By Edmee Kelsey, CEO, 3megawatt
The explosive growth of the solar industry is creating opportunities for increasingly niche companies to exist in the market. Asset owners can now choose from a vast array of technologies and service providers to optimize solar operations. But is it more advantageous to bundle specialized services or work with a single service provider?
As new players in solar operations have emerged, conventional definitions and responsibilities have begun to shift. It was more common in the early days of solar to see a single company like SunEdison or First Solar handle all stages of the large-scale solar life cycle. More recent business models focus on particular segments such as development, construction or operation.
Now, the industry has started to see specializations within specializations. Operators no longer need to outsource aerial inspection work; they can fly their own drones using sophisticated third-party aerial thermography software. Robots may soon take over vegetation maintenance.
It’s tempting to combine multiple specialized service providers to create a “best-of-breed” combination of technologies and operational services, but that requires lots of coordination.
Who is responsible?
More service providers require more coordination, but who is ultimately responsible when there are so many cooks in the kitchen? The third-party asset manager, the investor/owner or the O&M company?
The investor/owner will put contracts in place but will often delegate responsibility for coordinating the project to another party. At financial close, the owner-investor will decide which activities they plan to perform in-house and which they will outsource. Once an effective division of activities is determined, the owner-investor will execute service contracts with one or more parties to provide asset management and O&M services.
In those service contracts, owner-investors will stipulate the exact responsibilities and expectations for each service. These service contracts will also most likely include key performance indicators (KPIs), as well as penalties and damages if these KPIs are not met.
Asset managers typically assume the role of “owner’s representative.” This means they are often expected to coordinate, organize and schedule services with different service providers. Different entities can perform the role of asset manager. Sometimes the developer inherits the asset manager’s role after financial close. Other times, investors appoint an independent third-party asset management service provider — often one involved in other assets of their portfolio.
Some owners have recently started to build their in-house asset management capabilities. This is either due to the fact that their portfolios have scaled enough to justify the investment or because they want to exercise more control. Some O&M companies also perform asset management services as part of a one-stop-shop service offering.
Regardless of who ends up coordinating the project, there are new challenges associated with this shift in responsibilities.
What are the challenges?
If there is a bilateral relationship between the owner and a single service provider, the responsibilities will be relatively clear and coordination should not be an issue. It gets more complicated when multiple parties service the asset, since each provider may also outsource part of the contracted services to a third party.
Every service provider will have their own priorities and needs that might conflict with those of other service providers. Here are some common challenges:
- Sequential scheduling: One service provider could end up waiting for another to complete a job before getting started. This complicates scheduling and could increase the cost of the service.
- Delays: There may be a delay in the work of one service provider that affects the work of another. As a result, the service provider may miss a deadline and be in breach of its obligations.
- Blockers: Individual service providers may not be able to do their work at all because they are blocked by another. For instance, a grass-mowing contractor could say it has not been able to mow the grass because the maintenance company left cables lying around. Ensure the definition of each service provider’s responsibility is clear.
- Cost-sharing: If multiple service providers are involved in a project, it may be unclear who pays for what. For example, if an O&M company pays for a monitoring system, does it mean it automatically needs to give everyone on the project access? What if the owner pays for the monitoring software? Would the O&M company be obliged to use it?
- Communication: If one service provider needs to share detailed instructions about replacing components, using spare parts or hanging an access code on a padlock, effective communication guidelines must be established. Are maintenance plans automatically shared with other service providers?
How can multiple stakeholders work together?
In order to serve a project or energy asset with multiple stakeholders and service providers, asset owners need effective processes and systems in place.
The energy asset is central to all parties involved, as is the ability to share its associated data and documents easily. Syncing information between owners, asset managers and O&M service providers can be a challenge. Project data is often stored in spreadsheets, document management solutions, monitoring systems, ticketing systems, accounting software and asset management software. Activities are usually coordinated via email and phone.
More professional owners and service providers have all this information synced into one centralized platform used to manage all internal operations and workflows. They may give restricted access to other service providers to share information. They own the platform, which means they will retain control of system access and own all the data.
This works well if other service providers don’t have their own systems and can “piggyback” on an existing platform. But larger service providers typically already have their own systems in place too. They may not find it practical to access third-party platforms to enter their data. Unless it is specifically mentioned in their service contracts, they will keep project information within their own organization, which makes service coordination and sharing information challenging.
When it comes to coordinating services, half the battle is in finding a way to facilitate a more fluid exchange of information among these different systems. Luckily, there are now modern asset management software platforms that create the seamless exchange of information via application programming interfaces (APIs).
With access to an open API, every service provider can decide which project data streams they want to synchronize with their internal systems and which information they want to share with other service providers. The more information that’s shared, the easier it is to collaborate with multiple service providers for a long-term, profitable project.