Solar OM Insider on Economics of solra plant operations

The Economics of Solar Plant Operations

Welcome to the Solar O&M Insider, the first podcast series dedicated to solar PV operations, maintenance, and asset management. This series is brought to you by Alectris, a global solar asset care innovation firm. I’m Glenna Wiseman of Identity3, your host.

This session is focused on the economics of solar plant operations.  We’ll also get a glimpse into themes to be discussed at this month’s SunSpec member meeting, March 30 in San Francisco, CA.

The SunSpec Alliance is a trade alliance of more than 100 solar and storage distributed energy industry participants, pursuing information standards to enable “plug & play” system interoperability. SunSpec standards address operational aspects of solar PV power and energy storage plants on the smart grid—including residential, commercial, and utility-scale systems—thus reducing cost, promoting technology innovation, and accelerating industry growth.

To address this topic and the effects of operations on maintenance costs and asset value we welcome Tom Tansy, chairman of the SunSpec Alliance and Laks Sampath, U.S. country manager for Alectris, a SunSpec member and contributor to its standardization efforts evolving in the industry.

This episode of the Solar O&M Insider features:

  • Developing Information Standards for the Solar Industry
  • Three Themes at this Year’s SunSpec Member Meeting
  • Defining Solar PV Plant Operations
  • Solar Investors Want Complete Operational Records
  • Key Areas to Reduce Solar Plant Maintenance Costs
  • Operation Risk is Top Risk in Solar Investing
  • The Contribution of Operations to Solar Asset Value
  • The SunSpec Alliance O&M Cost Model
  • Operations and Management Industry Catalysts of Solar Asset Value

Solra OM Insider March 2017 with SunSpec and AlectrisFull Transcript

Welcome to the show, gentlemen.

Tom: Thanks very much, Glenna, I’m very pleased to be here.

Laks: Thanks Glenna for having me again.

Developing Information Standards for the Solar Industry
Glenna: Tom, you’ve been leading the efforts of the SunSpec Alliance since its inception. Could you share with our listeners the organization’s mission?

Tom: Our mission, in a nutshell, is to develop information standards for the solar industry. And when I say develop them, sometimes that means that we create them ourselves but more often than not, what we’re looking to do is identify existing standards out there that, if either better known or better understood or made easier to consume, would be adopted by the public. So, we’ve been at this for seven-and-a-half years now. We’ve developed probably over a hundred models of our own in standards, and are now really getting into driving the SunSpec standards, as I said, through the international process, either through the IEEE, the IEC, or other related organizations.

Three Themes at this Year’s SunSpec Member Meeting
Glenna: I would imagine that your upcoming March 30th event, member meeting, is going to tackle the continual evolution of those standards. Can you tell us a little bit about the themes or industry trends that you’re looking to address this year?

Tom: We’re all about standards all the time. And so, we actually have three themes that we’re taking on this year that are related to the work streams that we have going on inside of the alliance. One is for grid integrations. We’ve been working quite a bit with advanced function inverters and the rollout, what’s happening here in California, New York, and Hawaii. So, that’s one of the major topics.

A second major topic is asset, what we call Asset Management 2.0. And embedded within that, of course, is the operation and maintenance topics. And there we’re rolling out the second edition of national best practices that we’ve helped to co-develop with NREL and Sandia. And we’ll also be providing a sneak preview of our O&M cost model web application. This is just being put into beta and it will be made available on open terms to the entire industry.

And then finally the finance topic. SunSpec is a contractor to the U.S. Department of Energy on the Orange Button Initiative. We’re developing the interchange standards for financial data. And with regards to the financial data, of course, that includes lots of different topics associated with O&M and asset management, which is really a critical risk element that needs to be looked at and mitigated within the whole financing context.

Glenna: And you’re doing all of this in one day?

Tom: It’s all going to be done in one day. How do you cover so much of this work? And I often ask myself that but we do…there’s a method to our madness and basically, we have our members do the work. And so Laks will be helping us on the O&M and asset management topic. We’ll be diving into that, there will be sub-groups. But yes, it’s going to be a full day, that’s for sure.

Defining Solar PV Plant Operations
Glenna: Speaking of Laks, as an O&M veteran, Laks, you’ve seen the maturation process that’s really moving across the globe and with that comes the refinement of terminology. We’ve all seen that the industry is really working on refining the terminology. To our topic today, let’s tackle defining PV plant operation. How do you define this, Laks?

Laks: Thanks, Glenna. To pick up on what Tom was saying about the best practices guide that’s been put out, there’s a whole section actually devoted to plant operations. The Appendix E actually provides sample descriptions of various activities related to the scope of work for plant operations and plant maintenance. For this podcast, I would look at plant operations from a 30,000-foot level and say that it is simply all the activities that precede and also follow the boots to the ground maintenance activity.

I’ll ask the question, who’s watching the system? Who’s identifying the issues? And who’s dispatching the required personnel to fix the issue in a timely manner? And who’s verifying these fixes? The main aim of the operations team is to minimize truck rolls and effectively schedule any work needed so that there is very little interruption in the energy production, which is what these plants are supposed to be doing.

Glenna: From that 30,000-foot level, Tom, maybe you could help us understand what we can look for, what we will see in this 2.0 best practices and how you as an organization define operations.

Tom: The refinement of best practices has to do with diving into all the particular conditions that you might see in the field. So, for example, there’s a section here on environmental conditions. That can be, is the plant in a warm, humid area versus a hot, dry area? Are you in an area of bird populations? Do you have to deal with snow? Things of that nature. So each one of these types of environmental conditions would dictate a different protocol for operating and maintaining the plant and you’d be looking for different thresholds on plant operations that would precipitate looking into one of these activities or the other.

Another major area has to do with preventative maintenance. The idea really is to minimize truck rolls overall which, of course, you can do that by dealing with operations and maintenance in a proactive basis. If you are knowing to check on certain items according to a certain time interval then, of course, you can knock out many of the activities that you may need to in a single truck roll.

It’s about optimizing your boots on the ground and minimizing the need for boots on the ground by getting ahead of it. Just in the same way that you’d maintain your car by taking it for scheduled maintenance, I mean, that’s how you want to deal with your power plant as well. Now, I know what Laks would tell me is, boy, you’re spending a lot of time talking about the maintenance, So what about the operational aspects? And of course, we cover the operational aspects as well. So, in other words, the active oversight of the plant.

And now with the changes to the grid codes where we’re actually going to have solar plants supporting the grids, the operational component starts to become a lot more interesting in 2017. So we’re starting to look at those topics and I can say the next time that we do the update, this is going to be a much bigger piece of the overall equation.

Glenna: Well, that’s definitely a signal that the industry is moving into a more…what some folks call legacy power generation technologies, right?

Tom: Absolutely. Legacy being the set and forget type, right? So, those are largely obsolete. You know, you’re definitely going to have to take a more active interest in these topics. However, if you do it in an intelligent way, this means that you’re actually spending less time and less money on the plant and driving more value.

Solar Investors Want Complete Operational Records
Glenna: Well, and I think one of the things that we see is that the contractors and service providers who have operated in other more traditional fossil fuel-based energy generation technologies are moving into the renewables. And they’re bringing with them the approach of, we start O&M and asset management from the very beginning, the very development stage of the plant. All of these standards, at least from my point of view, point to the fact that the industry is growing up, right?

Tom: Absolutely. If we could provide one piece of advice for the solar industry that we’ve, I think, actually have learned the hard way and that is to keep records from the very beginning. SunSpec’s work in finance and securitization, what we’ve determined, of course, is that where the investors see the risk is in the long-term operations of these plants. And where the risk starts is if you have incomplete records. You know, how was it built, who operated on it, etc. So again, that’s another big component here, I think, is just coming up with better methods for handling record-keeping so that you can verify actually what was done and operate with some confidence that your plant is in good shape for long-term.

Glenna: Plant maintenance cost, that how much is it really going to cost to operate this investment for the next 20, 25-plus years, is really an important part of it. So Laks, let’s talk a little bit about the specific activities you put under the umbrella of operations and how, in your experience, they affect that long-term maintenance cost.

Key Areas to Reduce Solar Plant Maintenance Costs
Laks: I really like the way best practices guide has identified four key areas. These are all areas that Tom articulated in his own words in his earlier comments. It starts with plant monitoring, right? That’s number one. There’s number two which is administration of operations. And that’s part of what the documentation and starting out at the very beginning even as the plant is being constructed, that’s the piece that Tom was talking about.

Then conducting of operations, itself is number three, is how the best practices guide identifies it. And Tom mentioned about, you know, what is the geographical location? What kind of local conditions are there? All of that happens by looking at the monitored data and identifying specific issues that are specific to plants and being able to not worry about certain things but yet at the same time, looking at the overall health of the plant.

And direction of performance of work. I mean, Tom alluded too as well on that one, that’s number four, which has to do with can we roll a truck…should we be rolling a truck now, or should we be rolling a truck along with the preventative maintenance that’s going to happen in the next month or so? Right? Can these things wait? And overall number five, they do talk about operator knowledge, the protocols and documentation. Operator knowledge is critical in identifying root causes so that the actual corrective maintenance can be done very quickly, like I mentioned earlier.

And the documentation is what Tom was alluding to, which is, what’s the maintenance history of this plant? Do we know everything that ever happened on this plant? And where do we maintain that? These are at a very high level. We could actually devote a whole podcast just on these four aspects of operations.

Glenna: Well, that’s a wonderful idea. But let’s see if we can zero in a little bit about, to either one of you, can we give some specific examples of how these activities affect maintenance cost? It’s easy for me to understand, a non-tech engineering person, to understand the more trucks you have to roll to fix something, to get it back up, that’s going to be really expensive. Because you’ve got a human being involved in that. The longer the plant stays inactive and you don’t know about it or you can’t get it fixed because the part isn’t available, that’s going to affect performance and that’s a cost. So, are there any other examples that you can think of that we can really get specific in how preventative operations and maintenance can affect cost?

Tom: Sure, I’ll maybe tackle that one first. And it’s a relatively simplistic example but I think it’s one that many people have encountered. In the old days, when something broke you’d dispatch a guy, typically a guy, in a truck to go fix whatever was broken. They might take care of cutting the grass or whatever while they’re at it. Let’s say that the guy in the truck is a certified electrician. And so now you have him cleaning panels and basically pulling weeds on the plant. His assigned wage grade fully loaded, depending upon where you are, is going to be somewhere between say \$30 and \$100 per hour. So, you don’t want that person dealing with vegetation issues.

At the very beginning, getting the right person for the right job at the right time. That’s really a great way to save money but more importantly, and this is the point of this O&M cost model that we’re debuting, is that you really don’t want to be looking at this as how much money you spend. It’s like more about, well, the investment that you make, what’s your return on that? What is your internal rate of return for your investment in O&M?

If you turn the equation on its head and say this is an active investment that I’m going to match rather than a cost center, you look at things in a whole different way. So getting the right person for the right job and paying them for doing the task that they are equipped to do, I think, is one of the principal ways that you could really make this investment work.

Operation Risk is Top Risk in Solar Investing
Glenna: You’re turning it on its head in a way that actually communicates in language and a modeling that works for the investment community as well, which is really important.

Tom: As I mentioned, in our work on securitization and financing, which we’ve been working on with various parties for about the last four years, what the investors say after they look at all the different risks associated with a power plant, they take a look at the credit for the offtaker, you know, are they going to buy all the power that they signed up to do? They look at the components and they satisfy themselves the components work pretty well. And ultimately, they look at the duration of the contract, which is going to be 15 or 20 years and then they say, well, okay, the stuff works great and we’ve seen degradation curves. It seems to have worked for a long time. But there are mechanical components. Are the people going to be there in time to keep this thing running?

This operational risk was identified really as the top risk in solar investing. The investors demanded that we get a handle on this so they can get comfortable with the investment cost overall. As an industry we’ve taken a thoughtful approach for how to manage these assets over a long period of time.

Again, the right people on the job and are looking at things like optimizing how you even access these plants. You know, is your route that you’re taking to get to the plant, is it optimal? Because at the end of the day, you know, if you have people sitting in trucks, driving out long distances to the plant, that costs money too. All these different types of activities about how to optimize the expenditure of resources to make sure that the plant is returning what it needs to be is really the focus.

Glenna: You’ve just cited a perfect example of how advance planning can save a bunch of money. If you already have all of that worked out, how are you going to respond to a specific set of incidents? How are you going to handle all of that logistically? There’s a huge logistics component here that I think really points to, if we have all this worked out in advance as the plant is being developed and constructed then we have a handle on this from the very beginning. Does that make sense on your end, Laks?

Laks: Tom hit upon a lot of the upfront investment or thoughts, actually, more to long-term operations and maintenance of the plant. And that’s very valid. I’ll give you a couple of examples of what we go through on a day-to-day basis for the portfolio that we manage.

So, ground fault errors. These are always happening some way or the other. A 20-megawatt plant, one of the 20 inverters went down and trying to find ground fault is not an easy task. It’s important that the operator is knowledgeable and is able to interpret the data that they’re seeing and be able to identify what the issue is.

So the last time that happened for us on the 20 megawatt plant, we were able to direct the boots on the ground, or the field technician, directly to the one combiner box we suspected there was a problem. Sure enough, when they opened the box, there was arcing. They had to splice the wires and got the plant back up and running. And the comment made by the field service provider was, I can’t believe you guys actually identified it down to the combiner box. That essentially saved a huge amount of money, because according to him he said, “For me to test everything on this inverter, like all the strings, would have taken me half a day or more.” That is savings. Providing a certain amount of budget towards plant operations, to make sure that the maintenance costs are lowered, is critical in the long run.

Glenna: I really appreciate that we’ve unearthed some specific examples here. Tom, let’s make sure that we’ve given listeners insight into all the ways that SunSpec is tackling lowering maintenance costs. Is there anything else that you wanted to mention in the context of the work that your group is doing?

Tom: We have been socializing the work that we’ve done on the O&M cost modeling with vendors, one of the surprising things that’s happened, and I’m gratified by it, is that the manufacturers have taken a look at the cost model. When I say manufacturers, inverter manufacturers, string combiner box manufacturers, cabling manufacturers, have taken a look at the model and evaluated against their own products. And they said, if you design your product in this specific way then you can eliminate steps X, Y, and Z. And so, by proper design, you can just eliminate certain activities that you may otherwise have budgeted for. That’s one big way to go about it.

Secondly, standardizing the names and the terminologies around these activities that we do has been another key savings. Now the reason why is that you can then encode that into standardized contracts. As an asset owner, you’re able to evaluate basically like for like. This is a big question that consumers have or that plant owners have is that are they really getting similar service as they go from operator to operator? And are those services that are being done, are they the right ones? Because you hear lots of different things, so just standardizing the set of terms and services has been another key contribution.

So I’d say that I would cite those two things as the biggest changes to the way that we’re thinking about this. Can we design out problems? And then once we have a proper design, can we execute it on a standardized set of activities in the right time and the right place?

The Contribution of Operations to Solar Asset Value
Glenna: Excellent. Okay, so we’ve talked about the maintenance cost part of our topic. Let’s move over, and I love that we’ve surfaced this investor theme because that’s really critical to the industry to get lower cost of money, more investors involved, build investor confidence. Let’s move over to the asset value part of our topic. Laks, maybe you can give us some insights into how you perceive the scope of work in operations bucket as affecting asset value.

Laks: Interestingly, Tom mentioned car being taken in for service. Let’s look at the car and also look at something we all know, the real estate asset. Unlike a real estate asset, solar assets do not appreciate because of the location. That’s just a matter of fact. They’re strictly a depreciating asset, like your automobile.

There are two questions to ask when acquiring an existing plant. So first of all, how well has it been performing? You know, in other words, has the plant operator done a good job ensuring year-to-year kilowatt hour production? And secondly, how well has it been maintained? Again, maintenance has to do with how effectively has the plant operator ensured proper, preventive, and timely corrective maintenance of the plant. It’s all about production. If your production is not up to par, your asset value is not going to go anywhere at all.

Glenna: Tom, any comments on your side? In terms of how value can be sustained with proper maintenance and proper operations?

Tom: Again, record-keeping. This is really kind of a big theme. To get your documentation together at the beginning. And if you’re actually following the best practices, which means that you are paying the right people the right amount to do the things that they’re qualified to do and you maintain a record of that, this gives a lot of confidence to the investor that not only is the work that the service provider is doing for them the right stuff on this plant but that the service can be replicated. What this means is that the performance of the plants that they’re seeing is actually representative. It’s not extraordinary because we’ve taken extra care. This is actually what you should expect. This sort of consistency of performance is what really stimulates that investor confidence and keeps them coming back for more.

Glenna: When does 2.0 come out? Does it come out at the March 30th meeting?

The SunSpec Alliance O&M Cost Model
Tom: 2.0, this is all the industry term. It’s happening right now. We’ve actually started rolling it out really with the introduction of the best practices, which occurred in October of last year. It’s more of a process than an event. What you’ll see at the annual meeting, that’s going to be the newer stuff is the actual capturing of those best practices and putting them into this O&M cost model. The O&M cost model, what that will allow you to do is go online, model your own systems in plants, and then do a peer comparison with others that have done a similar operation.

So for example, we have maintained national labor rate tables. And with that we allow the users to put in their own old labor rates and maybe even refine the job descriptions and so forth for the people that they used to do specific tasks. This sort of iterative process, what that yields for the industry is basically a group knowledge that is going to results in refinement. That’s all part of what we call Asset Management 2.0, crowdsourcing knowledge of practitioners on the ground that do this stuff every day and that are innovating and refining practices as we go.

Glenna: How exciting.

Operations and Management Industry Catalysts of Solar Asset Value
Tom: What’s exciting to me is the resonance that we’ve gotten. I think that the people that are involved in O&M and asset management, they’re really kind of tired of being looked at as the fix-it guys, because they can do so much more. They can be really the catalyst or the agent that really drives value. And so that’s why I think that they really sort of seized on this topic of looking at asset management and O&M as an investment, as opposed to the cost center that it has traditionally occupied.

Glenna: Well, from a fix-it guy to a catalyst that drives value, that’s quite the pivot there, Tom. I think that’s great.

Tom: Absolutely.

Glenna: I think that’s a wonderful way for the industry to see itself and to go forward with that kind of an intention. Maybe we can wrap up here with that horizon point, towards that vision of what the O&M and asset management industry can be for the global solar industry. We profoundly heard here in this conversation is have your paperwork together, follow the standards that are evolving in the industry. To both of you, is there anything else that you would like to put forth here that the industry as a whole can do to lower maintenance cost and increase asset value?

Tom: Sure. Well, proper training and then, of course, combined with assigning the person with the right training to do that specific job. So far the training in the early going has been kind of general in nature, allowing basically anybody in a plant to do a new job. And now with greater scale, we need specialization. We need specialization so we can pay the price.

Glenna: And I realize that’s a huge, big question. We could probably spend the whole day talking like you’re going to do on March 30th. Laks, is there anything else that you would like to add to the conversation?

Laks: Tom knows this and most people in industry know this of me. My drive is to ensure that people actually understand what plant operations is all about. I like the way Tom put it.  The fix it guy is a field ops guy, field maintenance, field service technician, to step…one step earlier which is making sure that somebody who understands the plant does effective data analysis, identifies a root cause for the problem. All this will reduce maintenance cost. You know, if you can do that then you can reduce your truck roll, you can actually reduce your maintenance cost. That’s the single thing that will drive down boots-on-the-ground cost.

Glenna: Tom, please tell our listeners how they can get more information about SunSpec, where they can get that and where can they register for the March 30th member meeting.

Tom: Sure. Go to sunspec.org, S-U-N-S-P-E-C-dot-org. The big banner right in the middle of the page, the first thing that comes up would be come to the annual member meeting. Click on that, you can learn all about it, register. And we certainly hope to see you there in San Francisco. It will be at the Hyatt Union Square in San Francisco on March 30th.

Glenna: Excellent. We encourage you to go (to the website), you can also get a glimpse of those hundred-plus organizations and companies that are supporting your initiative, Tom. I really encourage everyone to check out sunspec.org. Thank you, Tom and Laks, for joining us for this session of the Solar O&M Insider.

Laks: Thanks, Glenna.

Tom: Thanks a lot. Speak to you soon.

Glenna: Thank you, listeners for joining us for this session in reviewing the impact of solar operations on plant maintenance costs and the asset’s value.

I am Glenna Wiseman, your host. This Solar O&M Insider podcast series is brought to you by Alectris at alectris.com.