JUNE 25, 2021
Optimizing Your Solar O&M with Availability and Energy Performance Guarantees
Our recent webinar examined the benefits and challenges of the two main types of O&M guarantees for solar plant operators and asset owners.
Availability and performance guarantees are becoming increasingly popular options for solar plant owners seeking to reduce risk and ensure their financial returns, but what are they and how do they work? A recent Borrego webinar brought together a panel of industry experts to unpack some of the benefits and challenges of the two types of guarantees.
Moderated by Teresa Dillon, O&M technical sales account manager at Borrego, the webinar featured panelists Ian MacRobbie, VP operations at Algonquin Liberty Power and Kristine Sinclair, team lead for utility solar due diligence in DNV’s solar independent engineering (IE) group. I also joined to provide the O&M engineering services perspective.
What Are Availability and Performance Guarantees?
I led off the discussion with an in-depth overview of the differences and similarities between availability and performance guarantees.
Availability guarantees, also known as energy or effective availability guarantees, do not explicitly guarantee the amount of energy the system will generate, rather they guarantee that the system generates power when the irradiance reaches a certain threshold — more of a time-based guarantee. The effective availability variation also bakes in the energy impact when the system is unavailable.
Performance guarantees, on the other hand, are an explicit guarantee of the amount of energy the system will generate. This combines the conditions of the availability guarantee with a guarantee of equipment performance, performance ratio or performance index calculation, and adjustments for variance between modeled and measured weather.
Guarantee Contracts and O&M Considerations
Next up was a dive into certain contractual details of guarantees, such as exclusions and damages. Exclusions might include force majeure events or utility-cased outages, or items negotiated on a per-project or per-owner basis, such as warranty claims, spare parts supply and availability, and the impact of snow, ice and module soiling. Damages could be paid if the system performance doesn’t meet the guaranteed level in terms of PPA rate, electricity value, a portion of the O&M fee or other factors. In some cases, contracts reward O&M providers for exceeding the guarantee.
The O&M considerations for meeting guarantee obligations came next, a list familiar to any experienced operations and maintenance professional. Considerations such as the number of failures (often out of the O&M provider’s control) and issue identification (are outages or underperformance quickly and clearly identified). On the critical question of response time, considerations include how long it will take for the technician to get there and how many sites they are responsible for. In terms of issue identification, note the importance of quick and clear data acquisition system analysis as part of an operations center monitoring hundreds of sites.
Other obligations include corrective time (troubleshooting and correcting the root cause of the problems, well as assessing spare parts availability and location) and performance issues, such as module performance and reliability; inverter efficiency and derating; modeling for shade, terrain and snow; and soiling modeling and washing schedule.
From the O&M provider side, I offered some additional perspective. Providers are often cautious and deliberate about committing to guarantees while acknowledging that they are a requirement in some instances. Typically, providers offer some sort of availability guarantee, since that aligns with their core competency of identifying, responding to and correcting issues rather than getting into the complex morass of modeling, equipment performance reliability, soiling/washing and construction quality required in a performance guarantee.
Guarantees from the Unregulated Power Producer’s Perspective
Ian, who works for the unregulated power producer division of Algonquin Liberty Power, has a fair amount of experience in time- and energy-based availability guarantees. He said the relationship between the owner and O&M providers is a balancing act: energy-based guarantees work best for the owner but are not always ideal for the provider. Owners want as few exclusions as possible, while O&M providers would prefer more — it typically takes lots of time to discuss and sort out the exclusions, he said.
One of the central questions is what level of control is the owner willing to give to the O&M? For example, it may be easier to let the O&M take control of warranties but the owner must be comfortable with relinquishing that control. And owners, Ian remarked, like to be in control.
Guarantee Data Across the Industry
Kristine of DNV brought her IE experience to the proceedings, presenting gigawatts’ worth of DNV availability guarantee survey datasets from both the distributed generation (DG) and utility solar sectors. She noted that many operating DG projects were performing as expected in the 98-99% range, with a median availability of 97.6% observed, but the long tail of the statistical distribution included a small group of projects that were the “cause of the heartache.” A survey of utility-scale contracted availability guarantee levels indicates that the industry has converged to the 98-99% range, with 60% of contract guaranteeing to the 99% level.
She underscored the necessity of clearly defined contractual exclusions, explaining how fuzzy definitions and long exclusion lists can lead to disputes. Kristine also emphasized the importance of a robust and actionable spare parts management plan.
Kristine presented an informative summary slide of the contractual considerations for availability guarantees, divided into “favorable to owner,” “aligned incentives” and “favorable to operator.” At the top of the list of aligned incentives, there was the core of any successful owner-O&M guarantee contract: “clear and straightforward definition of availability, how it is calculated, and exclusions clearly specified.”
Is there a Goldilocks Guarantee for Owners and Operators?
Some of the owner and operator considerations offered typical contrasts. For example, owners want a high percentage, performance-based guarantee, while operators want carve outs to protect against being held responsible for things outside their control like spare parts lead times and serial defects in modules and other components.
The webinar concluded with an extended Q&A session, with questions coming in from the audience as well as lively discussion among the panelists. Sign up now to hear the Q&A session or watch the entire webinar.