Solar O&M firms develop granular cost benchmarks to extract further asset value
Operations and maintenance companies are tapping growing datasets to implement more detailed cost benchmarking as advancements in connective IT raise the potential for performance gains, company executives told New Energy Update.
The rapid fall in solar modules and installed costs in recent years has raised the importance of O&M efficiency. Larger PV operators and service providers are leading an industry shift towards more advanced performance metrics and cost benchmarks.
O&M costs in developed PV markets such as Germany and the U.K. account for 20-25% of the levelized cost of energy (LCOE), the International Renewable Energy Association (IRENA) said in a report published in June 2016.
Innovations in plant design, component improvements and the clustering of maintenance services have led to dramatic falls in O&M costs and operators are now seeking new ways to lower prices.
Some U.S. O&M costs are already close to $8,000/MW/yr, the cost the National Renewable Energy Laboratory forecast for 2020 in its 2016 Annual Technology Baseline report, shown in the table below.
US O&M cost forecast
(Click image to enlarge)
Costs represented for different % load factors and cost reduction scenarios (low, middle and high.)
Data source: NREL's 2016 Annual Technology Baseline (ATB) report.
O&M service contracts might include cleaning and inspecting, fault diagnosis and repair, data analysis, contract management and warranty enforcement. Additional features can include technical improvements and repowering and even the management of drones and automated cleaning systems.
Optimizing O&M contracts requires the right mix of data benchmarking and project experience, since requirements can vary greatly depending on technology choices and resource strategies. In addition to cleaning costs, O&M prices depend on requirements for corrective and preventative maintenance, labor, spare parts agreements and finer detail such as whether inverter maintenance is included.
O&M service provider greentech benchmarks specific cost components within the O&M package to provide transparency on the whole cost structure, Ingo Rehmann, greentech's Managing Director, told New Energy Update.
“We developed this approach to not only benchmark the whole O&M, but single disciplines and in detail. We had to look at the preventative maintenance pricing, cleaning, monitoring systems, corrective maintenance level and different countries…to make it comparable," he said.
Many of Europe's largest PV firms are adopting best practice guidelines for O&M, but differences remain on the best way to measure and improve O&M performance.
Besides its regular O&M services, greentech also carries out a pre-assessment of project requirements and technical capabilities to identify appropriate benchmarks to support asset owners.
This independent assessment first establishes if the plant operates at 8 euros per kW peak or 6 euros per kW peak and defines the main performance boosters. In a second step these boosters are analysed in detail to understand the cost-structure in a bottom-up approach. This more detailed study then establishes key project requirements such as monitoring frequency and maintenance scope and reaction times.
Greentech's benchmarking sets out asset specific target prices for the single O&M components taking into account independent market research and its own database.
By comparing actual data against industry benchmarks, the operator is able to identify underperforming areas and adjust operational strategies.
Solar plant owners often overestimate the cleaning requirements of the facilities, Rehmann said.
"In a UK climate, for instance, and with the angle modules are usually installed at, you don’t have to clean your modules so often-- more than once or twice a year doesn’t make sense, however, this has to be validated on a project by project logic," he said.
Clean energy investor and asset management provider Glennmont Partners takes a more in-house approach to benchmarking the performance of O&M providers, Jordi Francesch, Head of Asset Management at Glennmont Partners, said.
“We are very active in the market, so we know the big elements of cost for the different players, and we understand how the cost of structure is defined,” Francesch said.
Glennmont favors price comparisons of specific O&M cost categories, rather than a top-down analysis of the price per MW, and the company uses these to issue tenders for contracts, he said.
As the solar market matures, more detailed O&M metrics and consolidated datasets are being developed to optimize investments.
Operators must be wary of large discrepancies between actual figures and emerging benchmarks as O&M contracts priced far below market levels often lead to poorer performance, Francesch said.
“When I’ve seen players in the market with a very low fee for O&M it is because of important elements which fall out of the scope of the contract. For example, if you have a big project and ideally you should have five maintenance guys, but you only have two because it was a cheaper contract, they will probably not do the corrective maintenance on time,” he said.
Savings from lower price O&M contracts may be negligible compared to lost revenues from lower performance levels and O&M strategies must find a balance between technical potential and economic benefit, Francesch said.
Benchmarking can allow operators to renegotiate O&M prices or increase the service level included in the contracts.
SolarPower Europe's 'O&M Best Practice Guidelines for PV solar plants', published in 2016, set out availability-based bonus schemes which could be incorporated into O&M contracts.
Performance metrics such as reaction times and plant availability could be translated into bonuses or payments to ensure the owner is correctly compensated, the guidelines said.
Examples of Availability-related Bonus Schemes and Liquidated Damages
Source: SolarPower Europe's 'O&M Best Practice Guidelines for PV solar plants' (2016)
The continuing advancement of data analytics and the Internet of Things (IoT) should create more benchmarking tools for solar companies. Cross-border data sharing should accelerate performance improvements during construction and operations phases.
Fransesch predicts that the O&M market will evolve to include benchmarking based on performance indices.
“I see more systems like those of the [Europe’s] Green Solver Index for wind and solar or Wise Energy, which is based on the Internet of Things where they pull together a lot of data from different sites and you can compare the performance of your plant versus your peers,” he said.
By David Appleyard