Commercial Operation Date
Definition
The commercial operation date (COD) is the date on which a power project is formally declared to be operating commercially under its offtake and financing contracts, usually after construction is complete, required tests are passed and the grid connection is in service. Contracts define COD precisely, and many set a guaranteed COD, a deadline after which the seller owes damages or the buyer may terminate. Contracted revenue under a PPA or toll typically begins at COD.
Why it matters
COD is the hinge between construction risk and operating cash flow. Offering materials often quote a target COD; contracts and loans depend on a guaranteed one. Investors should check the guaranteed date, how it can be extended, what damages or termination rights apply if it is missed, and what the project earns, if anything, before COD.
Common misconceptions
- •A target COD is not a guaranteed COD.
- •Mechanical completion is not COD; testing and acceptance follow.
- •Revenue before COD is usually merchant and may be small or uncertain.
- •The label is only a starting point. Investor outcomes usually depend on the governing documents, cash-flow priority, valuation policy, disclosure quality, and manager discretion surrounding the term, not just the shorthand definition used in marketing materials.
Technical details
Typical sequence
Mechanical completion.
Commissioning and performance tests.
Grid operator approval to operate.
Substantial completion under the EPC contract.
COD under the offtake contract; term conversion under the loan.
Timeline context
Berkeley Lab found the median project built in 2025 took 61 months from interconnection request to commercial operation.
How investors apply the term
Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.
The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.
Frequently asked questions
- When does an energy project start earning contracted revenue?
- Usually at COD as the contract defines it. Energy Vault's Cross Trails battery agreement runs ten years 'from the commercial operation date, which was May 31, 2025.' Power produced before COD is often sold at market prices; Pelican's Jaw's financing treats it separately as 'Pre-Completion Revenues.'
- How does COD differ from finishing construction?
- Construction completion, testing and acceptance are separate steps. SCE's contract with Ameresco defines Substantial Completion as achieved only when, among other things, 'the Performance Requirements have been achieved,' and sets a Guaranteed Completion Date by which the contractor 'guarantees that the Project shall achieve Substantial Completion.'
- What is a guaranteed COD?
- A contractual deadline. In Pelican's Jaw's financing, the lenders' 'Guaranteed Completion Date' is the PPA's 'Guaranteed Commercial Operation Date,' as extended under the PPA. Fervo agreed to offer Google an expansion with 'a guaranteed commercial operation date no later than June 2030,' alongside a 396 MW project with target CODs beginning in the third quarter of 2028.
- Why do lenders care about COD?
- Because construction loans usually convert to term loans, and distributions to equity usually start, only after completion. In Pelican's Jaw's financing, equity distributions require that the term conversion 'has occurred' among other conditions.