In recent years, prices for utility-scale solar projects have plummeted to an all-time low. With purchasing mechanisms such as public bids growing in popularity, there has been a “race to the bottom” in pricing, and today, the cost of solar farms is typically less than traditional fossil-fuel powered plants. This has created unprecedented growth in technology adoption and investment alike, showing promise for the clean energy transition of the future. But this doesn’t come without challenges.
 

To deliver a solar project from concept to completion involves many parties; developers, independent engineers, lenders, EPCs, insurers and system owners all have a stake in the project. While each party’s goal is to achieve its maximum project returns, not all parties have the same metrics to achieve this, nor the same level of incentive to ensure the highest return over the lifetime of the system. Project lenders, insurers, and system owners will have the most at stake in the project’s longterm performance and with so many parties involved, they must pay close attention to risks.

Investing in Utility-Scale Solar

For an investor to take an interest in a solar project, risk must be reduced to an absolute minimum. A solar array must generate electricity at a predictable operational cost structure in order to deliver long-term, reliable returns.

The PV industry has made great strides in delivering certainty for the investment community. The ever-increasing number of institutional investors that are now backing PV projects is a testament to the promise of solar in delivering steady and predictable cash flows, but there is still a way to go to ensure the highest yield over the 20-30 years of the system’s lifetime performance.

Testing and Due Diligence

Many project developers turn to independent engineers and quality assurance providers to carry out the required due diligence when it comes to key PV power plant components. This is particularly true with regards to solar modules. Testing laboratories and regimes are quite sophisticated, with the ability to expose modules to extreme operating conditions and simulate their likely performance over their operating life.

Module failures are well documented and, in some cases, such as potential induced degradation (PID), documented in great detail. Unfortunately, this isn’t the case with the range of components often lumped together under the tag “Balance of Systems.” This includes components such as electrical cabling, connectors and tracking systems; and this is a crucial oversight.
 

Taking a Closer Look at Trackers

The deployment of solar tracking technology has grown rapidly. This is not surprising, as the technology significantly cuts down the amount of land necessary to host the solar plant and can increase generation output by approximately 20 percent. GTM Research forecasts tracker implementation as high as 80 to 90 percent in key PV markets including the U.S., Latin America, Middle East and Australia, as soon as this year.

This makes it all the more worrisome that the risks posed by component failure in tracker systems are not well understood, analyzed or priced. What’s more concerning, there is a lack of understanding of the impact that tracker failures or faulty operation can have on a project’s bottom line and Net Present Value (NPV). Given this, independent analyst TÜV Rheinland conducted the first-of-its-kind investigation on tracker reliability. The resulting “Risk and Economic Analysis on Two Tracker Architectures” report looked at the most popular tracker architectures, centralized and decentralized, investigating each according to its individual component and system reliability.

Assessing Risk and Economic Impact

The report found that the centralized architecture had vastly lower scheduled and unscheduled Operations and Maintenance (O&M) costs when compared to the decentralized architecture studied.

Findings showed the centralized tracking architecture loses 39 percent less energy due to component failures compared to the alternative architecture; has a 6.7 percent lower levelized cost of energy (LCOE); and nearly 4.6 percent higher net present value (NPV).

The Bottom Line

Breaking down the O&M costs in more detail, the report found unscheduled O&M costs to be the most damaging to a PV project’s bottom line. This should give cause for investors to take a closer look at all components when investing in utility-scale solar. Notwithstanding the fundamental differences between tracker architectures, many solar plant financial models incorrectly assume identical O&M expenses. Financial returns on solar PV power plants can be significantly impacted by erroneous O&M modeling assumptions.

As the PV industry enters the next stage of its evolution, and society moves toward an energy transition, there is good reason to believe that all risks of a solar PV array will be assessed in greater detail. More scrutiny may uncover potentially underperforming components and high O&M costs before an investment is made. For investors, this can’t happen soon enough.