"Renewable Asset Management" - an industry growing up
The good news is that the installed base of operational renewable energy assets are growing at a super rapid rate. Even better news is that renewable energy assets are quickly becoming an established asset class for all sorts of investors. Every day new investors are entering the market - they’re cashed up and ready to deploy capital.
These investors expect the same diligence and professionalism of the management of their renewable energy assets as they do from any other asset class. This includes timely information, transparency, streamlined processes, and tools to identify and mitigate risks.
Yet our industry is still so young. Asset management is a fast growing and dynamic new area of the renewable energy economy. As is the case with any developing service, the challenge is to find and standardize the scope of activities .
Within the solar industry, the term is often used interchangeably with Operations and Maintenance (O&M). But O&M is just an element of the complete scope of asset management. Some people argue that asset management is today, where O&M was 5 years ago.
Am owner/operator's goal is to maximize asset value by optimizing both physical assets and administrative processes. Maintaining returns in the long-term requires accurate forecasting, ensuring performance of assets, and delivering on all administrative and financial agreements.
This process has become more complicated by evolving regulatory frameworks, which often require business models to adapt quickly. An example is the reconciliation of feed-in tariff revenue in countries that have had retroactive cuts - these regulatory changes make the tasks of the Asset Manager more difficult.
Trend 1 - Decline of margins
The primary driver of the industry growth are the declining investment costs and operating costs of the generating assets. But as the costs decline, the fees allocated to asset management are also declining. As the industry matures, asset owners can no longer afford relaxed business and accounting practices. The best asset managers have found that previously insignificant oversights can be very costly as their solar portfolios scale. So for 2016 we predict that asset managers have to face lower margins while bringing higher efforts.
Trend 2 - Better scope of needs
In 2016, renewable asset managers will become more aware of their needs to run a streamlined asset management operation. Their experience will allow them to write a list of requirements of what's needed to be able to excel at solar asset management including type of staff, the type of business processes, and the types of tools needed to support those processes.
Trend 3 - More streamlined data acquisition and integration
One of the major pain points for asset holders is the data quality, assuming there is any data at all. This data includes, but is not limited to production data collected from measurement devices, inverters, meters, and weather stations.
One of particular interest will be getting information from the field. At the end of the day, measuring devices can only tell you so much. They don't replace human eyes that go to the site and identify potential problems that have not yet been reflected in the data.
2016 will not only see the quality and quantity of data improve, but the integrating and normalizing data will improve on an industry level - so much so it will be comparable across an entire portfolio.
Trend 4 - Solar will no longer stand on its own
We believe energy storage will be the killer app for solar. Combining solar and storage creates a dispatchable asset that can replace almost any grid service. Even more, costs are declining. Immediate opportunities will be the ability to provide ancillary services, time shifting, peak shaving, and demand charge reductions.
In 2016 we will see the development of new business models that integrate not only storage, but other progressive energy sources into single projects. These projects include microgrids, and off-grid projects. They will combine assets that will generate revenue at varied rates, lifting the requirements for solar asset management to an entirely new level.
Trend 5 - Emergence of better tools
The staffing of solar asset management is done primarily by knowledge workers with significant expertise and training. Staffing in the solar asset management space will completely transform to include trained engineers who maintain solar assets, trained financial accountants who maintain the financial reports, and lawyers who ensure regulatory and contract compliance.
Knowledge workers are not cheap, meaning asset owner-operators will have to look at how they can best leverage those knowledge worker skills in the most economical way.
We see opportunities for the development of software and integrated systems that will free knowledge workers from repetitive tasks such as transporting data into different tools and reports. These tools are available within other industries, but nothing that specifically addresses the needs of the solar industry.
We predict that in 2016, management will increase the use of new and better tools for capturing data, normalizing and standardizing information, auditing data integrity, and creating insightful reports. These tools will allow team members to automate work flows, which will free up their valuable resources. This way they will have more time to focus on the analytics and increasing asset value.