Solar EPC Agreement for a Factory: The 15 Clauses That Decide Who Pays Later

A solar EPC agreement for a factory decides who pays when something slips: the roof leaks, the DISCOM delays, an inverter fails or output falls short. The fifteen clauses below are the ones that move cost between you and the contractor. Read them before the price, because a low quotation with a thin agreement usually returns as variation orders later.

Why the agreement matters more than the quotation

A quotation lists equipment and a price. An agreement says what happens when the plan meets the site. Most disputes on rooftop plants come from the same places: an item nobody priced, an approval nobody owned, a performance figure nobody could test, and a warranty that sat with the contractor and not with you. If you are still comparing bidders, line up their offers first using our quote comparison checklist, then take the shortlisted draft through the fifteen clauses below. Our solar EPC service page describes what a complete scope looks like.

The fifteen clauses

Performance: guarantee the ratio, then decide on generation

Performance ratio compares the energy a plant delivers with the energy its rated size should deliver for the sunlight that actually fell on it. A PR clause is testable because it corrects for weather. A generation guarantee in units per year is not, unless the clause also corrects for irradiance. If a contractor offers a generation figure, ask for the weather-correction method in writing, or ask for a PR guarantee as well.

It helps to know what a public floor looks like. The Ministry of New and Renewable Energy's office memorandum of 10 June 2022 on the residential rooftop programme includes a model vendor agreement. In it, the vendor guarantees a minimum system performance ratio of 75% under a test carried out in line with IEC 61724 or an equivalent BIS standard, for five years. The same document asks for a module performance warranty of more than 90% in the first ten years and more than 80% in the next fifteen, and for the vendor to maintain the plant for at least five years. It is a residential document, so treat it as a reference point and not as a commercial standard for a factory. Write your own figure and test into clause 6, and read what to check in a performance guarantee.

Delay damages: what the law lets you recover

Section 74 of the Indian Contract Act, 1872 lets a party recover reasonable compensation not exceeding the amount named in the contract, whether or not actual loss is proved. In practice, this means a delay rate in the agreement is enforceable up to its stated cap, but a court can award less if the figure looks out of proportion to the loss. Set a rate you can justify, such as the cost of buying grid power in place of the plant's output or the cost of an extended site presence, and put a cap on it. The reciprocal point matters just as much. If you delay site access, roof release or your own approvals, the contractor will ask for time, so define those events in clause 5 and not in an argument.

Payments, security and variations

Tie each payment to something you can see or test. A typical convention is an advance on order, a payment on delivery of material, a payment on structure and installation, and a balance on commissioning and acceptance, with a part held until the defects period ends. The split is a commercial negotiation, but the principle is fixed: the cash you have paid should never run ahead of the work you can verify.

For reference, the Department of Expenditure's Manual for Procurement of Works (second edition, 2025) suggests performance security of three to ten per cent of contract value for government works, and notes that item-rate contracts typically allow quantity variations of 10 to 15 per cent before a competent authority's sanction is needed. A private factory owner is free to choose, but the ranges show what experienced procurers treat as reasonable. For changes, insist on a written order that states the rate basis before the work starts.

Approvals, warranties and the handover pack

Name the owner of each approval: the DISCOM feasibility and net-metering application, any state renewable agency registration, the electrical inspector's clearance where it applies, and fire safety reviews for roof work. Say who pays the fees and what happens to the schedule if the DISCOM asks for a design change. Rules differ by state and change over time, so cite the current regulation in the schedule and not a remembered one. Approved-list rules for modules also change; see our note on the module approved list and put the rule in the change-in-law clause.

Warranties should be assigned in writing, with the module and inverter manufacturers' certificates and serial numbers listed. Our guide to the documents an EPC contractor should provide lists the handover pack: as-built drawings, test reports, string records, manuals, and monitoring access in your name.

How Secured Engineers helps

We design and build C&I solar plants for factories and commercial buildings, and we are comfortable with the agreement being read line by line. Design is done in-house, and Fire NOC, CEIG and DISCOM net-metering applications are filed in-house, which makes clause 4 simple: one party owns the file. Mechanical, electrical, plumbing, fire and solar work can sit under one contract, so the roof, the electrical room and the fire design are not left between contractors. We work from offices in Noida (Delhi NCR) and Ludhiana, with 535+ projects across 18+ states and 89.77% repeat clients.

If you hold a draft agreement or a quotation, send it and we will mark the gaps against these fifteen clauses. Start with solar EPC for your factory, message us on WhatsApp, call +91 70099 85817, or ask for a free proposal. This article is general information, not legal advice; have your counsel review the final agreement.