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Three Tips to Better Estimate the True Cost of Solar O&M

Sep 16, 2021

Solar projects are more than thirteen times more likely to chronically underperform their initial production forecasts. This fact uncovered in the 2021 kWh Analytics Solar Risk Assessment underscores the critical challenges that growing solar portfolios (and their owners) are facing.

Entrusted with the long-term results of solar facilities, Operations and Maintenance (O&M) and Asset Management companies know their likelihood of success is often set before they get to work, before the last interconnection is made, and even before the final contract is signed.

Using research across the industry and experience operating 4 gigawatts (and growing) of utility-scale solar assets, Origis Services has three key learnings to share with financiers, developers, and owners who want to better estimate the true cost of solar O&M.

Tip 1: Include Optimal Levels of Corrective Maintenance in Service Contracts

Analyzing data from more than two gigawatts of utility scale solar facilities, Origis Services discovered the most effective way for asset owners to reduce overall O&M costs: including roughly 70% of corrective maintenance into the annual service fee contract. Corrective maintenance—which is the repair and replacement of faulty inverters, PV modules, and other equipment—is an inevitable expense in operating solar assets, and yet all too often piecemeal O&M contracts exclude it.

Focused on maintenance costs for 75MW and 150MW systems, this analysis showed that asset owners can spend nearly 30% more than they expected to fill the gap. Instead of paying high-priced, dispatched services, O&M that includes the corrective maintenance “sweet spot” of 70% can plan for and more cost effectively respond to inevitable equipment failure.

Tip 2: Invite O&M Service Providers to Review Early Asset Contracts

According to kWh Analytics CEO Richard Matsui, “there is a one in eight chance that [solar] assets will be a chronic underachiever.” Although an experienced O&M provider such as Origis Services can be a great partner in reducing risk and optimizing solar asset performance, even we are limited by the terms from upstream contracts.

Are the inverters and solar panels protected by warrantees? What specific components are covered and for how long? Are there service-level agreements that ensure response times and remedies? What insurance products are available to fill the gaps?

With clean energy technology so rapidly evolving, it’s not unlikely that asset owners will discover their strategically invested equipment in the field is several generations out of date and no longer supported by the manufacturer. That where’s clear and comprehensive upstream contracts save the bottom line.

Getting an experienced O&M provider to review solar asset contracts up front and to ensure the terms match ongoing operational services and risks is a critical way to reduce unforeseen expense.

Ready for Predictable O&M, Asset Management Costs?

Tip 3: Understand the True Cost of Solar O&M Services Starts with a Clear and Transparent Contract

Even though more solar assets are being developed every year, the average cost of O&M has plummeted. By 2018, according to research by Wood Mackenzie, O&M prices decreased about 58 percent compared to previous years. Unlike PV modules, this price change has nothing to do with innovation. Within services, 70 percent or more of hard costs are attributable to labor, and those costs are only going up. So how are O&M companies providing such decreasing rates? By dramatically reducing service scope.

Inevitable expenses such as vegetation management, corrective maintenance, and PV cleaning make up 40-45 percent of an asset’s total O&M costs. Budget O&M contracts often ignore these essential services, and those unaccounted-for expenses will accumulate over an asset’s lifecycle. Wood Mackenzie analyst Leila Garcia da Fonseca advises: “It makes sense for asset owners just to go with a full wrap [contract]. . . In the long term . . . they’re going to incur [fewer] expenses than doing [it] ad hoc.”

CONCLUSION

Solar asset owners can and should pursue the most profitable projects. Underestimating or ignoring operational risks, however, can all-too-often backfire and create solar assets incapable of performing as expected. An O&M partner such as Origis Services can help set up solar project for success. Here are the three takeaways recommended for all O&M plans:

  1. Include optimal levels of corrective maintenance in service contracts
  2. Invite O&M service providers to review early asset contracts
  3. Understand the True Cost of Solar O&M services starts with a clear and transparent contracts

RESOURCES

Get an Indicative O&M and Asset Management Cost Estimate

Addressing Solar Asset Underperformance

Solar O&M Shortcuts Lead to Higher Costs Later

True Cost of Solar O&M can be 28% Higher Than Planned or Budgeted

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