Prices for utility-scale solar operations and maintenance contracts have dropped across the globe in recent years, driven by competitive auctions and fewer services being provided. But prices at the bottom of the range (approximately $3 to $5 per kilowatt per year) are not without their drawbacks, experts say.
Cutting corners on the full “scope of service” contract, which includes site maintenance such as vegetation management and equipment checks, often leads to higher overall costs over the course a project’s lifetime, according to new research published by kWh Analytics and conducted separately by Wood Mackenzie and Origis Services, a unit of solar developer Origis Energy that provides O&M for internal projects and other owners.
“This trend of squeezing O&M pricing is coming at the expense of the owner and...the long-term project,” said Josh Corbitt, Origis Services’ director of business development for O&M and asset management. “Those costs are going somewhere, and they’re being shifted down the road — more often than not at a higher price for the customer.”
Analyzing the number of hours spent on corrective work for a 2-gigawatt portfolio and how much that work cost, Origis found that asset owners can end up paying nearly 30 percent more than planned if their original contract leaves out “corrective maintenance,” which includes repairing and replacing faulty equipment such as inverters and modules.
“Inverters are constantly going down and going offline,” said Corbitt. “Somebody has to be there on the site to troubleshoot.”
Origis prefers including corrective maintenance in the contracts it fulfills and those for its own projects, said Corbitt. With corrective maintenance included in the contract, Origis Services is better able to staff its sites to make sure the needed technicians are available when issues do crop up. For its own projects, the company has identified a “sweet spot” that includes 70 percent of estimated corrective maintenance in a contract’s annual service fee.
As an O&M provider, Origis has a vested interest in increasing the price of those contracts. But the company’s results align with independent analysis from Wood Mackenzie. The lower cost of current O&M contracts is often “erroneous,” said the consultancy in a paper published Wednesday, because those contracts often drop necessary maintenance work in favor of cheaper top-line figures.
“Prices might not include some important parts of operation and maintenance just because they want to reflect the lowest figure possible,” said Leila Garcia da Fonseca, a principal analyst at WoodMac.
Vegetation management, corrective maintenance and module cleaning can make up 40 to 45 percent of a project’s total O&M costs, according to WoodMac. Lower-priced O&M contracts often exclude those services, even though they’re essential to a solar plant’s functioning.
Garcia da Fonseca agreed that including those functions in the scope-of-service contract is likely to be cheaper over time. An all-in contract also may come with a warranty stating that the servicer will guarantee a project’s functioning at a certain level, while a la carte options usually do not.
“It makes sense for asset owners just to go with a full wrap [contract],” said Garcia da Fonseca. “In the long term…they’re going to incur [fewer] expenses than doing [it] ad hoc.”
Learn more about Wood Mackenzie's new report, Global solar PV operations & maintenance (O&M) 2020