Solar Asset Management in 2021: - SOLARNEWS

Solar Asset Management in 2021:Mitigating Risk, Ensuring Performance

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Team DetailsNomenclature & AcronymsIntroductionThe True Cost of O&M and Asset ManagementExtreme WeatherAsset Bankability and Plant PerformanceDigitalizationClosing Words

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Table of contents

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Disclaimer: This overview is provided by Solarplaza International BV (“Solarplaza”) as a service to its customers on an “as-is, as-available” basis for informational purposes only. Solarplaza assumes no responsibility for any errors or omissions in these materials. Solarplaza makes no commitment to update the information contained herein. This overview is protected by copyright laws, and may only be reproduced, republished, distributed, transmitted, displayed, broadcast or otherwise exploited in any manner only by accrediting Solarplaza as the source of it and providing a full hyperlink to https://northamerica.solar-asset.management where it was originally published.

Copyright © Solarplaza 2021 January

Design and layout: Charl Visser

Lisette BuistProject Manager

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Sid EshuisBusiness [email protected]

Jason DeignContributing writer, Solarplaza

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Team Details

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Nomenclature & Acronyms

DC Direct CurrentKPI Key Performance IndicatorLCOE Levelized Cost of EnergyMWdc Megawatts (DC)NERC North American Electric Reliability CorporationO&M Operations & MaintenanceOEM Original Equipment ManufacturerOpex Operational ExpensesPV PhotovoltaicsROI Return on InvestmentSCADA Supervisory Control and Data AcquisitionSEIA Solar Energy Industries Association

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Introduction

New technologies, growing portfolios, tighter margins; now is an exhilarating time for solar asset management in North America. Continued cost reductions have consolidated PV’s position as the technology of choice for many generation asset owners, and 2021 looks set to be a record year for installations as COVID-19 restrictions lift and stimulus packages kick in.

For asset managers, this means knowledge acquisition and sharing is as vital as it ever has been. The need to deploy new strategies, processes and technologies rapidly at scale leaves little room for trial and error. So it is

Figure 1: U.S. solar PV deployment forecast. Source: SEIA/Wood Mackenzie Power & Renewables U.S. Solar Market Insight 2020 Q4.

important to learn as much as possible from trailblazers and industry leaders. To that end, Solarplaza’s Solar Asset Management North America has been tracking the key issues and topics in North American solar asset management for the last seven years and has become established as a critical platform for discussions around improving plant efficiency and profitability.

This paper captures the major themes of Solar Asset Management North America 2020, to offer an outlook of what awaits North American solar asset management this year.

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The True Cost of O&M and Asset ManagementOnce a solar plant has been commissioned, its profitability is largely a question of maximizing production and minimizing O&M and asset management costs. But evaluating the true cost of O&M and asset management is not easy. Beyond in-house costs, asset managers need to factor in the impact of the labor rates of different types of contractors, whether it is possible to defer payments, how opex costs might be folded into supplier agreements and so on.

“There’s often a misconception that if there is a warranty in place, the O&M people aren’t doing anything and the other guys are doing it,” says Michael Eyman, managing director of Origis Services, a subsidiary of Origis Energy focused on O&M and asset management for large-scale solar facilities. “When something breaks, and you have control of a site, your guys are engaged in running the work order, scheduling the guys coming out, doing the safety briefings, overseeing their activities and cleaning up the site afterward. Those work hours are still hours that people must be paid for.”

Clearly, corrective maintenance still involves costs for the asset manager even when equipment is under warranty. Furthermore, O&M costs can include items such as round-the-clock monitoring, project management teams, performance engineers providing analytics, software developers for data integration and analysis, NERC and SCADA experts, high-voltage technicians and much more.

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Figure 2: Inflation-adjusted PV system cost benchmark, 2010-2018. Source: National Renewable Energy Laboratory.

These costs are sometimes categorized under other headings, such as administration or operations. The issue is to reduce as many of them as possible. This can sometimes be achieved through economies of scale, and some costs, such as labor rates, might vary significantly by location. “We look at the labor rates county by county in some cases in California, particularly where you have prevailing wage projects that involve state funds,” says Eyman. “Where you’ve got federal funds involved, there’s a prevailing wage that has to be met. There’s a federal schedule associated.”

The issue of wage variances is particularly acute in distributed generation because of the high cost of urban technicians, he notes. Such factors are likely to become increasingly relevant in 2021 not only as asset owners strive to drive down prices but also as developers ponder ways to make solar economics pan out with the gradual loss of the U.S. Investment Tax Credit from 2023 onwards.

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Reducing solar O&M and asset management costs is challenging at the best of times, but particularly so when dealing with extreme weather events. These have the potential not only to cause catastrophic damage, halting production, but also to result in

The fact that extreme weather events cannot be predicted does not mean asset managers should not prepare for them. For example, if there is a threat of an extreme weather event then it helps to have in place contracts with suppliers that might be needed for site assessments and remediation, says Lynsey Tibbs, project manager of solar operations at Southern Power Company.

significant unforeseen costs. And they are becoming more common: 2020 was the sixth consecutive year in which 10 or more billion-dollar weather and climate disasters impacted the U.S., according to the National Climatic Data Center.

Similarly, asset managers should be talking to insurers and OEMs. “Things like non-disclosure agreements should be in place well before something hits, so you have someone to call immediately,” Tibbs says.

On insurance, asset managers should be aware that the market has hardened as a result of growing weather events. This means insurance costs are rising, with a

Figure 3: U.S. 2020 billion-dollar weather and climate disasters. Source NOAA National Centers for Environmental Information U.S. Billion-Dollar Weather and Climate Disasters (2021). https://www.ncdc.noaa.gov/billions/, DOI: 10.25921/stkw-7w73.

Extreme Weather

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consequent impact on opex. “Underwriters have seen losses and are more concerned about specific issues,” says Sara Kane, senior vice president of risk management broker Beecher Carlson.

A weather strategy should also include details of when to stow sites and how to ensure there are no loose items that could be damaged. Stocks of oil, gasoline and food should be procured, along with items such as portable gensets.

Although extreme weather events usually represent a challenge for solar asset management, they can also represent an opportunity. Last year, for instance, solar microgrids were cleared for use in all U.S. regional wholesale electricity markets. These are often configured to deliver resilient electricity supplies in the event of grid failures. In California, for example, regulators in January approved USD $200 million for microgrids that can supply power when the state grid is affected by blackouts from wildfires.

With microgrids, though, “one of the issues is that renewable energy is very variable,” says Scott Barrington, business development manager at Trimark Associates. “The way we deal with that is having energy storage and having a tightly coupled system. One of the key components is a microgrid control system.”

Sophisticated control systems can allow microgrids to operate in a more or less autonomous fashion when the wider grid is impacted, allowing electricity to flow whatever the weather.

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From the minute a solar plant starts exporting energy to the grid, a key concern for asset managers is to ensure it meets its performance targets. The U.S. industry as a whole suffers from an average 6% underperformance, according to research from kWh Analytics, a solar risk mitigation firm. The level of energy loss is around 1% to 1.5% across 50 GW of utility-scale plants surveyed by aerial inspection specialist Heliolytics.

Underperformance thus appears to be mostly a problem for small systems, with figures from the U.S. Department of Energy suggesting a performance shortfall of up to 8%. In any case, the numbers show a clear trend towards asset owners and managers overestimating the likely performance of their plants, with potentially significant impacts on profitability.

Some of the losses seen by asset managers are recoverable, for example, when due to dust or vegetation shading. This category, which Heliolytics CEO Rob Andrews refers to as ‘scope 1,’ includes issues that can be fixed and can be split again into limiting or binary losses. An example of a limiting loss might be an incorrect tracker alignment, which still allows for some production, while a binary one could be something like an inverter failure, which stops operation altogether.

Because of their all-or-nothing impact on production, binary failures are given priority in remediation efforts. And plant performance strategies generally should first seek to deal with scope 1 items, which can account for 1% to 1.5% energy loss within a project, Andrews says. However, a growing concern as plants get older is

Asset Bankability andPlant Performance

Figure 4: Percentage of labor hours spent on different remediation activities. Source: kWh Analytics, Solar Risk Assessment: 202.

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non-recoverable performance or ‘scope 2’ losses, such as long-term module degradation or erosion of components.

“These are difficult to address because they are not necessarily going to be things that are going to impact on any one stakeholder’s KPIs in any given year,” Andrews says. “However, these things can have a big impact on the long-term performance of a project.”

For some time now, digitalization has been recognized as a major force for disruptive change in North American solar asset management. This is because digital tools have the potential to significantly improve efficiency, flexibility and responsiveness compared to manual methods. According to Steve Hanawalt, executive vice president at Power Factors, the fact that 80% of O&M outlays are due to labor means that digital strategies can deliver major reductions to LCOE, cutting costs by between 30% and 80%.

As an example, 10 years ago many asset managers performed annual tests manually on 100% of strings. After five years, it became clear that only around 2% of strings were failing a year, so manual testing started to be applied to a smaller proportion of strings—around 2% to 10%. That strategy did not work well, either, because random testing of a limited proportion of strings only offered limited scope for detecting failures.

Also, “what the site can actually do and the financial model are rarely the same,” he cautions.

Financial models tend to be based on over-optimistic assumptions from engineering consultants, according to Jon Previtali, director of technology and technical services at Wells Fargo. The answer to the problem is for independent engineers to base their assumptions on the best possible data—and to not compete with each other on better estimates.

The situation started to improve a couple of years ago thanks to aerial thermography, which allowed for all arrays on a plant to be checked once a year with a single flyover. However, aerial thermography still involved manual processes, such as reporting potential anomalies and creating work orders to investigate and deal with problems. Today, digitalization has resolved these issues through what is called condition-based aerial thermography.

Instead of carrying out annual or six-monthly flyovers based on a calendar schedule, this involves timing each flyover based on the thermal performance of the DC arrays. “That helps time the aerial inspection,” says Hanawalt.

Furthermore, when it comes to handling the reports, “we do not ever go to paper,” he says. “We have an interface between these aerial thermography inspection reports and it pulls that data—including geolocation of every module in the system—into the platform. We can do a true ROI analysis of when it makes sense to roll a truck.”

The system can even raise work orders automatically. This can deliver a 19% ROI compared to managing aerial thermography manually. But compared to

Digitalization

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the 100% manual methods of a decade ago, the benefit is 74%, according to a Power Factors analysis based on a 125 MWdc plant.

This is just one example of the benefits of digitalization in O&M. More widely, digital tools can help improve many areas of corrective, preventative and predictive maintenance.

“You can certainly schedule your washing every March, every May,” says Nick de Vries, vice president of technology and asset management at Silicon Ranch. “But you can truly optimize when you start to look at your data and say, can I predict that there will be soiling? Should I wash rather than being behind the curve? This is where we get into predictive maintenance.”

Figure 5: Economic benefit of digitalization of string testing, based on a 125 MWdc plant. Source: Power Factors.

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Closing Words

While many of the challenges facing asset management in 2021 are ones that the industry has been aware of for some time, their relevance is increasing as the lifespan of plants grows and portfolios get larger. The optimization of plant design and construction means that the capital cost of solar is continuing to fall. Therefore, moves to reduce LCOE are increasingly dependent on what happens during the operational phase of the plant.

In 2021, North American solar asset management will continue to be concerned with issues such as insurability, underperformance, O&M strategies, plant health, component selection, repairing and repowering, and coping with extreme events such as fire and hail. What will change is that solar will have gone from being a minority player in the energy sector to the driving force for new generation and employment.

According to the U.S. Energy Information Administration, 39% of all new power generation in 2021 will come from solar, a higher level than any other technology. As all eyes turn to solar this year, Solarplaza’s Solar Asset Management North America 2021 campaign will be helping to ensure that the performance of the solar assets over their lifetime stays on track.

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