2014 was the year when many owner/operators started to realize the importance of solar asset management. 2015 marks the year where for the first time there is an industry conference dedicated to the topic. The solar installed base is growing, the market is getting more mature and consolidation is starting. These are our 5 predictions for 2015.
1. There will be more solar assets to manage
Market research firm IHS expects that there will be about 55GW of solar installed in 2015. This means an increase of the world wide installed operational solar asset base to 235 GW by the end of this year - an increase of almost 25%.
2. There will be a large influx of new players
New owners and operators will enter the market daily. As the market matures, the investor base will get larger as more investors will get comfortable with the risk profile of solar. New solar asset management operators will emerge from many different backgrounds.
Examples of backgrounds of new operators include:
- O&M operators expanding the scope of their activities to include commercial asset management;
- Developers with asset management activities wanting to leverage their existing organization with 3rd party business;
- Hardware manufacturers wanting to become fully integrated along the value chain
- Technical advisors wanting to lever their technical skills
- Property managers seeing parallels with their own activities
- Solar asset owners starting an in-house activity;
- Start-up teams with various backgrounds perceiving low barriers to entry
3. Global operators will start to emerge
Until today, solar asset management service has been relatively local. Some markets already have their national champions (Germany and Spain) and other markets are still very fragmented (Italy). But as asset owners are chasing higher yielding opportunities in non-local markets, operators with global aspirations will expand internationally to cater to the needs of their client base.
4. The balance of in-house versus outsourcing will shift
In the US most asset management activities have traditionally been performed in-house. In 2015, the percentage of outsourced solar asset management will grow, as third party solar asset management firms are starting to get traction. In Europe, where traditionally most asset management has been outsourced, an increasing number of owner/operators are bringing asset management in-house because they find that it becomes more cost effective as their portfolios grow.
5. Solar asset management will get more complicated
The industry is getting more and more creative to get deals done. This means that project documents will include terms and conditions that have far reaching implications for asset management.
The list is long, but some examples include:
- More complicated invoicing processes stemming from market oriented power purchase agreements: synthetic PPAs (with energy swaps), market discount PPAs (fixed discount to utility pricing), time of day billing, hybrid PPAs, increased performance and capacity guarantees, etc.
- More reporting requirements and regulatory compliance with public financing structures such as YieldCos and green bonds
- Impact of new business models including storage
- Need for frequent forecasting to feed into demand/response systems
- Need for detailed project cash flow forecasting manage liquidity bottle necks as a result of cuts in government incentive rates
- Need to manage a larger number of smaller installations
- Consolidation of existing operating portfolios with incomplete historical documentation.