Performance Monitoring is like Insurance

Photovoltaic (PV) power generation is experiencing rapid growth, reaching a total global capacity of ~30GW in 2010, a 30% increase over 2009. In the US, PV capacity in 2010 doubled to ~2GW. PV power generation is still a nascent industry providing less than 1% of the world energy supply (less 0.1% of America’s supply). With growth rates averaging above 50%, the majority of the installed PV capacity is relatively new – or less than 5% of the anticipated operating lifetime of the system. Underperformance due to a wide range of material and enviromental factors which can degrade power output by 10% or more, is poorly anticipated in the current installation climate. Most systems are monitored by “eyeballs” which is both ineffectient and error prone. Thus there is a large market opportunity for precision analytics in PV monitoring to reduce underperformance and maximize revenue generation over the lifetime of the site.

Market Opportunity

Detect and diagnose underperformance and deliver actionable messages to site owners.

With so many new companies entering into and competing in the renewable energy marketplace, how do the parties ensure that key components of a solar generation facility perform as intended? Rigorous commissioning and performance testing might address immediate issues. But what happens in later years when photovoltaic modules do not meet performance expectations or the inverter fails? What happens when a developer or contractor obtains modules from an inexpensive overseas supplier and the modules degrade more quickly than projected? What good is a warranty from a company that will not be around in a decade to respond to a claim? What remedies exist when key components fail to perform as intended? Is there insurance available to respond to these risks?

Target Market Segments – Grid-connected Commerical

In the US, grid-connected commercial installations comprised over 50% of total installed power in 2010 surpassing 400MW, a growth rate of 100% over 2009. [1] At an average price of $5.87/W, this represents a $2.4B market while the global market exceeds $10B. The European Photovoltaic Indusry Association (EPIA) estimates a global demand of 14GW to 30GW depending on policy initiatives.[2] Additionial forecasts from US consultants support the 30GW level and strong growth in North America [3,4,5,6]. Assuming 30% commercial and a price reduction to $4/watt installed, produces a total global market size of $18B to $40B.
Grid-connected commercial solar installations are created with a variety of financial arrangements:

  • A Power Purchase Agreement (PPA), where the developer agrees to install and maintain the generation facility and the site, building or land owner agrees to buy the electrical output.
  • Site Lease Agreement under which the site host (which may or may not be the off-taker) gives the developer rights to install, own and operate the facility at the project site.
  • An Engineering, Procurement & Construction Agreement (EPC) under which the developer hires a contractor (the “EPC Contractor”) for the design, materials and construction services necessary to provide a turnkey facility accompanied with an Operations and Maintenance Agreement (O&M) under which the developer hires a contractor (which may or may not also be the EPC Contractor) to provide long-term maintenance services.

The U.S. solar power purchase agreement (PPA) market will grow to reach an estimated $8 billion in new photovoltaic (PV) solar power generation installations by 2013, up from an estimated $0.7 billion in 2009, according to Gartner, Inc. [6]

Revenue Critical Production

Revenue is a critical factor behind all of these arrangements. At the point of agreement, estimates of performance are made using guidelines or modeling programs or sstatistical simulation tools.
Uncertainties in revenue over time relate mostly to the evaluation of the solar resource and to the performance of the system itself. In the best of cases, uncertainties are typically 4% for year-to-year climate variability, 5% for solar resource estimation (in a horizontal plane), 3% for estimation of
irradiation in the plane of the array, 3% for power rating of modules, 2% for losses due to dirt and soiling, 1.5% for losses due to snow, and 5% for other sources of error. [7]
Identifying and reacting to losses that can be managed is critical for revenue and O&M efficiency.
However, with all of the agreements that are typically executed in connection with a solar project, it can be confusing to figure out who is responsible for losses. Moreover, the parties and agreements described above may not themselves provide adequate performance assurance for such components. The practical answer for determining who ultimately bears responsibility depends on the contract warranty and insurance if available. This can be further complicated when PPA agreements are traded in secondary markets – much like the maligned mortgage practice that contributed to the financial crisis in 2008.

Guarantees Under PPA and EPC Agreements

Increasingly, developers that offer performance assurances to the off-taker under a PPA turn around and pass along their exposure to the EPC Contractor under the EPC Agreement. However, such assurances often have their limits. For example, a performance guaranty from the EPC Contractor may provide assurances that the system, as designed, will perform as intended. But such guaranties may not ensure performance of the modules or inverters themselves. Also, there may be disagreement about whether another warranty exclusion applies, such as a failure to properly maintain the equipment. If the contractor under the EPC Agreement and the O&M Agreement are the same, this particular concern is less of an issue as the same party would be responsible for design, procurement, installation, and maintenance.

Performance Monitoring is like Insurance

As the solar market expands, another solution is becoming more widely available for those who want to limit their exposure to product failures. In particular, third party warranty insurance may be available to reduce or eliminate risk, albeit with added cost. The typical installation, property and liability policies obtained by a developer or contractor do not provide warranty coverage. However, a few insurers in the marketplace now offer specific warranty insurance policies. For example, one insurer is willing to give a 25-year guaranty that modules will perform to 90% capacity in the first ten years, and 80% for the remaining 15 years. However, this guaranty is also only available with respect to modules made by a limited set of manufacturers approved by the insurer, reinforcing the importance of vendor selection for key components.

The solar power integrators have four performance issues: Under-performance (losses), lack of effective monitoring, fire and maintenance safety, and module theft. A wave of no less than a dozen announced products, services and combination offerings addressing performance optimization have appeared during the past year. These products and services all require major paradigm changes, or need to be designed in as new construction, more difficult to justify. The problem, as described by Brian Banke, an Asset Manager for Solar Power Partners, a leading PPA.

“Maintaining a solar site is a “daunting exercise in O&M made manageable with accurate upfront performance modeling, a reliable and effective monitoring system, active monitoring by knowledgeable personnel, realistic preventative maintenance policies and budgets, solid warranty backing, efficient reactive repair policies and targeted analytics.” [8]

A true fault detection and diagnosis solution that can support the gamut of solar revenue reducing factors is needed. Such factors include:

  • Module degradation
  • Array soiling {episodic, chronic, seasonal}
  • Array shading {periodic, episodic, gradual increase, weather related, environmental related)
  • Array overheating
  • Module Failures (open/short cells, open short panels, blocking diode}
  • Array DC disconnect failure
  • Inverter failure
  • Combiner failure
  • Grid power failure {Single / Double phase faults)
  • Protection failures (panel fuse, array fuse, inverter output fuse, combiner fuse}

    1. SEIA Q3-2010 US Solar Market Insight
    2. EPIA 2010 Global Market Outlook for Photovoltaics to 2014. Also see Renewables 2010 Global Status Report (REN21) – July 2010
    3. International Business Alliance Dec.1, 2010 by Paula Mints, Navigant Consulting
    4. IREC Solar Market Trends Report, July 2010 (IREC21)
    5. GTM Global PV Demand 2009
    6. Garner SVPVS December 2009
    7. Report 2010-122 (RP-TEC) 411-IEARES, March 2010
    8. Brain Banke, Article series by a PPA Operations supervisor Heres comes the hard part.

Leave a Reply