US solar market boom cuts O&M costs years ahead of forecast
Innovations in plant design, component improvements and the clustering of maintenance services are pushing O&M costs close to $8,000/MW/yr, the cost the National Renewable Energy Laboratory forecast for 2020, industry experts told PV Insider.
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Falling component prices and installation costs have driven down plant lifetime costs and raised the importance of O&M expenses. U.S. installations have hiked on the back of Investment Tax Credits (ITCs) and O&M providers have responded to increasing competition by widening their range of services.
The levelized cost of energy (LCOE) for plants in high solar resource areas is forecast to fall from $81/MWh in 2014 to below $50/MWh by 2020 under an aggressive cost reduction scenario, according to the National Renewable Energy Laboratory's (NREL's) 2016 Annual Technology Baseline (ATB) cost report, published in September.
The capital cost of projects in high irradiation areas could drop by 44% by 2020 to $1.1 million/MW and fixed operating and maintenance expenses (FOM) are forecast to fall by 55% to $8,000/MW/yr, NREL said.
US O&M cost forecast (NREL)
Costs represented for different % load factors and cost reduction scenarios (low, middle and high.)
Data source: NREL's 2016 Annual Technology Baseline (ATB) report.
Faster progress
Economies of scale, component improvements, and optimized plant design are driving down O&M costs and the NREL's projections of $8,000/MW/yr are already within sight.
O&M costs for large U.S. projects have halved in the last two or three years, Wayne Mays, Director of Engineering at developer Avangrid renewables, a subsidiary of Iberdrola, said.
“For a 2018 project we are already seeing prices in the [$9,000/MW/yr] range,” he said.
High activity areas such as Kern county in California are seeing particularly competitive prices for installation and O&M as developers benefit from economies of scale and clustering of projects, Mays said.
"I have seen a critical mass of O&M people assigned to serve a number of PV plants in an area – with one person assigned to each plant (but with the flexibility to support multiple plants)," he said.
"That's going to be a huge advantage...I would guess that an isolated project might pay 20% or more for O&M," he said.
US cumulative solar capacity up to Q2 2016
Source: GTM Research, Solar Energy Industry Association.
Bloomberg New Energy Finance (BNEF) is currently benchmarking global utility-scale O&M costs at around $10,000/MW/yr, based on the latest calculations by developers, Jenny Chase, Head of Solar Analysis at BNEF, told PV Insider.
The introduction of tenders to drive up international competition in PV projects has led to record-low project prices in Chile and the United Arab Emirates (U.A.E.) this year, raising the bar for plant efficiency.
"What all these bids have in common is that you can't really build them without looking at roughly $10,000/MW/yr," Chase said.
Inverter gains
Inverters are a main source of PV plant failure and suppliers have sought to improve performance and reliability, inventing new materials and systems while harnessing big data analytics to increase yields.
NREL's ATB report assumes inverter lifetimes will increase from an average 15 years to 20 years by 2020 under the low-cost scenario, Wesley Cole, NREL energy analyst and co-author of the report, told PV Insider.
"These is a piece coming from a cheaper inverter and a piece coming from having a cheaper inverter last longer... and there is the assumption that the efficiency of the inverter is going to increase," he said.
Indeed, large inverter suppliers have recently guaranteed lifespans of 20 to 25 years and these lifespans continue to increase as technology is improved.
New inverter designs are also featuring improved accessibility of components to minimize downtimes, Mays noted.
“I think that’s a really excellent innovation…You’ve got a fairly large part of your solar project down when you lose an inverter,” he said.
Some developers have also shifted from holding whole new inverters on site to keeping replacement parts instead.
Smaller three phase string inverters are also becoming more popular and are expected to represent 40% of the global utility-scale market by 2020, according to IHS.
Plant design
Developers are also introducing new plant designs based on growing project experience to accelerate installation times and reduce O&M costs.
"A really large and significant component is the cost of cleaning," Chase said.
Large plant projects are optimizing the space between rows to access panels using cleaning vehicles and in harsh environments developers are designing plants to protect key components, such as inverters, from soiling, she said.
Tracker designs have also evolved and new tracker systems place drive motors on each row to avoid blocking access to the panels, Mays said.
"It really makes it easier to do that vegetation management and that helps in controlling costs as well,” he said.
The introduction of robotic cleaning technology could lower costs further, Chase said.
In Israel, where labor costs are higher than in other parts of the Middle East, technology firm Ecoppia has developed remotely controlled robotic cleaning system which does not require water.
Ecoppia's technology is being considered in areas lacking access to low cost labor, Chase said.
Asset owners are also increasingly investing in automated monitoring and data analytics to identify or plan for system outages and avoid unnecessary labor expenses.
Asset data is allowing developers to build more precise pre-operations strategies, improving the modelling of energy production and operations costs.
Thinner margins
Some U.S. operators are now performing O&M activities in-house and many others are choosing to select independent providers for key activities, such as inverter maintenance and vegetation management, rather than contract out the entire work.
Experts believe increasing O&M market competition will narrow margins and reduce the prices offered to operators.
"There's a lot of balance of system overhead on the O&M side that could be pushed down and squeezed out as there is more competition and entities get more efficient at managing O&M contracts," Cole said.
According to Chase, U.S. incentives, in particular the Investment Tax Credit (ITC), are preventing prices from falling in line with some other markets.
I think [U.S.] prices are higher because EPCs can get away with it due to the generosity of U.S. incentives. Plus you can buy a lot of different packages of O&M service level, and if you prepay in the U.S. you can claim the ITC on it," she said.
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