The global solar PV industry first took off in Europe and as such, the industry that came about in order to take care of those PV plants, otherwise known as Operations and Maintenance (O&M), got a head start in Europe.
Here are five key factors shaping the differences in the U.S. and European solar PV O&M markets. Presented in a panel format, this discussion serves as a pre-cursor to the first trade event solely dedicated to solar O&M in the U.S., Solar O&M North America later this month in San Francisco.
Our five key factors emerged based on the input from our three experts:
Cedric Brehaut (left), principal consultant at SoliChamba and author of the GTM Research 2013 report, ““Megawatt-Scale PV Plant Operations and Maintenance: Services, Markets and Competitors, 2013-2017.” Brehaut has extensive experience in the solar industry and is an expert in solar PV monitoring and O&M.
Christoph Neufink (right), who has been in the solar O&M space since 2009, is the director of service at skytron energy. Birthed in the early stages of the European PV market, skytron energy has three decades of industry experience and 4.5 GW of solar under monitoring management. The company announced its first U.S. project in October, a 5.8-MW commercial PV install in Yuma, Arizona.
From the southern part of Europe, Vassilis Papaeconomou (left) brings the perspective of the independent solar O&M provider. He is the managing director of Alectris, a Greek based independent O&M firm, now making headway in the U.S. Papaeconomou’s solar experience started in 2006 on the development and construction side before moving into O&M in 2012. Alectris has nearly 100 projects under O&M management including its initial U.S. projects, 24 MW’s recently dedicated in Georgia.
Turn the page to read the first of our five key factors driving U.S. and EU Solar O&M.
1. The Bottom Line
Brehaut: The value of solar energy is overall lower in America than in Europe, and the U.S. investment tax credit (ITC) is not a production-based incentive. European feed-in tariffs, on the other hand, tend to put a higher price on every kWh produced, so they encourage adoption of production-enhancing technologies and O&M services.
The prevalence of ‘third-party ownership’ financing – such as solar Power Purchase Agreements (PPA) and leases -- in the U.S. tends to produce large portfolios of assets in the hands of few operators, while European markets show a fragmentation of assets across a variety of investors (large and small).
2. The “Fix It First” or “Leave it Alone” Mindset
Neufink: In Germany generally the mindset toward O&M is influenced by the cultural proclivity to “fix it before it breaks” versus the U.S. mantra of “never fix it until it is broken.” There are disadvantages to both. Fixes to operating components that may still have life can negatively impact the investor’s return on investment. On the other hand, fixes that wait until energy generation is affected tend to cost more in the long run.
Papaeconomou: The O&M concept is better understood in the U.S. than Europe. Probably because the U.S. is a more services agnostic market, whereas Europeans tend to undervalue services. We see already a lot of companies in America that have identified the market need for O&M services. In Europe this process took some years whereas in the U.S. such services are better understood despite the market being much younger than Europe.
3. Market Maturity
Brehaut: The U.S. is ramping up faster with larger plants than Europe, meaning that the U.S. has a smaller base of skilled professionals to handle the O&M maintenance. Developers must think about the labor force much more in advance than in Europe
Papaeconomou: The U.S. has a larger number of large plants. This is not necessarily market specific, but more because the technology and financing tools and know-how have increased a lot. From the market development point of view, the U.S. is developing at a more controlled rate than Europe. We see better quality plants in the States and a more sustainable growth of the market. Also a consequence of that is the U.S .is doing a lot more in terms of developing standards and is being more innovative in bringing costs down.
Neufink: More systems are getting older and aging out of the warranty period in Europe, which opens up the O&M contract to negotiation. Along with more independent O&M service companies, these factors are creating the opportunity for investors to negotiate new, lower costs but are leaving performance guarantees off the table.
4. The Solar Secondary Market: Existing versus Emerging
Brehaut: Europe has a secondary market where solar PV assets are sold to new investors. This often results in renegotiation of O&M contracts and/or a switch of O&M providers. Most solar assets in America are still owned by the initial investor, although this is beginning to change.
Neufink: The secondary market is more alive and vibrant in Europe than in the U.S. Solar parks are changing hands more frequently due to many factors including EPC firms going under as the construction of sites slows down. When a plant changes hands the new investor / owner typically is aggregating several sites and wants to have the same O&M supplier and monitoring system for all assets to standardize reporting. We are spending a lot of time on new contracts, moving monitoring from the first 3rd party to the second 3rd party owner.
5. Differences in the O&M Services Landscape
Brehaut: The largest American O&M service providers are vertically-integrated solar firms, while in Europe leaders tend to be EPCs and the markets are more fragmented. Independent O&M providers are growing in number and market share in both regions.
We see a tendency toward more solar O&M being “baked into” the beginning of the construction and engineering phases of PV development in the U.S. This was true of the Origis Energy 24-MW plant in Georgia for which our team brought O&M considerations into the conversation very early in the development of those assets.
Neufink: O&M is typically at the construction table earlier in Europe. It is more often involved in the early stage of the construction of a new solar plant in Europe than the U.S. Acting as a type of quality “controller” the motive of the investor or developer to involve O&M early is to ensure quality standards and O&M efficiency after the build.
Neufink: The “fix it before it’s broken” mindset does influence the demand for monitoring granularity. In the U.S. 1-, 2-, even 5-MW plants barely have a monitoring system – only the meter is monitored. In the European market, much more detail is required including string monitoring on every larger installation, very detailed monitoring equipment and a more comprehensive scope and depth of monitoring information.
Brehaut: Theft and vandalism are usually not a concern in America, whereas most European markets (except Germany) require intrusion detection, video surveillance and/or on-call private security staff.
Parts and Labor
Neufink: Geography shapes differences in the U.S. versus European solar O&M market. It either helps or hinders service providers. One example is the availability of parts. Logistics for the delivery of parts is either more complicated based on the location of the solar parks or less complicated depending on the length of the road to be traveled.
Another example impacting both proximity and availability is the skilled labor pool. In Europe, almost every electrician has solar experience. In the next village or hamlet over, there is a skilled electrician who can at least handle the most basic of on-site solar PV O&M fixes. The continent has 15-20 years of solar experience with the attendant ramification on the training of electricians to handle PV installation and repair. This is applicable across Europe except in new markets. In the U.S. the talent to handle O&M incident management is geographically far away from most plants. Additionally when you build a plant, you train 1, 2, or 3 levels of workers so you have O&M service labor options.
Papaeconomou: In the states, EPC contractors and O&M providers are less willing to provide performance guarantees whereas in Europe it is standard. In Europe such guarantees were given without much thinking and companies were very opportunistic because of the huge margins they had in the EPC. Now many companies are distressed so they are willing to promise more than they can do to get more contracts. The European market is becoming healthier and serious companies do not promise something they have not checked and are sure they can perform.
Lead Image: Origis Energy USA Camilla Solar Farm Georgia, O&M by Alectris – Second Largest Solar Installation in Georgia, dedicated February 10, 2014.