Do you engage in wind power projects? – Don’t underestimate your responsibility as a power plant operator

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For some years now, institutional investors have invested in renewable energy projects, which are easily predictable and, thus, offer reliable returns. Currently, their focus is on wind power and photovoltaic projects, which are traded and change ownership on a global scale today. After long phases of evaluation, due diligence examinations, purchase price calculations and negotiations, wind farms are finally transferred to the new owners who look forward to a stable rate of return over the term of the power plant operation.

 

Many of these new owners – in particular institutional investors who have never had to do with primary energy supply before – are not aware of the fact that power plants are not just an object to invest money in to reap certain income per year but are fully operational power plants whose operation is linked to specific obligations and requirements.

 

As long as the power plants operate smoothly, no lawsuits are filed or no official audit is imminent, everything is fine. But what happens if one of the aforementioned situations materialises? Are all documents necessary for the power plant operation in place and at hand? Has everybody fulfilled their tasks and obligations? Who will be held responsible for a possible accident and who will have to meet the claims for damages? Of course, it is the owner of the power plant or its manager or representative body who will be held responsible in the first place. Accidents sometimes also happen in wind turbines – in the end, they are power plants that operate non-stop. In Germany alone, there were about 50 serious accidents where power plants were destroyed in a fire, components were torn off, lift systems fell down or workers were fatally injured between 2008 and 2016, as reported in the media. This does not include minor accidents.

 

If, in such an event of damage, it can be proven that the owner or manager culpably breached their duties, e.g. organisational negligence such as failure to properly organise workflows or delegate tasks to the authorised persons, this can have severe legal consequences. These can include anything, ranging from substantial fines or five- or six-digit revenue losses due to a power plant shutdown through to criminal prosecution in the case of negligent personal injury or involuntary manslaughter.

 

The responsibility for avoiding such cases of damage or for keeping power plants in proper condition and for ensuring their safe operation so that the dangers inherent in such power plants do not materialise is referred to by the legislator as “operator’s responsibility”. Below, we focus on the topic of “operator’s responsibility” and specifically on the ways of how owners can legally protect themselves against the accusation of having violated their duty.

 

But what exactly is to be understood by operator’s responsibility?

 

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Operator’s responsibility results from executing direct physical control over and having direct access to the power plant, i.e. the operator is responsible for any and all scenarios arising therefrom and for any and all possibly resulting events of damage.

 

In order to put this responsibility in more concrete terms, the legislator imposes statutory obligations. If the relevant addressee of such obligations, i.e. the investor who owns or operates the power plant, does not comply with such duties, this may lead to severe consequences. 

 

 

 

Figure 1: Statutory operator’s liability under GEFMA 190 [guideline on operator’s liability issued by the German Facility Management Association]

 

Among other things, the obligations include:

  • Upkeep of construction and technical equipment (§ 3 MBO [German Model Building Regulation])
  • Upkeep of work equipment (§ 10 BetrSichV [German Work Health and Safety Regulations])
  • Legal duty to make land or premises safe for persons or vehicles, e.g. snow clearing and gritting (§ 823 BGB [German Civil Code])
  • Obligation to pay damages in the case of damage caused by buildings (§§ 836, 838 BGB)
  • Plant liability under VDE [standards issued by the German Commission for Electrical, Electronic and Information Technologies]

 

First of all, investors should know the exact legal bases and to whom they are accountable in what situations. Such projects can involve all kinds of interest groups:

  • Authorities, especially in the case of power plants approved under the BImSchG [German Federal Immission Control Act]
  • Attorneys of the opposing party in a lawsuit
  • Courts
  • Banks
  • Insurance companies
  • Shareholders
  • But of course also organisations such as employer’s/trade associations if an employee (also including third parties engaged!) sustains damage. 

 

Moreover, the operator must meet certain record keeping and retention obligations not only as regards the amount and the kind of documents or their quality and scope but also as regards the storage place and the retention period. These go far beyond the common obligations arising from existing permits, which often exactly prescribe what kind of information about the on-going wind turbine operation, e.g. wind data or information about switch-off times due to shadowing and flying bats, must be stored. So, for example, a wide range of documents, calculations and documentary evidence relating to the entire life cycle of the power plant must be stored and submitted, if need be. The documents relate to virtually all project phases, thus including the preparatory and installation phase where the operator is often not even involved in the project yet and, therefore, does not have any direct access to accurate documentation. Typical examples include securing of land plots, installation of various kinds of equipment and the power plant itself, development of technical documentation for the power plant etc.

 

To what extent can the operator’s liability be transferred?

Of course, operators can assign these tasks to external third parties; for example, they can task them with handling technical or business aspects of the power plant operation. When assigning a transferable task, they should make sure to use legally safe and technically impeccable wording. This should be done not only to make sure that the parties are agreeing on the same thing as regards the distribution of tasks but also to stay on the safe side as regards the effectiveness of the transfer of risks to the engaged third party in the event of damage.

 

However, the operator’s risk cannot be transferred entirely and, thus, some of its elements always remain with the owner. Typically, the operator always has the so-called “supervision obligation”. Furthermore, the operator must comply with other obligations such as the duty to give proper instruction/briefing when delegating a task, to equip the person to whom the task is being delegated with necessary means and grant them the necessary powers and to carefully and appropriately select those in charge and service providers. All these duties cannot be transferred and, thus, are always part of the residual risk of every power plant operator.

Conclusion

When acquiring and operating wind farms it is essential for institutional owners (thus being the wind farm operators) to reduce the operator’s risk as far as possible and ensure that transferable tasks are transferred to an external third party in a legally safe way. In this context, care should be taken to ensure that impeccable and legally valid wording is used in order to avoid situations where such a transfer is subsequently declared ineffective. Often, new owners of windfarms are not aware of the residual risk related to non-transferable obligations. Therefore, in respect of the remaining risk relating to non-transferable obligations it should be of great importance to investors, and thus operators, to develop a consistent organisational and process flow structure where the remaining obligations of the operator are accounted for. Not least because of this, it is essential to keep accurate and up-to-date records required to document the installation and operation of the windfarm. In this context, it is vital to have specialist knowledge as to what documents are required (in terms of type and quality) so as to ensure that the power plant documentation is compiled and kept in accordance with the law.

 

Minimise this residual risk as a windfarm operator and don't set yourself up for a rude awakening from the dream of a sure-fire investment.

 

Our offering as Rödl & Partner

Our experts will conduct a “quick check” to determine how the issue of “operator’s liability” is handled at your firm. They will check both the construction-related and technical aspects and the relevant documentation of your organisational and process flow structure. This includes a check of documentary evidence and a review of contracts concluded with service providers in order to determine whether and how tasks are delegated. Our experts will also interview responsible employees at your firm in order to be able to adequately assess the overall situation. The result of our activities will be an informative report on our findings indicating weaknesses and risks and including practical recommendations.


If requested, we can next provide you with the infrastructure necessary to ensure appropriate and legally safe documentation for the power plant. In this context, we will not only prepare for you a comprehensive overview of all necessary and legally required documents but also a schedule across the entire lifecycle of your power plant to tell you when what documents including what data should be kept on file and updated, if need be.

 

In the third step we could revise contracts as well as your organisational and process flow structures based on a detailed actual vs. target comparison. This will help eliminate significant defects identified during the quick check and, thus, effectively minimise the operator’s risk.

Contact

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Benjamin Hufnagel

Associate Partner

+49 911 9193 3570

Send inquiry

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Henning Wündisch

Partner

+49 911 9193 3551

Send inquiry

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