We are often asked how to define Solar Asset Management (SolarAM). Here at RadianGEN, we think broadly and holistically about SolarAM. We view SolarAM as the comprehensive scope of work necessary to ensure that a solar project performscontractually,technically and financially to provide the expected return on investment.
What is Solar Asset Management?
SolarAM is more than “boots on the ground” technical maintenance. Good asset management requires a deep understanding of how the equipment, contracts, and financial structure all work together to achieve desired results.
Savvy investors and owners understand that effective asset management is essential to achieve a project’s financial objectives. With proper SolarAM, it is possible to increase energy production and decrease operational costs to produce the expected ROI.
SolarAM requires leadership and accountability to reduce risks for solar project owners, investors and developers.
The Solar Industry
The solar industry has seen dramatic growth over the last decade. The number of MWs and projects has grown significantly. According to SEIA, over 10.3 gigawatts (GW) of solar projects are installed and operational in the U.S. North American Clean Energy recently reported that the US solar PV pipeline awaiting completion has grown to 43 GW. These are big numbers.
Thus far, the industry has focused primarily on how to build more projects and how to build them more cost effectively. However, as the solar industry matures, there is a need for greater focus on how the existing base of operating solar projects can be managed better in order to deliver all of the expected benefits.
Traditionally solar projects have been promoted as low risk investments with few moving parts, well warranted equipment and little technical maintenance. However, as the market has matured, maintenance requirements have been more challenging, there has been consolidation in the equipment sector, and the investment structures used to finance the projects are more and more complex. In addition, the ITC structure has created disincentives for installers and developers to focus on long-term performance. While solar continues to be a good investment, these factors underscore the importance of good, qualified management across all of the functional disciplines that are required for the asset – technical, contractual and financial.
Comprehensive Solar Asset Management should include:
1. STRONG OVERSIGHT OF ASSET OPERATIONS
Oversight and management of Solar O&M activities and the O&M provider, good production monitoring and analytics for energy optimization, clear budgeting and cost/benefit analysis of capital investment requirements or repair work, and regular onsite visits.
2. CONTRACT ADMINISTRATION AND REGULATORY COMPLIANCE
PERFORMANCE OF OBLIGATIONS IN THE UNDERLYING PROJECT AND FINANCIAL CONTRACTS AND COMPLIANCE WITH LEGAL AND REGULATORY FRAMEWORKS TO KEEP THE SYSTEM AND PROJECT ENTITIES OPERATING SUSTAINABLY.
3. PROJECT FINANCIAL ASSET MANAGEMENT
Fulfillment of cash management activities for the project company (billing, paying expenses, setting aside required reserves); control and reduction of operating costs; management of SREC sales.
4. FINANCIAL STRUCTURING, ADMINISTRATION AND TAX REPORTING
Fund reporting and loan servicing, audits, coordination and management of accounting and tax experts.
5. SPECIAL SITUATIONS
Resolution of unexpected events such as insurance casualty events, warranty claims, litigation, etc.
With the proper SolarAM strategy and effective implementation of that strategy, owners will significantly increase the odds that their projects will not only deliver the baseline expected ROI but also exceed pro forma expectations.