By Pritil Gunjan, Senior Research Analyst, Navigant Research
Globally, the energy markets continue to witness an increased proliferation of distributed renewable resources (DER). The onsite power and behind-the-meter market segments are probably the biggest applications of DER generation technologies. Instances of outages and equipment fails in off-grid locations, along with random surges in power demand, can cost millions of dollars per day in lost revenue to asset owners. Adverse weather conditions and inefficient performance can exponentially increase the risk profile of these projects, creating an imperative need to optimize asset performance.
The energy industry has traditionally relied on calendar management programs for its valuable assets. Consequently, these assets face a high risk of breakdowns and unavailability between service intervals. This traditional approach can negatively affect the life expectancy of assets while drastically reducing their ROI, as they are likely to miss faults that occur between these intervals. Navigant Research defines asset performance management for DER as the digitization of operations, maintenance, and technical performance of distributed energy technologies such as solar PV plants, wind turbines, and energy storage solutions to enable them to operate at the highest level of efficiency and increased asset availability. Asset performance optimization (APM), therefore refers to a holistic approach to strategically manage risk and returns for asset owners while ensuring optimum technical performance across assets.
Due to the logistics involved in operating and maintaining remote installations, integrated APM solutions have an economic advantage over corrective and reactive maintenance practices. Since the distributed renewables market is driven primarily by operational economics, APM can significantly affect the return on capital and lower the total cost of ownership for asset owners. However, like all industries, the renewable energy sector will need to leverage economies of scale to maximize the benefits of APM.
Seven key benefits of implementing an effective APM model are as follows:
- Identify faults before they occur through predictive maintenance
- Facilitate machine learning and data analytics
- Identify operation and maintenance (O&M) costs for each phase of the asset lifecycle
- Drive risk management decisions
- Streamline and predict skill and resource requirements
- Define the asset failure profile and availability guarantees
- Predict the life expectancy of assets and reduce CAPEX investments
Technology accelerators can help break down the difference between expected and actual performance across different asset types while identifying the causes of performance loss. Digitally enabled O&M activities make it possible to synchronize production and balance the energy demand and consumption curve while offering the best monitoring services. At its core, APM includes Internet of Things technology accelerators such as data analytics, robotics, artificial intelligence, machine learning, and digital twins. Unlocking the power that data analytics can bring to the asset management function will transform the distributed energy sector’s ability to drive-up efficiency, lower emissions across hybrid renewable energy systems, and bring more flexibility and resilience to renewable power generation. Smart connected assets and digitization can unlock opportunities to optimize asset performance and efficiency gains across distributed renewables assets.
Navigant Research expects the global revenue for distributed renewables APM to increase from $4.6 billion in 2018 to $23.2 billion in 2027. Growth is anticipated to be driven by a maturing installed base in Europe and North America and substantial new capacity additions are anticipated in Asia Pacific.
Annual Distributed Renewables APM Revenue, World Markets: 2018-2027
(Source: Navigant Research)
While the granular study of APM’s value across individual phases of the asset lifecycle cannot be understated, operators will need to make strategic decisions across the integrated value chain of their asset portfolios. Most new turbine and hybrid renewable systems equipment is complex to service and entry barriers for APM solutions providers are high, however independent service providers (ISPs) have access to modular control platforms and cloud-based technology solutions that can be implemented across multi-brand assets. APM platform solutions like Schneider Electric’s Aveva and General Electric’s Predix include an end-to-end integrated technology that can be applied to both distributed and utility-scale renewable assets.
However, most solutions providers have found success in grid-scale applications — not the small distributed renewables installations — due to the CAPEX required to optimize them. Asset operators remain skeptical about the benefits of high technology digitization for distributed renewables asset management, however some argue that the industry should prepare for this impending future. As platforms continue to be refined, and the marginal cost of implementation falls, these APM platforms will increasingly be applied to smaller distributed renewables systems in future.
Distributed Renewables Asset Performance Management Market Evolution
(Sources: Aveva, Navigant Research)
In the Asset Performance Optimization for Distributed Renewables report, Navigant Research recommends a two-pronged strategy for APM market participants to succeed in this growing market opportunity:
- APM aggregation: APM service providers can offer aggregated APM services across equipment/components, thus benefitting from economies of scale. DER aggregators and virtual power plants usually have access to distributed assets of multiple brands. This increases the operational efforts required to maintain contractual agreements across multiple service providers. Distributed asset operators can therefore take advantages of a one-stop shop for all their asset performance needs.
- APM hybridization: OEMs currently are the dominant force in this space. However, ISPs can offer modular, customized, and innovative solutions. The hybrid approach has a strong value proposition whereby operators use their own technicians for routine servicing while retaining OEMs and ISPs to perform extended services.
It is fair to say that the APM market for distributed renewables technologies is still in its infancy because of the scale of investments required to perform an integrated end-to-end APM. Yet, due to the logistics involved in operating and maintaining remote installations, integrated APM solutions have an economic advantage over corrective and reactive maintenance practices — especially for distributed power generation.
Pritil Gunjan is a senior research analyst with Navigant Research, contributing to the Generation solution. She leads the Distributed Renewables research service and has more than 12 years of experience as a strategy and business consultant in the energy sector.
Gunjan’s experience includes qualitative and quantitative research projects for clients across Europe, the Middle East, and Asia Pacific. She has designed and implemented primary and secondary research solutions, as well as forecasting models, across multi-client energy research projects. Gunjan has worked with blue-chip management consulting firms on large global assignments to design and execute strategy roadmaps for large-scale transformation projects for manufacturers, renewable developers, oil companies, utilities, and industrial players. Prior to joining Navigant Research, she spent 10 years at Frost and Sullivan and IBM – Strategy and Change. Fluent in Hindi and English, Pritil holds an MBA in finance from the Institute of Chartered Financial Analysts of India.