Farid Najafi, president of Arbox Renewable Energy
By Farid Najafi, president of Arbox Renewable Energy
Successful asset owners that enjoy a healthy bottom line make decisions driven by data to maximize returns and grow their portfolios. Through key performance indicators (KPIs) they assess, analyze and maximize the performance of their projects through development and operation. Having access to this data can help keep you well informed about your existing projects and take necessary action to optimize their performance.
Through comparison, benchmarking and plotting you can identify your best performing projects against your poorly performing projects. This insight can help you identify good opportunities and shy away from risky ones in the future.
Many companies use a variety of KPIs in their organization. Here are five KPIs commonly used in the industry.
1. ROI – Return on investment
This simple calculation is the ratio of a project’s estimated earnings to its initial investment. This metric can be used to determine if a project should go forward or not. It is a valuable practice to revisit the ROI throughout an asset’s life to learn what assumptions and techniques work and which don’t so that the process can be improved in the future.
2. NPV – Net present value
The NPV is a calculation that helps you evaluate the feasibility of a project. Today your money is worth more due to inflation and other factors. This calculation tells you the value off all the project’s estimated future earnings in today’s dollars. The higher the NPV, the more profitable your investment will be.
3. IRR – Internal rate of return
IRR is an advanced version of return on investment (ROI). Think of IRR as an interest on your investment. It tells you how much you are earning on the investment annually. It’s important to track the IRR throughout a project to ensure good returns are being achieved.
4. PR – Performance ratio
This is an important metric for power generation facilities. The performance ratio compares the actual electricity produced against theoretical estimates. The actual performance will be lower due to a number of factors including efficiency losses, site design and weather. A low PR indicates that technical problems are preventing an asset from performing optimally.
5. PA – Plant availability
This metric represents the uptime of the plant. If your plant is offline, down for maintenance, or experiences a service interruption, the availability decreases. A higher availability is desired and an availability of 98% or more is considered good.
This is just a sampling of some of the many KPIs that can be tracked. Other metrics that could be used include: total capacity, metric tons of carbon avoided, total energy generated, maintenance ticket count, or curtailment.
How does one track this information across their portfolio? It can be manually tracked on a spreadsheet or alternatively, software could be used to automatically monitor and update these values. If you have a portfolio that is reaching 15 or more assets, you may want to consider using an asset management platform to help automated these calculations for you. A common problem that many asset owners face is the amount of time they spend on month-end reporting. With software, these type of procedures can be quickly and automatically for you.
Farid Najafi is the president of Arbox Renewable Energy. Arbox is a software company that provides an asset management platform to solar companies. The Arbox Hap platform helps clients manage their growing portfolio of solar assets efficiently.
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