Cost vs. output: A maturing solar industry focuses on long-term project performance

By Jennifer Szaro, Erika Myers and Daisy ChungThe Solar Photovoltaic (PV) Asset Management and Performance conference held recently in Newport Beach, California, was a watershed for the solar industry, reflecting both the shifting focus of a maturing technology sector and the healthy debate taking place around key issues.Up until now, conversations at industry events typically centered on getting equipment into the ground. At this event, we turned our attention to ensuring that what we put in the ground stays in the ground and continues to perform at expected levels throughout its useful lifespan.The Solar PV Asset Management and Performance conference brought close to 200 attendees to Newport Beach for two days of panels and networking. (Photo by Jennifer Szaro)For example, should you design a PV project using equipment that can withstand a little neglect and still meet its minimum performance guarantees — oversizing to cover expected failures and environmental impacts in the field? Or do you right-size up front and plan accordingly in your operations and maintenance (O&M) budget to service this equipment for the full term of its useful life? These core questions sparked some of the most intensive debate at the conference, with a noticeable rift emerging between those on the project development and asset management (AM) side of the house and those with ongoing O&M responsibilities.Tackling AM and O&M was also a new direction for the conference organizers, the Solar Electric Power Association (SEPA) and the Solar Energy Industries Association (SEIA) — and another sign of industry evolution. In a PV context, “asset management” refers to the tracking and evaluation of a project’s commercial and administrative functions to ensure optimal financial performance, while O&M focuses more on maximizing energy production.Find out about SEPA’s new AM-O&M initiative here. The complex relationship between these two areas was also reflected in the broad range of stakeholders at the event — from developers, financiers, and project owners to hardware and software manufacturers, utilities and independent power producers. The conference drew close to 200 attendees, all with questions to raise and insights to share.To roll or not to roll: O&M budget debatesAsset management professionals said they have experienced pushback about setting high levels of control and performance requirements that — in industry parlance — “suck the value out of a solar PV project.” In other words, up-front requests for project monitoring and control systems or other O&M strategies — incorporating them in the planning process — could enhance long-term performance, but potentially reduce profit.On a more basic level, to roll or not to roll a truck was another much-debated topic. What is a reasonable or acceptable time frame for letting a performance alarm flash its ominous red warning before actually deploying a maintenance crew to the field to address the issue? Maybe you wait for four or five of these red flags or until the customer raises concerns about the system’s performance. Maybe you even wait until the project dips below its promised monthly output for a few months, but not enough to throw off performance for the entire year.In many cases, as we heard from conference participants, these decisions, once again, come down to the trade-off between cost to perform O&M work and the benefit of enhanced system output. More kilowatt hours produced mean more revenues generated.One intriguing idea was to write O&M contracts with provisions offering performance incentives or profit sharing for output beyond the minimum production guarantee.Long-term vs. short-term solar assetsAlthough most conference attendees could agree that what they want is to maximize project value, they had different definitions of “maximized value” and how to achieve it. The missing but defining ingredient seems to be “duration” — how long a project can perform at a certain predetermined level, taking into account expected system degradation and the resulting incremental drop in output.Generally, developers and infrastructure builders and providers have shorter-term expectations for solar projects, less than 10 years. But financiers, owners, and offtakers — that is, the utilities or third parties buying the power — are in for the long haul, up to 20 years or the entire asset lifetime, a critical point more fully discussed below.SEPA’s Erika Myers (far left) talks with attendees at the Solar PV Asset Management and Performance conference in Newport Beach.(Photo courtesy of SETS)Of all the stakeholders in the solar AM and O&M space, the financier’s point of view typically has not been included in many conversations until now. But their need for more predictable financial performance goes hand in hand with longer-term projections of project output, which in turn could better mitigate risks.Some lively arguments took place between utility executives and solar developers on the value of investing in highly reliable modules and inverters that are built to last through the term of the a power purchase agreement (PPA). Some PPA offtakers questioned whether it is in their best interest to invest in an asset intended to last 30 years when the pace of technological improvements may mean the equipment will be dated in a few years. Do you really need to invest in panels from a top-of-the-line PV manufacturer, or just plan for replacement at year 10? Some of this uncertainty may be understandable since utilities are more familiar with the technologies for coal and natural gas plants, which are not evolving at the same speed or in same ways as solar.Appropriate levels of monitoring and controlAnother hot topic was the level of monitoring and instrumentation required to ensure a system is performing as expected. Do you need to know module and string-level details, or is data granularity at the inverter level sufficient?In some cases, O&M managers seemed okay with keeping an eye on the bigger picture — system level — rather than stressing about potential, more minute failure points. Soiling of panels happens, as do critters, such as fire ants, and taller-than-expected weeds. A number of counter arguments were raised, calling for more detailed instrumentation and using string-level inverters instead of utility-scale inverters to minimize the impacts of these risks.Best practices and standardsMore signs of solar industry evolution surfaced during discussions on O&M best practices and opportunities for process improvement. System design and specification should go hand in hand with defining a system’s O&M needs in terms of planned useful life and expected output, especially for large-scale PV projects.These discussions reflected a desire to have both unified standards and continuity for monitoring and communication tools and well-defined best practices for the full life cycle of a project, from contract to decommissioning. The focus on how to best decommission these projects once they’ve outlived their usefulness was the most telling sign of an industry moving toward technological maturity.Asset champions: The hope for a better tomorrowPerhaps the most significant aspect of the discussions about standards was who the most avid supporters were — most frequently, those entities rescuing stranded assets in the field or buying out contracts after year six of operation, once the systems have been fully depreciated. These brave souls — such as utilities and private investors — often didn’t design the systems or originally guarantee their output, but they must now find a way to ensure the project’s optimal value.They may also need to figure out how to interact with defunct proprietary monitoring hardware and software or whether they need to replace some or all of the panels or inverters no longer under warranty. With their sights on long-term project viability, these stalwarts of the solar industry are the ones who will carry us to the next level of technology innovation and keep us relevant as an industry that can be counted on to deliver the electricity that was promised.Jennifer Szaro, SEPA’s Senior Director of Programs, can be reached at jszaro@solarelectricpower.org.Erika Myers, Senior Manager of Research, can be reached at emyers@solarelectricpower.org.Daisy Chung, Research Manager, can be reached at dchung@solarelectricpower.org.This article was shared via RSS by the awesome folks at Utility Solar Blog read more about <a href="https://www.solarelectricpower.org/utility-solar-blog/2016/february/cost-vs-output-a-maturing-solar-industry-focuses-on-long-term-project-performance.aspx"Cost vs. output: A maturing solar industry focuses on long-term project performance


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