avoid making changes during Stage 3 and Stage 4 to avoid costly and harmful to the project

3. Define the Best Fit for a Project Management Structure

The decision on which project management structure depends on the company and client goals and capabilities.   The key is to decide on a project management structure that can be deployed against a portfolio of multiple projects.

Regardless of structure, for Hover, each project is divided into manageable segments of work, including contractor service areas such as Structural, Electrical, Architectural, Materials Testing, General Contracting, Construction, Transportation, Inspection, Critical Equipment, and Surveying.

 

4. Ensure Competition and Value Delivery with Contractor Relationships

Having a consistent and repeatable approach for contractor relationships is one of the most important aspects of successful project management and execution.   For Hover, having a single contracting management team, led by the Program Management Contractor, gives us consistency across all projects, the ability to create synergies, and gives us the ability to have a “high level” view to ensure we don’t exceed contractor capabilities. 

Depending on the size of your organization and the number of projects being planned, the number and role of the contractors needs to take into consideration market conditions (both current & projected) during contract strategy selection, with construction & safety management prioritized to determine the best value to the program. For Hover, to optimize our ability to scale, the contracting management team utilizes multiple, larger contractors, each with regional or nationwide capability.

 

5. Properly align Business Model and Project Execution Decisions

This one may also seem obvious but needs to be kept top of mind from the outset of project management decisions. The software industry is a classic example, where the business model can be either a one-time product sale or as a subscription (software as a service). Decisions on how the product is deployed and serviced flow slightly differently for each model. For Hover, the two keys models are based on whether the customer will “buy the equipment” or “buy the electricity”.   

If the Customer “Buys the Equipment”:

  • The Customer will own the system (and may partner with a Hover-sponsored entity to do so)
  • Hover will execute an Equipment Purchase Contract with the Customer
  • The contract will require a minimum level of project services to be provided by Hover (i.e., structural, equipment delivery, lifting, mounting) to stand behind its product warranty
  • The Customer will be required to either pay cash or set up a regular commercial loan or PACE loan, which Hover will assist with as much as is needed.
  • The maintenance and insurance of the system will be the responsibility of the customer but supported by Hover

If the Customer “Buys the Electricity”:

  • Hover (through a special purpose entity) will structure the financing requirements and execute an Energy Services Agreement (ESA) with the Customer for a minimum of 10 years. Upon completion of construction, Hover will either retain ownership of the system or sell it to a third-party investor, depending on Hover’s goals at the time.
  • The Customer will have the option to buy out the system after a certain # of years based on a Fair Market Value (FMV) calculation acceptable to the IRS.
  • The investment capital stack organized by Hover will be a combination of debt (provider is TBD), tax equity (provider is TBD and/or Hover), sponsor (provider is TBD and/or Hover)
  • Hover will have full responsibility for maintenance and insurance of the system

In this article, we’ve used Hover Energy examples to illustrate the kind of decisions and considerations needed when thinking about successful Project Management and Execution.  Like all companies, we will learn and adapt our processes, but believe having a core set of imperatives ensures we have a scalable approach – one that gives our employees and clients confidence and maximizes the amount of time we have available to get things done quickly and efficiently.

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