The evolution of maintenance business models and service practices for commercial and industrial PV systems has been slow, but three new trends are threatening to profoundly disrupt the industry.
String inverters
A recent arrival in the U.S. market, three-phase string inverters are disruptive technology when it comes to O&M practices.
There is no need to repair a string inverter. Regardless of which internal component may have failed, the resolution is the same: remove the unit and replace it with another one, which technicians typically carry in their truck. The defective unit is then sent to the manufacturer for exchange. There is no management of spare inverter parts, and technicians do not need expertise in diagnosing and resolving issues inside the inverter.
String inverter failures have a lower impact on availability and production targets, so maintenance providers can wait longer before sending a crew, which allows them to better optimize truck routes and staff utilization.
String inverters provide higher monitoring granularity, thus allowing detection of DC issues that would require IV curve tracing in a central inverter system configuration. Consequently, some maintenance providers recommend a lower frequency of IV curve tracing for decentralized system designs.
But string inverters also have disadvantages for maintenance providers. First, failures are more frequent due to the larger number of inverter units per PV system. This means more truck rolls will be necessary to perform corrective maintenance. In addition, some investors/owners require that maintenance providers respond to a string inverter failure with the same level of urgency as they would in responding to a central inverter failure. Such a requirement causes a steep increase in maintenance costs due to the higher number of incidents.
ITC expiration
Currently, owners are incentivized to purchase multi-year O&M service contracts bundled with the PV system, so they can benefit from the ITC on the total amount. With this model, developers and installers get all the O&M revenue upfront: every dollar spent on O&M is a reduction of margin.
In a reduced-ITC world, owners may shift to shorter-term contracts with annual or quarterly payments. In this more conventional model, the provider is incentivized to perform service because it is tied to ongoing incremental revenue.
With this approach, installers and developers are also less likely to sell O&M at a loss, as it would translate into ongoing negative margins during the entire contract term, whereas the current bundling of services with the system sale hides the potential losses caused by low-cost maintenance.
California's Rule 21
California regulators are preparing a new mandate for solar PV systems in the form of an updated Electric Rule 21 that defines the grid support capabilities expected from solar PV plants and inverters, including remote controls. California Rule 21 is not limited to utility-scale systems: it applies to any PV system on the utility side or the customer side of the meter (except for wholesale trading plants, which are subject to different rules).
In phase 1 of the new Rule 21, which is expected to become mandatory in Q1 or Q2 2016, most of the required functionality is autonomous and performed by the inverters. In phase 2, distributed energy resources (DER) must be able to communicate with the grid operator, either directly, via facility energy management systems, or via aggregators. O&M providers whose operations centers are connected to distributed PV systems may become aggregators. The details of these phase 3 requirements are still being hashed out and validated by the California Public Utilities Commission.
Although it is still unclear how Rule 21 will change O&M, the new regulation is likely to increase the complexity and the importance of the “O” in “O&M.” What’s more, this trend is applicable beyond California: several other states are closely following the regulatory and standardization process in the Golden State, so we can expect similar rules to be implemented in various parts of the U.S. as the penetration of solar resources increases.
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For more information on U.S. residential and commercial PV O&M and asset management, including market size and 5-year forecast by segment and state, competitive landscape, vendor categorization, market trends, budgets/prices, sourcing strategies, and key vendor profiles, please refer to the new report recently published by GTM Research, U.S. Distributed PV O&M and Asset Management: Services, Markets and Competitors.