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Fluence customer seeking refund for Diablo BESS EPC contract, citing ‘defects and chronic failures’

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Global system integrator Fluence has been hit by a cross-complaint by the owner of the Diablo battery storage project in California, which is seeking a US$230 million refund for Fluence’s engineering, procurement and construction (EPC) work on it.

The project was completed by Fluence for independent power producer (IPP) LS Power affiliate Diablo Energy Storage LLC in April 2022 under an EPC agreement worth US$237,976,007. Diablo is now seeking the return of US$229,106,742 paid, citing a litany of ‘defects, deficiencies and failures’ at the project, plus damages, a California court document shows.

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Diablo is a 200MW battery energy storage system (BESS) in the city of Pittsburg, near San Francisco, described as an 800MWh system but actually built to 955MWh as per the document from the Superior Court of the state of California, County of Contra Cost, filed on 10 November, 2023.

In the court document, Diablo Energy Storage LLC spells out how a series of technical failures which it attributed to “Fluence’s poor workmanship and other shortcomings” led to overheating, downtime for maintenance and at times the BESS being removed from grid operator CAISO’s ancillary service market.

Though the project and its vehicle Diablo Energy Storage LLC was originated by LS Power, it may now be part of the IPP’s renewables-focused subsidiary REV Renewables which it launched in 2021.

The cross-complaint by Diablo is actually in response to a complaint initially filed by Fluence against Diablo in October 2023, in which it sought US$37 million in damages arising from its work on the project. Diablo’s cross-complaint in response is also seeking an additional minimum of US$25 million of damages.

Fluence declined to comment on the case when asked by Energy-Storage.news while LS Power has not yet responded to our request for comment.

Fluence did address the litigation in a 10-K filing on 29 November, saying: “Fluence denies the allegations in the cross-complaint and intends to vigorously defend against them and to enforce our claims against the defendants.”

“We are currently not able to estimate the impact, if any, that this litigation may have on our reputation or financial results, or on market adoption of our products.”

Specifics of Diablo’s complaint

The EPC agreement between the two companies covered the engineering and design, the BESS, a power conversion system (PCS) including inverters, an ESS control system, project substation, site improvements, procurement, installation and commissioning, recycling of the batteries at their end-of-life, remedy or warranty defects and the supply of spare parts.

The project was completed Fluence on 27 April, 2022, some eight months later than initially agreed, although this came at a time when supply chain issues were rocking the wider energy storage and renewables sector.

Diablo alleges that shortly after it assumed control of the project, it began to experience a series of failures.

The first allegation pertains to the control system responding slowly or inaccurately to CAISO signals, which caused CAISO to remove the project from the ancillary service market for several weeks.

The cross-complaint claimed Fluence’s proprietary Human-Machine Interface Monitor (HMI) also does not function properly, meaning Diablo has to operate the system with a Data Acquisition System that Diablo calls “inefficient and not intended for that purpose”.

Diablo also cited frequent failures of the Auxiliary Control System and the inverters, with an alleged 27 inverter failures between June 13, 2022 and July 14, 2022 alone, and two arc flash events that have occurred since it went online.

The company also accused Fluence of failing to satisfy the part of the EPC agreement which requires it to investigate and resolve the failures outlined, and failing to provide a facility for unmanned operation.

“In sum, Fluence’s performance under the EPC Agreement has been woefully deficient,” Diablo said.

“Fluence delivered Substantial Completion Certificates and turned over control of the Project hundreds of days behind schedule. Fluence delivered a Project that does not function as designed and requires constant oversight and maintenance.”

“Fluence has failed to properly address and resolve warranty items and chronic failures of essential systems. And Fluence still has not achieved Final Completion.”

Diablo also alleges that Fluence failed to maintain a valid license at all times during performance of the EPC agreement, violating California law.

The cross-complaint was filed on behalf of Diablo by law firm King & Spalding.

Fluence is the second-largest BESS integrator by past projects as per recent research from Wood Mackenzie and S&P Global, while S&P pegs it as the largest by past and contracted projects taken together.

Energy-Storage.news’ publisher Solar Media will host the 5th Energy Storage Summit USA, 19-20 March 2024 in Austin, Texas. Featuring a packed programme of panels, presentations and fireside chats from industry leaders focusing on accelerating the market for energy storage across the country. For more information, go to the website.

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