By Ashay Abbhi
India’s solar power capacity is expected to reach 80-90 GW by 2022, according to industry analysts, about 10 per cent short of the 100 GW target set by the government. This translates into a Rs 28 billion opportunity for the solar power operations and maintenance (O&M) segment. The need for O&M has assumed greater importance in light of narrowing developer margins owing to falling solar power tariffs. To improve revenues through better generation and reduced unplanned downtime, more efficient O&M practices are required. Moreover, O&M services will need to evolve to align with evolving solar power technologies with unproven track records and unknown operational challenges.
Meanwhile, the tariff pressures on developers continue to rise as a series of auctions have delivered sub-Rs 3 per kWh tariffs, with little hope of a tariff reversal. As a result, developers and plant operators are being compelled to reduce operational expenses and optimise generation to increase the dwindling profit margins. Besides, the recent imposition of safeguard duties, and goods and services tax (GST) is further building up the pressure.
Current market scenario
The cost of solar O&M currently stands at Rs 400,000-Rs 500,000 per MW per year and the overall market is worth about Rs 10.5 billion. Of the total solar power capacity installed so far, self-O&M (the owner and operator model) is undertaken by about 50 per cent of the asset owners, while the remaining is accounted for by EPC players and independent O&M service providers. The first model, that is, self-O&M, is typically used by independent power producers wherein all activities such as operations, maintenance, planning, execution and spares management are carried out in-house. The second model, involving EPC players, is employed for projects typically driven by financial investors. In this case, the EPC contractor is given the O&M contract during the warranty period. The solar rooftop space also uses the EPC model. The third O&M business model comprising independent service providers has begun to pick up in the Indian market only recently and is highly fragmented at present. However, the high pressure on costs is expected to be a key driver for this business model in the coming years.
Going forward, it is expected that large asset owners will continue to manage most of their O&M activities as the large portfolio helps achieve economies of scale. Meanwhile, mid- and small-size asset owners will continue to face cost and profit margin pressures, leading to outsourcing of O&M activities. Also, projects where the warranties are coming to an end will provide the largest opportunity for the independent O&M service provider model.
Manpower and module cleaning account for the largest share of O&M expenses at a solar power plant. Other factors driving costs include the size of the plant, the structure, the soiling rates, the vegetation growth, and the kind of technology deployed such as auto-trackers and robotic cleaners.
O&M activities in a solar power plant can be classified into five broad categories:
Plant supervision and monitoring – This includes activities such as performance monitoring, issue identification, diagnostics and root cause analysis.
- Operations and analytics – This involves service dispatch, supervision, power forecasting, remote plant control, schedule optimisation, performance trend analysis, failure analysis, planned outage management, etc.
- Maintenance – Various types of maintenance practices are employed at a solar power plant including preventive maintenance, corrective maintenance wherein breakdowns and condition-based maintenance are undertaken, and general site maintenance for module cleaning, grass cutting, etc.
- Operations-support functions – These typically include back-end functions such as spares procurement, inventory management, and finance and payroll management.
- General administration – This includes security of the site as well as warranty and guarantee management.
These activities are covered under various types of O&M service contracts. A comprehensive contract includes complete coverage of all possible on-site activities. The service level agreement includes performance guarantees and availability guarantees of over 98 per cent. Some contracts are limited to maintenance services wherein the work is carried out under the supervision of the asset owner and the contractor provides the manpower and skilled personnel for services. Yet another form of O&M contracts is the emergency services contract wherein the scope is restricted to breakdown maintenance and includes a fixed fee for a minimum number of responses.
Solar power projects are typically spread across a large area, making operations and maintenance tougher. This stresses the need for remote monitoring and capability across assets for efficient operations and to achieve economies of scale. This will help avoid underutilisation of resources. To this end, a centralised chain of command, and “hub-and-spoke” models for spares and services could be explored.
The solar O&M market is highly competitive and has a short asset creation time, which results in a dearth of skilled manpower. Therefore, there is a strong need to standardise O&M practices across the country and enhance workforce skills to enable smooth transition from one asset to another. The operating environment also requires adequate planning and flexibility to adapt to evolving government regulations and duties in a dynamic policy system.
A four-spoke focus is required for designing the O&M blueprint for solar power plants. This includes the specifics of the operating model such as whether it will be in-house or outsourced and centralised or decentralised as well as what skill sets the organisation must have and what key performance indicators would be required to measure the services against. It is also important to identify key targets and overall process objectives while ensuring that the right level of automation is in place to enable smooth operations.
With these in place, O&M costs can be optimised, primarily by recalibrating some specific parameters of the plant. These include a parameterised approach to module cleaning that considers soiling rates, cleaning costs and cleaning efficiency as well as manpower optimisation through centralisation and technology substitution. Moreover, the creation of a cluster model for providing services, a cost driver-linked budgeting process, and centralised decision-making will help lower O&M costs.
Technological advancements are also expected to be significant cost optimisers. Projects across the globe are using advanced technologies such as drones with infrared thermography, centralised command and control centres, water-free robotic cleaners, and data analysis and visualisation to identify incidents across string arrays and panels.
The way forward
O&M professionals, in-house or third party, will need to realign themselves to the changing solar power plant ecosystem. Focusing on the appropriate degree of centralisation of processes and structures will help companies optimise O&M costs to a large extent. Meanwhile, the deployment of remote monitoring and control tools can be leveraged to ensure better performance visibility and the granularity required for troubleshooting. Moving beyond corrective and preventive maintenance to predictive and prescriptive maintenance analytics based on big data will be required to help reduce downtime and improve operation costs.
The adoption of better technology aimed at optimisation of O&M services will help in preparing service providers for the significant growth in installations expected over the next four years, thus opening up the market for technologically and strategically advanced players.
Based on a presentation by Manas Majumdar, Partner, KPMG, at Renewable Watch’s recent conference on “O&M for Solar Projects”