The UK’s commitment to achieving net zero carbon emissions by 2050 continues to reshape the construction landscape. Renewable energy projects have become central to national policy, backed by substantial investment in solar, wind, and low-carbon infrastructure. However, while the technical pace of the sector accelerates, its legal underpinnings remain less certain - particularly in relation to payment mechanisms and dispute resolution.
The renewable energy boom and the HGCRA gap
The Housing Grants, Construction and Regeneration Act 1996 (HGCRA) introduced key protections for parties engaged in qualifying construction operations, including the right to adjudicate disputes and receive interim payments. These statutory rights have materially improved cash flow and expedited dispute resolution across traditional construction projects. Nevertheless, not all projects benefit.
A number of renewable energy projects fall outside the scope of the Act due to specific exclusions in section 105(2). For example, operations carried out on sites where the primary activity is power generation, such as wind farms, are often excluded. Consequently, even where the underlying works are construction in nature, parties may not be entitled to rely on the statutory protections afforded by the HGCRA.
Rising risk in a growing sector
As pressure mounts to decarbonise, the renewable construction sector is expanding rapidly, and with that growth comes an increasing volume of disputes. These projects frequently involve complex technologies, international supply chains, and tight delivery deadlines. Common issues include under-certified payments, delays due to technical failure, and unforeseen site conditions.
The risks are exacerbated by the exclusion from statutory adjudication. Where adjudication is unavailable as an automatic right, parties are left entirely reliant on their contractual dispute resolution provisions. In many cases, this will involve arbitration, which can take many months or even years to conclude. For smaller contractors and members of the supply chain, this can have serious consequences for cash flow and commercial viability.
Contractual workarounds: opting into the HGCRA
Importantly, exclusion from the HGCRA doesn’t prevent parties from agreeing to adopt its provisions contractually. When negotiating standard form contracts, particularly international forms like FIDIC or NEC, it is open to parties to specify that the contract will be governed by the payment and adjudication regime set out in the HGCRA.
This is an important consideration, because forms like FIDIC and NEC do not automatically comply with the HGCRA. FIDIC contracts, for example, typically include multi-tiered dispute resolution mechanisms that culminate in arbitration. Without appropriate amendment, they may not permit adjudication “at any time” or contain a compliant payment scheme. NEC contracts are more adaptable, and options such as W2 and Y(UK)2 are designed to align with the HGCRA, but these must be expressly selected and completed correctly in order to be effective.
Where a project comprises a hybrid scope (with some operations falling under the HGCRA, others excluded), careful drafting becomes even more important. Parties can mitigate the risk of jurisdictional challenges and enforcement difficulties by expressly opting into the HGCRA where it does not otherwise apply. This ensures consistency throughout the supply chain and reduces the potential for procedural delay.
Key takeaways
- Consider whether your project falls within the scope of the HGCRA – if in doubt, seek legal advice.
- Does the contractual dispute resolution mechanism work for you and the project? Without adjudication, resolution of disputes can be slower, riskier, and more costly.
- Review the payment terms – do they align with other contracts or could they create a gap?
- Don’t assume you’re covered - if the HGCRA doesn’t apply, make sure its incorporated by agreement.
Contributors
Partner
Senior Associate
