Maximizing Solar PV Returns and Production Effectiveness in Emerging Markets
Making Solar Bankable, an event produced by SolarPlaza and staged to a sold out crowd in February, brought together sectors of the solar industry to tackle issues related to solar in emerging markets.
Alectris, a sponsor and presenter at the event, highlighted the role solar operations and maintenance (O&M) plays in assuring “solar bankability” for the global investment community.
“We’re experiencing a lot of new capacity being added in these countries,” said Vassilis Papaeconomou, Managing Director of Alectris about emerging solar markets including India, the Middle East and Japan. In a recent Solar O&M Insider podcast program on the Making Solar Bankable event, he covered the topic his company presented at the event.
“Solar investors are looking for local companies who are able to provide the services they’re expecting from other markets, but they simply cannot find these competencies there. Thus there is a big gap between investor expectations and local market O&M competencies in emerging markets.”
Bridging the Gap between Global Standards and Local Emerging Market Expertise
Starting in the Middle East and now India, Alectris has developed an innovative approach to increasing bankability in emerging solar markets. These markets hold high solar potential but have little or no industry infrastructure including qualified contractors for operations and maintenance to ensure long term asset productivity.
The Alectris model draws on its solar operations and maintenance expertise and Solar ERP software platform, ACTIS, in collaboration with regional solar development and construction experts. The strategy benefits the emerging market by providing for the rapid evolution of regional operations, maintenance and asset management execution.
“A very nice success story for our company is a case study we have announced quite recently in Jordan, and where we are involved in a very early stage of a 12 megawatt plant,” said Papaeconomou.
Alectris is currently partnering with MASE in Jordan and the Middle East, and with Shri Shakti in India. More market partner alliances will be announced soon.
Geographic Parameters for Solar O&M in Emerging Markets
The geographic parameters in Japan versus in the Middle East, for example, is going to greatly impact the kinds of basic maintenance done in the field. In desert regions, for example in Jordan, “you certainly will have to do more panel cleaning than you’re going to be doing in Japan.”
But it’s also the services, the operational services around that, like the type of reporting, the frequency of reporting, the type of warranties, how these are backed and how these are structured that will come into play to efficiently operate a solar plant. So there are substantial differences between O&M contracts, and it’s not just relating to the frequency of preventative maintenance alone, or the scope of preventative maintenance, it goes much deeper into the fine details of an O&M contract.
Solar O&M Contractor as Long Term Investor Partner
Typically during the development and construction phase investors focus on the construction grid connection of the project. Once this is completed, they start making considerations on what happens next.
“We’re happy to see that this is happening really early in solar-developing markets, when the plans are quite new. The trend is moving to early inclusion of the solar O&M contractor instead of waiting for five years to see the issues come to the surface and then taking action,” said Papaeconomou.
“This is a major difference from what we’ve seen in Europe; Europe waited too long and we had a lot of engagement in revamping and fixing plants. We’re happy to see in these new markets, people realized at a very early stage and want to engage a professional bankable O&M contractor early enough so that they don’t step into the same problems as Europe.”
A big part of the challenge with operational assets is that they have not been properly maintained, but also a second parameter; they have been not properly designed. So when an EPC constructs a project and designs a project, the main focus is, of course, profitability which is fine; that’s the way a company works.
There is no interests aligned with the investor after the two years and that is where the O&M contractor, a professional O&M contractor, is actually a significant partner. The O&M contractor typically stays as a long-term partner of the investor and stays with the investor, in the investment, for the next at least 20 years. So the asset perspective of the O&M contractor is slightly different from the EPC contractor. You need to have both, and it’s our firm opinion that both should be engaged at the very early stage so you have opinions from both worlds.
The Extra Performance Generated from a Good Operating Solar Plant Can Make an Enormous Difference to the Investor
The extra performance derived from a good operating solar structure can make an enormous impact on system return on investment (ROI). The performance increase needed to enhance system ROI is normally not double digits.
“We’ve seen examples where a small increase in performance percentage points, meaning two, three, four or five percent, creates enormous value for the investors. At the end of the day, in many occasions, the O&M is actually no longer a cost for the investor; it generates more revenue than it costs.”