As we consider the implications of the post covid-19 economy for renewable energy, many things are hard to predict. But one thing is for certain: efficiency will be more important than ever.
The past 10 years have witnessed phenomenal growth in the development and construction of renewable energy generation capacity in Australia. The Clean Energy Regular recorded over 4GW of accredited power stations in 2019 alone.
There are signs that this stellar run is coming to an end as policy and infrastructure struggles to keep up with the pace of investment. Large-scale project investment fell from $10.7 billion in 2018 to $4.5 billion in 2019, marked by high-profile failures such as RCR Tomlinson in 2018 and key players such as Downer deciding to withdraw from solar altogether. Success hinges on the impact of factors such as falling marginal loss factors, access to transmission capacity and falling prices in the NEM. Investors are increasingly cautious in assessing these before committing to new solar projects.
However, few would question that the transition to renewable energy in Australia is inevitable. On the horizon is a future energy system that handles not only domestic demand but also exports renewable energy through HVDC and hydrogen. Renewable energy generation can only continue to grow.
While the industry grapples with the big issues emerging from the investment boom, solar asset owners and managers need to deliver profitability from existing plant today and sustain this over the roughly 30-year operational life of solar PV assets.
Managing renewable generation in Australia brings challenges that are unique to our environment. Operating costs, although declining due to reduced input costs such as cheaper PV hardware, are high relative to countries such as Dubai, the United States, Brazil and Portugal. Environmental factors such as large distances, extreme weather and vegetation management increase the cost of planned and unplanned maintenance. Australia’s high standards of compliance for safety and reliability demand increased management overhead and highly qualified technicians.
Revenue is also under pressure as daytime overcapacity in the NEM – combined with reduced demand caused by factors such grid constraints, negative pricing, equipment issues, differing resources and even the covid-19 lockdown – cause large variability in capacity that PV can provide. Research by David Dixon from Rystad Energy illustrates how these factors add to variability and headaches for asset owners, managers and operators – for example in Queensland, as shown below.
The role of asset management
In a May 2019 EcoGeneration article, Beatriz Toribio López from Blueshore made the case for asset management in renewable energy, to increase value and reduce risk for asset owners. Asset management has proven its value over decades in asset-intensive industries such as utilities, transport infrastructure and mining. Applying this discipline to solar and storage projects provides greater certainty for investors. Effective asset management integrates operations and maintenance (O&M) and engineering with commercial and financial management to maximise the value of assets.
Asset management practices follow the classic “plan, do, check and act” model defined by Walter A. Shewhart and promoted by W. Edwards Deming since the 1950s. The model strives for continual improvement using an iterative process: focus on elements of the process that are most critical to the organisation, measure their performance, decide on actions that will deliver improved performance, execute these and continue to measure the results to verify the outcome of the change.
Australia has the opportunity to leverage experience from asset management practices in Europe, which has more years of experience in managing assets through the operations phase. SolarPower Europe provides guidelines for all aspects of asset management, including project management, handover, technical asset management, commercial and financial asset management, procurement, people, data management, reporting and the contractual framework.
Key asset management strategies that maximise the value of solar assets include: project compliance maintenance; operations management and supervision; enforcing contractual terms and supervising the contractor’s operations; performance monitoring; data analysis and the use of key performance indicators’; capital expenditure and operating expenditure management, and; learning from experience.
Putting asset management into practice
So, how can asset management address the challenges in Australia? Owners of renewable generation assets need to ensure that their investment is delivering maximum value. Financial reporting alone cannot provide insights on the true performance of the asset.
Defining, measuring and reporting on KPIs are key elements of asset management. Measures such as availability (up time), response time and performance ratio should be included in O&M contracts. Having systems in place to measure and report on KPIs enables the asset manager to ensure accountability of O&M providers, including financial compensation for non-performance.
It is crucial that issues can be detected early, so the asset manager can take corrective actions before the generation asset accumulates lost revenue or cost overruns. This can be achieved by establishing reporting that integrates operational and financial data to provide a complete picture of asset performance over time.
Many projects engage a contractor for engineering, procurement and construction (EPC), where the contractor has broad warranties for performance and defects. The asset manager needs to ensure that issues are addressed during this period to avoid costs later during operation. The asset management system must enable issues to be tracked and managed against the warranty.
To ensure the profitability of PPAs it is vital to ensure actual generation is as close as possible to forecast. Failure to do so can lead to higher FCAS charges from AEMO. To address this, the asset manager should take into account performance over time and incorporate third-party data such as market data, weather forecasting and cloud cameras. To do this efficiently requires systems that can integrate data from multiple sources into asset-centric reporting.
With reliable data, a further step for asset managers can be to integrate the asset management platform with SCADA to incorporate power plant control. This provides the ability to actively manage generation, for example to reduce output and avoid charges due to negative pricing.
Fulfilling compliance obligations and meeting deadlines are critical for the asset manager. Failure to fulfil obligations on time can lead to severe penalties. For example, in Queensland, directors can be charged with industrial manslaughter for safety breaches and AEMO has the power to exclude generators from the market for repeated lodgement failures. The asset management system should provide the ability to track all compliance activities and deadlines.
Managing asset information
Putting these strategies into practice requires consistent, reliable data and information about the asset. Consider a generator with multiple solar generation assets in regional Australia.
To manage the assets, the asset manager will use information from a range of sources. These may include a remote monitoring system that delivers data on performance and reliability, a system used by the O&M provider to track incidents, a finance system to manage invoicing and payments, O&M and EPC contracts, PPAs, metering records, a portal for managing settlements, maintenance and incident records, engineering records, environmental records, plans and schedules, and so on.
With information in “silos”, managing the operation can quickly become inefficient. It makes sense for the renewable asset manager to establish a platform that will consolidate this information. Integrating monitoring, computerised maintenance management systems (CMMS) and resource planning systems (ERP) can provide an “asset-centric” view of the operation.
Putting assets at the centre of an integrated system, the asset manager can get a comprehensive understanding of the health of the asset, ensure compliance, manage deadlines and ensure that each asset is delivering on KPIs.
Consolidating information provides a richer understanding of the performance of the asset. The asset manager can build comprehensive dashboards, benchmark technical and commercial performance of different assets over time and relative to each other.
Centralised management of information reduces time and effort for administration because information does not need to be manipulated and managed between the systems. Introducing AI and machine learning to the mix offers the potential for automation and further productivity improvement.
Finally, a comprehensive asset management solution can provide assurance and visibility of assets for investors. Consider the case of MASE, a solar developer, operator and asset manager for commercial solar projects in Middle East and North Africa. MASE implemented automation using the ACTIS ERP platform for its new projects in the region. The software platform for solar PV plant asset management was tailored to the plant’s specific operations and maintenance requirements to facilitate optimisation. All data monitoring streams were gathered under a single platform enabling enhanced oversight into project activities and reporting operational performance. This has delivered greater certainty and bankability of projects for key development finance investors across the region.
Where to start
At the risk of sounding clichéd, the asset management digitisation journey starts “at the beginning”. The information needed to operate assets effectively begins to accumulate during project development, with artefacts like permits, environmental assessments and NEM registration. It continues throughout construction, with information gathered during design, engineering, procurement and the design of a PPA contract. Valuable technical and operational data are also gathered during operation.
Ideally the asset manager should be engaged from the development stage. In Australia assets are likely to be sold by the project developer to a long-term asset owner. It is important for the long-term asset owner and asset manager to do their homework on investments and gather all the data needed to manage the asset effectively.
The IT sector has some experience to offer the renewable energy industry when it comes to implementation. Countless software projects have run over budget or failed because the product delivered did not live up to the dreams of the customer or the promises of the salesperson. In short, software is hard to do.
The good news is that there are plenty of off-the-shelf monitoring, CMMS and ERP packages – so there is no need to reinvent the wheel. Even better, most are cloud-based, providing for rapid deployment. However, integrating systems from different vendors may not be as easy as it says on the box.
The future for renewables in Australia is bright, however the industry is being seriously challenged by infrastructure and market constraints. Effective asset management, supported by digitisation, will play an important role to ensure that solar and storage assets remain profitable and become more efficient and competitive in the global energy market of the future.
Matthew Stubbs is director of Profergy, a sales and delivery partner for asset management software platform ACTIS in Australia.