Earlier this year, the Solar Energy Industry Association (SEIA) announced that the U.S. is now home to over 2 million solar (PV) installations. What is even more incredible, is that this announcement came only three years after the industry celebrated its 1 millionth install. Many public and private organizations have deployed solar installations in an effort to reduce their energy costs and meet their sustainability goals. However, while these systems have the potential of providing tremendous benefits, there are several substantial risks that also come along if these systems are not managed and maintained. Here is a brief look at the top three risks for organizations that have solar.
RISK 1: OUTAGES & UNDERPERFORMANCE
Are your systems on?
In a recent study of 350 commercial scale solar energy systems, over the course of 26 months, these systems experienced over 3,500 performance impacting events. Based on these findings, we can expect the average commercial scale solar system to experience 4 to 5 performance impacting events each year. This challenge is further complicated by the fact that these solar underperformance events are silent killers. By that we mean that these outages and underperformance events are difficult to detect. When your climate control or IT systems experience issues, it is usually immediately apparent. However, when your solar facilities experience issues, it is very easy for them to go unnoticed for extended periods of time, exposing organizations to thousands of dollars in lost benefits. It is a common tale to hear from organizations who have discovered that one of their systems has been offline for long periods of time and in some cases years!
RISK 2: POWER PROVIDER PERFORMANCE
Are you falling prey to these two commonly held unexamined assumptions?
Many organizations have deployed their solar projects under Power Purchase Agreements. Under these third-party ownership agreements, a Power Provider installs and operates these systems, and the host organization pays the Power Provider for delivered solar energy. This deployment strategy comes with the benefit of requiring no (or low) up-front costs while shifting the system operations & maintenance responsibilities to the Power Provider. However, there are two commonly held unexamined assumptions related to this deployment model.
The first unexamined assumption is: “since Power Providers are only paid when the systems are performing, they are equally incentivized to see these systems perform well”. However, in reality, Power Providers carry less risk from performance shortfalls given their portfolio approach than the host organization. A shortfall in performance at an organization’s site will represent a substantial increase in energy costs for that site, while that site’s same shortfall will be less significant in terms of the Power Provider’s expected revenues in their portfolio of systems. Unfortunately, in light of this, we are seeing a significant trend in poor operational follow-through from several of the power providers.
The second unexamined assumption is: “since we have a performance guarantee, we will be compensated for these shortfalls”. However, in the event of underperformance, typical performance guarantees fall well short of making organizations whole. Typical performance guarantee targets are set at less than 100% of expected output (typically between from 80 – 95%), are weather adjusted (which can be difficult to audit), have a multi-year true-up period (typically 2-5 years), and are set at a fraction of the energy payment rate.
RISK 3: LACK OF FINANCIAL TRANSPARENCY
Do you know how much you are saving from your solar?
For most organizations, the key performance indicator for their solar portfolio is the cost savings generated by their systems. However, due to the complexities of utility net energy metering programs, utility rate structures, and the performance variability of these systems, it is challenging for organizations to accurately assess the financial benefits they are receiving. After deploying behind-the-meter solar, variables such as system performance, changes in energy usage patterns, and shifting utility rate structures (with seasonal & time-of-use rate variations) all factor into the financial benefits delivered by these systems. Most organizations do not have visibility into actual savings being delivered by their solar.
At TerraVerde Energy, our Asset Management team partners with public agencies & commercial enterprises to mitigate these risks and deliver peak financial performance from distributed solar and battery systems. Our dedicated, experienced team actively monitors these systems daily, responds immediately to performance issues, manages power provider performance, and provides detailed performance reports. We optimize the performance and management of these systems so that you can realize maximum savings with the minimum amount of time and resource investment. Using our Utility Billing Engine, we are able to produce what each line item of your electric utility bills would have been for a given period, had your energy systems not been deployed. This enables us to answer with unparalleled accuracy how much our clients are actuallysaving from their energy systems.
For a free copy of an example performance report and to learn more about our Asset Management program, email us at hello@terraverde.energy.