Does a more integrated asset management and O&M strategy deliver better results?

Over the past two years we have carried out analysis on solar assets to determine the impact of an integrated approach to asset management and operation & maintenance (O&M) contracts. This analysis has shown that on portfolios where RES is providing both services, site performance is nearly 4% higher than comparable portfolios with separate service providers. Rob Mattholie, Senior Asset Manager – Solar, examines the reasons for this and questions whether the industry needs to rethink traditional delivery mechanisms.

The traditional delivery model in utility scale solar projects has been to award separate asset management, and operations & maintenance (O&M) contracts. The asset manager ensures the legal and contractual compliance of the project as well as maximises the financial performance of renewable assets. In addition, the owner has traditionally placed value on the independence of the asset manager to monitor the performance of the main O&M service provider. This is particularly key in traditional O&M contract structures where the asset manager is monitoring key contractual performance metrics such as performance ratio or availability. However, what if this traditional structure is prohibiting performance improvement initiatives that could be realised through a more integrated approach?

The traditional model arguably has some key disadvantages, for instance it could lead to silo working meaning that there are missed opportunities to be had by pulling together to make decisions to improve asset performance. In addition, time that is spent monitoring contractual performance metrics, which are often not a good proxy for the ultimate financial performance of the asset, could be invested in other areas to increase revenues and again boost performance.

RES has extensive experience of providing high quality asset management and O&M services under various contract models. Over the course of two years we have carried out a benchmarking exercise, using standard industry Key Performance Indicators (KPIs) such as Energy Performance Index (EPI), to compare the performance of solar sites where RES manages both contracts versus those with separate contractors. This analysis has highlighted several benefits of a combined approach, leading to improved performance and increased revenues for asset owners.

This new model provides the opportunity for the service provider to support long-term thinking around plant upgrades to minimise recurring OPEX and downtime associated with aging plant e.g. inverter repowering modelling. By anchoring decisions on a common set of objectives, strategic line-of-sight is easier to achieve. In addition, it provides enhanced streamlining opportunities with respect to areas such as HSQE, ESG management, reporting and procurement, as well as removing interface related risks.

On those sites where RES manages both the asset management and O&M contracts, we found that the average Energy Performance Index (ratio of actual: expected yield) was approximately 3.6% higher than those portfolios with separate service providers. Although 3.6% performance uplift might not seem ground-breaking it equates to circa additional £450k/year on a typical 100 MW solar portfolio.

Under an integrated service delivery contract, both O&M and asset management services could be delivered with the service fee linked directly to project financial performance, for instance, a percentage of net project income (i.e. revenue less operating expenses). This approach enables the owner and service provider interests to be closely aligned, promoting greater trust, collaboration and continuous improvement. In addition, as well as performance related benefits, a fully integrated contract presents the opportunity to make further savings through cost efficiencies which are passed back to clients.

With an improvement of nearly 4%, which equates to additional revenue of over £450K per year for a 100 MW solar portfolio, we believe that the industry should jump on this opportunity to evolve and truly integrate contracts. This will help improve the performance of assets to benefit both owners and provide more clean energy.