Wanted: A Solar O&M Provider With Motive

Written by Jay Levin
on August 14, 2013 No Comments
Categories : E-Features

Operations and maintenance (O&M) is a critical part of optimizing photovoltaic system performance. However, no matter how well-written your O&M contract is, it will only be as effective as the people behind it. This key issue is overlooked on many large-scale commercial solar projects, as nobody expects an operator to default on a service contract. But the risk of O&M contract default may be substantially higher than most solar owners realize. And even if there is not an outright default, an unmotivated operator can lead to systems not meeting performance goals and costing owners lots of money.

The key question that owners must ask and answer so that they can select O&M service providers to best maximize system performance is: ‘What motivates my O&M provider?’

The installers
The most common O&M structure in commercial PV today is to allow the solar installer or engineering, procurement and construction (EPC) contractor to operate the system after construction. Using the installer for O&M has many advantages, as the installer is likely to be intimately familiar with a system that it designed and built. The installer has access to the key personnel that built the system and can likely identify the right person to send out to troubleshoot. Chances are that many items discovered during routine system inspections will be covered by the installer's warranty, which would allow for a speedy remedy upon discovery. There are many more reasons that make the installer seem like the perfect choice for operator.

But will the solar installer be a motivated operator?
A typical O&M contract would become effective upon commercial operation of the system. The reality is that once construction is finished and the PV system has achieved commercial operation, the installer has already received the bulk of its revenue for the project. Therefore, the turnkey installer of a 1 MW commercial rooftop project built for $2.50/watt will have earned $2.5 million of revenue – which may include 10-15% profit (up to $375,000) – by the time its primary role shifts from builder to operator.

However, the typical O&M contract is priced at $0.010-$0.015 per year – or just $10,000-$15,000 in the sample system above. That figure likely contains a profit margin under $4,000. Will the installer dedicate resources to earning that trivial sum, or will they ignore operating responsibilities in order to focus on the next $2.5 million job?

The answer is not simple. It may come down to the way O&M fits into the installer's business model. Does the installer view its O&M strength as a key competitive differentiator? Does the installer have enough systems under O&M contracts that would indicate a significant revenue stream from O&M? Is there a dedicated O&M manager on staff whose sole focus is to service operating systems? Can the installer prove that it is performing effective O&M on its other systems?

The installer may remain motivated by carrots, such as shared benefits from excess production or future projects with the system owner. It will ultimately be the responsibility of the system owner to evaluate these factors to ensure that the installer is a motivated O&M provider.

Third parties
Suppose you have selected the right people to build the system but have determined that they may not be the most motivated operators around. Or maybe they have already failed as operators within the first year or two since the system went live. Now what?

An attractive option may be to use a third-party O&M source. Few companies are positioned as ‘solar O&M only.’ But a company that is selling this as a stand-alone service should be highly motivated to do a killer job operating your system. The third party may be set up with a better infrastructure for dispatching and managing service. Can the small or midsize integrator that built your systems with outsourced local labor in three different states dispatch capable solar service technicians within 48 hours to each site if necessary?

A company that takes on such a challenging role as O&M provider without having benefited from the integrator's revenue stream is likely either motivated to optimize your system's performance or just plain crazy. Still, the motivation alone may not make such a group successful, as its lack of familiarity with the ins-and-outs of your particular system may take a while to overcome. Troubleshooting may take longer than it would with the installer, as the third party may not be aware of system-specific design or operational issues that the EPC contractor had already dealt with.

If you decide to go with a motivated third-party provider, you must be confident that they are able to catch up quickly on the things they missed during the development and construction phases so that they can operate and maintain the system effectively. They should want to learn as much about the system ahead of time so that they can be proactive in maintaining the system and not just reactive when your inverter goes down.

But from a pure motivation standpoint, owners can take comfort in knowing that a third-party O&M's entire business depends on how well they are able to take care of your PV systems.

In-house O&M
This is the trickiest one to evaluate, because it really depends on how much of your own time you want to spend taking care of this shiny new PV system you just built (or not-so-shiny if the array is located near an airport and has anti-glare panels). You have learned a lot about solar during the process of developing and building your system. You understand the performance targets and the scope of services required to optimize system performance. You have a large lawn mower and are not afraid to use it!

Systems that are built with third-party financing will often require a formal O&M contract, likely by a solar integrator or operator as described in the first two sections of this article. But if you are the owner, then you may want to keep O&M services in-house. This is not necessarily a bad choice, but you must have a deep understanding of what goes into this task.

You may already know whom to call if there is a problem with the system. Local landscapers will be able to maintain the grounds. But you will want to make sure that you have budgeted time for troubleshooting and handling warranty claims. Do you know what your warranties cover? In addition, you need to be on top of the solar production monitoring and know how to identify and react when the system is underperforming. Much of this can be automated, but the hours can pile up when trouble persists.

And will you wash those thousands of dusty solar panels or just wait for the next rainfall? If you ask yourself the same question when it's time to wash your car, then you may want to hire someone else for O&M. If you choose to self-perform your solar O&M, be sure to budget time accordingly for yourself or your employees who are handling this task. Many systems run smoothly for extended periods of time, but when they do have performance issues, the drain on resources can be quite taxing.

The one great thing about self-performing O&M is that you should already be motivated to optimize your system's output, as all positive gains go directly into your pocket.

Motivation is not the only factor in the decision-making process, but it certainly is an important one. Here is a quick scorecard you can use to evaluate key success factors to help decide which type of O&M provider to use. The questions are designed to weight the decision on the motivational factors discussed in this article. Score each type of provider (installer/EPC contractor, third party or in-house) on a scale from 1-5, where 5 is ‘strongly agree’ and 1 is ‘strongly disagree.’ Whichever provider ends up with the highest score will give you a good indication of where your O&M future lies. The O&M provider is familiar with the installation.

13094_chart1309 Wanted: A Solar O&M Provider With Motive Deciding on an O&M provider requires a comprehensive analysis of your system's operation and maintenance needs. The choice is rarely black and white, and this article is not meant to favor any particular type of provider – but understanding what motivates different O&M providers is always a critical factor in this decision-making process. The best thing to do before you start building a commercial or utility-scale PV system is to make a list of pros and cons for using each of these three types of O&M providers to meet your project's service needs. It is abundantly clear, however, that selecting the best O&M provider can increase output and make you a lot of extra money, while choosing poorly could cost you dearly.

Jay Levin is director of operations for Tecta Solar and a NABCEP-certified PV installation professional. Reach him at jlevin@tectaamerica.com or on Twitter @jaylevinPV.

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