Despite major differences in market status, rules, dynamics, competitive landscape and outlook, most O&M and asset management markets in the world are being shaped by the same fundamental trends, according to the new report Megawatt-Scale PV O&M and Asset Management 2016-2021, released by GTM Research and SoliChamba Consulting.
Trend #1: O&M price pressure
As PPA prices for solar PV energy continue to decline around the world, price pressure applies to every part of the value chain, including operations and maintenance (O&M). All the major markets are experiencing significant year-over-year O&M price declines (ranging from 5 percent to 20 percent) unless they are bottoming out.
The lowest prices are found in India, considering that they include many services that are typically excluded in other markets, especially out-of-warranty repairs. Germany, the U.K. and the U.S. also have competitive markets and low prices. Vendors in France and Italy are still operating at high margins but the price pressure is intensifying, and we can expect a decrease in the years to come. Prices in Spain are harder to gauge; they seem to be stable but may be hiding the fact that repairs could prove to be expensive in a market where service density is not optimal, plants are older and often suffer from build-quality issues, and spare parts can be a major issue due to equipment suppliers having exited the market. Prices in Chile seem high, but they also factor in high labor costs, very remote locations, and extreme temperature conditions. Japan is a clear outlier, with prices at a level comparable to those observed in Germany during the years of higher FIT rates.
Trend #2: Larger portfolios
New construction markets like the U.S. and India feature large plant sizes and consolidated ownership landscapes that result in very large portfolio sizes. At the same time, portfolios are consolidating in mature markets like Italy and, to a lesser degree, Germany. This consolidation in ownership naturally translates into consolidation in asset management and O&M in the hands of a few very large players.
Trend #3: Grid integration
In several major PV markets like Japan and parts of the U.K., grid penetration of solar PV generation assets has already reached a level that has the potential to impact grid stability, so regulators are enabling grid operators to curtail PV production, and sometimes to ask for other grid services such as reactive power support or frequency regulation. Grid support functions, especially curtailment, strongly impact the economics of PV assets, and trigger both asset management and O&M requirements.
Trend #4: Energy trading
Many megawatt-scale PV plants in Germany already sell energy on the power exchange market via the country’s “direct marketing” program, and other countries are moving to similar models, as France is doing in its new auctions program. In Italy and the U.K., PV asset owners have the choice to either let the utility sell the energy and pay a service fee, or to contract an energy trader that places the energy on the power exchange and usually charges a lower fee. The energy trader, usually a separate entity from the owner and the asset management provider, will play an increasing role as more PV electricity gets sold on power exchange markets.
Trend #5: O&M Field Service Technology and Innovation
In many markets around the world, including Germany, the U.K., the U.S. and India, O&M prices have hit bottom, if we assume that providers will deliver the promised services and generate a decent level of gross margin. Unless O&M vendors are willing to sell at a low or negative margin, innovation is the only path to further cost reductions. New and promising technologies include plant designs that optimize the levelized cost of energy (LCOE) instead of the capital expense, string testing functionality built into inverters, waterless robotic cleaning solutions, drones for thermal imaging, and advanced data analytics allowing for the detection of issues without physical site inspections.
Trend #6: IT Automation and Innovation
There is still much to be done in improving and automating the integration and data flow between the different actors in the value chain (developers, EPCs, owners, asset managers, O&M providers, equipment OEMs). Monitoring and control systems are becoming increasingly open and connected, and professional asset management software solutions are gradually replacing manual processes and Excel spreadsheets. Data management has become a differentiator for both asset management and O&M providers, and several providers have in-sourced the technology.
Trend #7: Cybersecurity
As levels of PV penetration in power grids increase and plant sizes in several parts of the world exceed 100 megawatts, the risk that a malicious party could hack into a PV plant’s SCADA system, or an operations center managing a large portfolio, has become increasingly real. It's also unacceptable within the industry. The NERC critical infrastructure protocol (CIP) attempts to address this issue and reduce risk exposure for North America. Other markets and regulators around the world are discussing or implementing similar rules. As cyber threats continue to become more sophisticated, the cybersecurity requirements for PV plants will become more demanding and impact O&M providers, especially in markets where they are required to control the plants remotely, such as the U.S. and Japan.
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For detailed analysis of the top utility-scale PV ownership, asset management and O&M competitive landscapes, as well as key trends, service levels and prices, market sizes and forecasts for all the major PV markets (Global, Europe, Germany, U.K., Italy, France, Spain, U.S., Canada, Chile, Mexico, Brazil, Japan, India) please refer to the new report Megawatt-Scale PV O&M and Asset Management 2016-2021: Services, Markets and Competitors.