JUNE 14, 2021
O&M Strategy: Navigating Common Contracting Pitfalls
In our previous O&M strategy blog post, we focused on key considerations for developers and asset owners when selecting a solar and storage operations and maintenance (O&M) provider. We touched on the importance of training and experience, the use of aerial inspection and data management technology, warranties, and safety. This post will focus on some common contracting fails and pain points and offer advice on how to navigate them.
Prioritize O&M for the Long Term
One issue we see with some developers and asset owners is a failure to prioritize O&M for the long term over the lifecycle of the asset. Too often O&M ends up under budgeted or even eliminated in an attempt to save money. A solar plant without a sound O&M program in place will likely underperform, endure higher overall operating costs, and see the savings gained from low-balling O&M eliminated because of costly recurring repairs, uneven service, warranty issues and innumerable truck rolls.
While defining project details and digging into the assumptions baked into the O&M proposals may take more time or resources than originally anticipated, it is essential to finding a provider that actually offers the best value — and won’t increase the price later through change orders from misaligned desires and expectations. Planning for — even designing for — operations and maintenance from the beginning of a project’s life cycle guarantees a better return on investment, especially for a long-term owner or for someone who hopes to sell the asset after a few years.
Don’t Overlook Preventive and Corrective Maintenance
Asset owners should always look closely at their O&M scope of work to see if it lists specific tasks with specific time requirements. Some service providers include a lot of vague language, which when digging into the details might only mean that they provide system monitoring and nothing else. We believe that providing preventative maintenance, including system washing and corrective maintenance for problems that may occur, helps get the most value from a solar system investment.
Many customers don’t fully grasp the costs involved for what would seem to be the most basic aspects of site O&M. While the “wash, mow and blow” model may seem simple, this is a hidden cost center if not approached with diligence and consistency. In fact, market research group Wood Mackenzie has estimated that vegetation management, corrective maintenance and module cleaning can add up to 40-45% of a solar project’s total O&M costs.
Some loss-leader O&M contracts often exclude these essential services. Errors made by inexperienced subcontractors can also add up to another painful cost center. For example, using a mop or another inappropriate cleaning brush can scratch the microetching on the module glass (which will reduce efficiency), while failure to account for water runoff after cleaning could lead to issues and possible fines from municipal authorities.
Keeping a Lid on Truck Rolls
One of the most common activities in the O&M business is the proverbial truck roll — when the service team goes to the customer site to make repairs, perform maintenance and conduct other operational functions. The truck roll is also one of the most abused aspects of O&M. Some providers even base their revenue models on the number of truck rolls they can make, charging the customer for each roll, regardless of whether they are necessary or not. Just because a warning light is blinking does not mean it’s time to roll a truck. It could just be a glitch in the communications system.
Borrego’s service programs bake in an unlimited number of truck rolls, making it in our best interest (and the customer’s) to be diligent and frugal about when we do send our teams to a job site. By using the data and analytics generated from Borrego’s computerized data management system, we can be strategic about rolling trucks. The more preventive and proactive we are, the better, allowing us to deal with system performance events before they become a problem.
Don’t Lose Revenue Over Response Times and Spares
Response time to site and spare part availability are often cited as two of the top culprits of lost revenue for solar plants. If an O&M provider doesn’t have a firm guarantee for response time to site (within 24 hours is standard for a major event, for example) and some form of recourse to enforce this guarantee, that is a surefire recipe for asset-owner disappointment. When it comes to spares and spares storage, it’s important to know the service provider’s assumptions on what spare parts are on hand and which are included at no additional fee, with inverters being the major item. Even small items like fuses and switches can be points of failure. Replacing them can add to time and materials costs, and yet they are sometimes not included in the spares inventory. Borrego’s spares management processes, based on our years of experience and a database of hundreds of different components, helps reduce asset owners’ risk.
Be Clear About Warranties
Warranties can be a major O&M pain point if they are not addressed thoroughly in the contract. Buyers should distinguish between warranties provided as part of the solar EPC scope and warranties provided by the O&M contractor. There are maintenance consumables such as filters, fuses and wiring that typically fall outside of warranty coverage. These costs often land within a grey area in the bid stage. Many O&M service providers exclude these unless specifically instructed by the system owner to include them.
Safety Is Paramount
As mentioned in our previous O&M blog, safety should be the top priority in any O&M program. It is often easy to identify which bidders take safety seriously, and which are simply using boilerplate language. Failing at safety can be the difference between protecting the life and health of field technicians and exposing them to serious or even fatal injury. Here are some safety-related questions asset owners should ask O&M providers during the proposal process:
- Does the provider share an O&M-specific health and safety manual?
- Are there regular O&M-specific safety trainings taking place for routine work tasks as well as specific ones from OEMs? Are these items outlined in their proposal?
- What does the O&M service provider say about their experience maintaining solar equipment, and is their experience outlined in their proposal? For example, Borrego has extensive solar experience, with 1.2 gigawatts of solar projects under contract, and has strategic relationships with most of the leading component suppliers.