2021 Solar O&M Predictions

2020 reminded us that making predictions is risky business. Who could have predicted the global upheaval and impacts of the COVID-19 virus and resulting pandemic? And who could have predicted that the solar power industry would grow last year despite these obstacles?

Nevertheless, imagining the future and making plans for it is part of what makes us human — so here I go. The following eight predictions are key changes I see occurring in the solar power industry in 2021 and beyond. What do you think will happen?

2021 Predictions

Prediction #1: It’s Time to Focus on the “O” in O&M

As renewable power plants supplant more and more fossil power plants, the electric grid increasingly will depend on solar power facilities to reliably transmit power to consumers around the world. Are solar plants ready? Are solar operators ready? In my opinion, we still have some work to do.

Over the next several decades, as we move toward a zero-carbon electric future, the solar power asset class will continue to be an excellent replacement source for fossil power generating assets. However, making electricity is just one aspect of a complex problem. Another aspect is the ability to instantaneously match supply and demand for electric consumers in a safe and reliable manner.

For the last century or so, the operational control part of the equation has been largely supplied by fossil generators. Renewable power facilities will need to take over this key role in the future and upping our game in plant operations is the key to success. Solar O&M will need to become experts on subjects like forecasting, scheduling, settlement, control, coordination, regulation and reserves. These are services the fossil power industry knows well and capabilities that renewable power operators must be equipped to take over.

2021 will start a shift towards renewable power owners and operators taking on a larger role in the operational requirements of running the electric grid. We can look to more mature markets like Western Europe for lessons on how to use renewable power assets for generation and control of the grid.

Note: I plan to devote a future 2021 article to this important topic — keep an eye out!

Prediction #2: More Hybrid Systems

Prediction #2 is really part of the outcome to Prediction #1. The only way that a variable and intermittent generation asset can meet the operational control requirements of the electric grid is to be able to supply energy to the grid independent of the energy resource itself (i.e., the sun and wind). Since it’s impossible to predict the available sun and wind resource perfectly and it’s too costly to build significant reserve margins, the next best option is to co-locate solar power and energy storage facilities.

These “hybrid” power plants allow operators to inject energy into the storage system when supply exceeds demand and extract power when demand (or price) exceeds supply (or cost). The rapid decrease in the cost of battery energy storage systems (BESS) is driving the swift adoption of hybrid power systems in the global electric grid. I heard recently that 100% of the utility-scale solar power projects in the queue for interconnection in the US are solar-plus-storage projects.

Prediction #3: Bigger Projects

You thought today’s solar power projects were big? You ain’t seen nothing yet. In 2021, a 100 MW solar power project will no longer seem big. Start thinking about gigawatt-sized projects in the future. Why? For at least three reasons:

1. The scale economies are so significant that building large projects just makes economic sense
2. The solar cost of capital is declining and lots of money is available to finance projects
3. The need is so great. If you exclude hydro from the renewable power mix, renewable generation is currently only about 10% of the world’s electric supply. To get to a 100% renewable energy supply mix by 2050 would require approximately 420 GW of new generation capacity each year for the next 30 years. We're not going to get there building 1 MW solar projects.

Prediction #4: Consolidation of Assets and Suppliers

Even with the challenges of a pandemic year, the solar industry saw a lot of consolidation of solar assets and suppliers. Expect to see even more in 2021 and beyond. As the industry matures, we’ll see consolidation in the solar tracking, module, monitoring and services market segments. I also believe we’ll see plenty of announcements of project pipeline and operating assets acquisitions in 2021 as big players set ambitious targets for growth over the next 5 to 10 years.

Prediction #5: Long-Term Performance and Reliability

As more pressure is placed on the solar power industry to provide ancillary services to the grid and an economic incentive for reliability is provided by the FERC and RTOs, I believe we will start to see a “flight to quality” in solar plant development and construction.

With little incentive to build quality and reliability into the current utility-scale solar power project, only long-term asset owners seem to be focusing on true lifecycle cost and performance in the solar marketplace. Building lower quality projects and flipping them may work in the early days of a new industry, but that strategy will not work when you are responsible for “keeping the lights on” for billions of people on the planet.

With long-term asset owners leading the way and demanding higher quality assets and with regulators providing the economic incentives, I believe 2021 will be the year that long-term performance and reliability finally will catch on within the solar power industry.

Prediction #6: Greater Interest in Performance Optimization

Like Prediction #5, we are starting to see a greater interest in optimizing the operational performance of solar assets. Why? Two reasons:

1. As an asset manager, it just makes economic sense to really know the gap between actual and optimal performance in your fleet
2. Analysis by industry experts has revealed that the current fleet of projects being commissioned in the US are not meeting project pro forma targets

If production shortfalls are occurring, it’s the asset manager’s responsibility to leave no stone unturned when it comes to identifying problems and improving project cash flows. Because repowering early in the project’s life likely isn’t economic, the next best option is to uncover “hidden capacity” in the project.

This capacity usually is unseen by operators because it typically consists of many small and discrete offline or underperforming DC array components. We estimate that even well-run facilities are losing between 2-5% of their maximum generating capacity at any given moment. Expect to see growing interest in advanced asset performance management software platforms that help asset managers and performance analysts to tease out these small individual underperformance events—events that add up to substantial lost revenue over time.

For more on this, check out my recent white paper, “The Growing Need for Advanced Solutions in Solar Performance Management.”

Prediction #7: Rationalization of O&M Costs

In keeping with my “flight to quality” prediction, I think we’ll start to see a slow upward trend in O&M costs in 2021. Some may view this as a negative, but not me. Having been an asset owner in the fossil power business for over 20 years, I have a pretty good idea about the true cost of operating a power generation asset. The prices that have been winning the recent solar O&M contracts are neither realistic nor sustainable. Contrary to solar snake oil salesman promises, solar power is not a maintenance-free business.

To really meet industry expectations around lifecycle plant availability and production takes a serious commitment of skilled workers, management, parts, logistics and information technology. Each of these has a cost and should include a fair and reasonable markup. The prices I am seeing in the market do not meet these requirements. I see a correction to market pricing beginning in 2021 until we have a sustainable asset class in place.

Prediction #8: COVID-19 Lessons Learned

The suffering and upheaval caused by the coronavirus pandemic can’t really be measured. But, amid all of the uncertainty that COVID-19 brought to our lives, the global solar power industry rapidly adapted and generated good results for the year.

As I talk to industry colleagues around the world, they are communicating that the tough lessons learned from the pandemic will make O&M organizations stronger and more resilient going forward. From improved processes around worker safety, to cross-training, to flexible work schedules and locations, many of the lessons learned during the pandemic will continue to strengthen our industry long after this crisis is behind us.

Summary

We're all looking forward to better things in 2021. And, while there are sure to be new challenges that will influence these predictions in unforeseen ways, I believe the topics I touched on will be key influencers for the solar power marketplace in 2021.

What are your predictions for 2021? Which of my predictions do you agree with? Are there any you disagree with? Share a response and let me know what you consider to be the critical issues for our industry in 2021.

Steve Hanawalt is Executive Vice President and Co-Founder at Power Factors. For more information, visit our website.