EU vs US Solar O&M Insights

“In Europe, the requirements for an O&M contractor are much stricter than the U.S. O&M contractors are asked to assume greater responsibilities for the operation of a solar PV asset.”

Vassilis Papaeconomou (Left), Managing Director of Alectris at Solarplaza Solar O&M Event

How are the U.S. and European markets different as it relates to solar PV operations, maintenance (O&M) and asset management (AM)?  As we come together for the Solar Asset Management event in San Francisco we can get a better idea of how participants view O&M and AM by looking at regional market factors affecting their perception.

Overarching regional solar PV market factors affecting O&M and AM include:

Europe

1. Europe has a longer solar history, hence more long term operational experience
2. The market has been based largely on generous FiT schemes
3. The average fleet is much smaller than in the U.S., both in terms of number of plants and size of plants
4. At the time when the markets boomed there was minimal experience related to ensuring against future challenges. In general these challenges were underestimated.

The U.S.

1. The market is very competitive and not based on FiT schemes
2. Market development is at a more “normal” pace (no boom and bust)
3. There is much more international experience and the technology has matured, but less long term experience exists in local markets
4. Fewer players with large number of plants and/or large size of plants

As we look at specific O&M and AM regional differences, let’s revisit the three layers for managing a solar PV asset:

1. O&M – purely technical content
2. Asset Management – O&M overview, administrative, financial tasks
3. Owner

Solar asset care in Europe

• FiT schemes are being adjusted retrospectively and margins are under increasing pressure; whereas in the U.S. margins are already low due to the heavy competition.
• Due to the small average size of fleets, investors still outsource most O&M and AM activities.
• In the European market, there is enormous pressure to cut costs, but due to the relatively small size of fleet, it is still uneconomical to insource activities. As a consequence we see a tendency toward merging the first two levels cited above (O&M and AM) together. Either asset managers try to gain more technical capabilities to provide O&M or O&M contractors work to gain AM competencies to offer AM. Both target to offer O&M and AM as a bundle to minimize costs
• Increasingly we see requirements from investors towards an O&M contractor to go into the AM sphere. O&M contractors are often asked to provide, on top of the simple field activities, more administrative and higher level engineering services. The average expectations are no longer to simply do preventative and corrective maintenance but also to take on a big part of engineering (technical analysis and troubleshooting), also called performance monitoring, and administrative services.

Solar asset care in the U.S.

• Margins are under pressure from the beginning due to very competitive market.
• Large players have the ability to insource activities closer to their competencies: Financial and administrative, and outsource the technical part. In other words the last two levels (AM and Ownership) are merged together.
• Due to the limited long term experience of the American solar market, a large number of investors consider the simple maintenance activities as sufficient to ensure sustainable performance.
• Also due to the fact that future challenges are underestimated combined with the fierce competition, many investors include in their business model the absolute minimum for O&M: just the maintenance omitting the “O” (operation).
• Especially with large players, the tendency is to outsource as little as possible, namely the field activities.
• Consequently, O&M is perceived more often in the U.S. as maintenance (corrective or preventative) task, where the “O” (Operation) is completely forgotten.

When talking with investors in the U.S., O&M is perceived as simply “M.”  In many cases the monitoring of the plant by the O&M contractor is not included and the obligations are minimized to providing preventative maintenance and corrective maintenance on call. Performance guarantees are not widespread as a standard requirement for O&M contractors (in order to provide performance guarantees, the contractor needs to effectively operate the plant).

In Europe, the requirements for an O&M contractor are much stricter in many aspects including reporting, engineering/troubleshooting capabilities, performance monitoring, warranty management, spare parts, proxy towards authorities etc. O&M contractors are asked to assume greater responsibilities for the operation of a solar PV asset.