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5+ COD: how to unlock value from existing renewables portfolios

image credit: Photo credit: Karsten Würth from Unsplash

Most forecasts show electricity generation from renewables to grow exponentially over the next decade, yet many owner/operators and investors neglect existing portfolios that are generating them revenue today. Aging assets, five years beyond Commercial Operation Date (COD), get overlooked because they are already generating revenue, so why fix something that’s not broken? However, many have underlying problems that are not easily identified and may not be fixable – a recent study showed underperformance of utility-scale solar assets by 6.3% on average compared with pre-construction forecasts, mostly due to inaccurate forecasting methodologies.

But there are many opportunities to course-correct – experience shows that assets can be improved through strategic reviews of operating processes, contract evaluations, enhanced monitoring, and supply chain rigor. Whether it’s solar, wind, or hydro, plenty of underperforming assets are overlooked, resulting in situations where revenue is not maximized. That missed opportunity can make all the difference.

So what can asset managers and owners do? Here are four steps asset managers can take:

1. Don’t just set it and forget it

Original Equipment Manufacturers (OEMs) are expanding their Operations & Maintenance (O&M) services as service agreements offer growing revenue opportunities. These long-term contracts have provided owners and investors with revenue and cost stability, and have enabled the industry to fare better than others during COVID. While assets may be revenue positive and may even be hitting their generation targets, parameters on the ground change over time, whether it’s due to market forces, operating conditions, or changes in equipment infrastructure. Contracts should not be thought as static but as dynamic, living, breathing documents. That means there are opportunities abound to review contracts to reduce costs, increase generation, or identify investment opportunities. Bringing partners on board is critical, and the key is to find win-win situations that benefit all parties.

2. Don't miss the forest for the trees 

An individual asset manager’s job is to optimize the performance of one plant – but a portfolio manager’s job is to identify opportunities across assets. It sounds simple, but in reality it requires looking at a portfolio not on an individual asset basis, but finding synergies to leverage across the portfolio. And it means prioritizing investments based on the lowest hanging fruit, and setting up portfolios for future success. This means thinking about investments not only across different geographies but across different generation technologies as well. In addition, sometimes this means optimizing one asset while putting another at a disadvantage. For example, supply chain planning across your portfolio can enable purchases at scale, negotiation leverage, and strategic placement of critical main components that can be utilized across assets, even though this may not be optimal for each individual asset. By taking a step back, portfolio managers can identify opportunities that can optimize the portfolio overall.

3. Improve corrective and preventative maintenance through data-driven supply chain management  

Unplanned down-time is an asset manager’s worst enemy, and yet, many plants don’t leverage analytics sufficiently to improve preventative and corrective maintenance, enabling better inventory planning to minimize unplanned downtime. Many owner/operators don’t have full visibility into what components they’re actually consuming. There are multiple sourcing options, whether parts are single-sourced from OEMs, assets can leverage 3rd party suppliers, or even if repair or refurb options are available. Understanding what you buy and who you can buy it from enables owner/operators to determine what main parts should be in inventory on-site, and which 3rd parties should be leveraged, so that unforeseen down-time is minimized.

4. Pick your partners wisely 

As OEMs offer more O&M services, and 3rd party options for everything from Engineering, Procurement and Construction (EPC) through security increase, opportunities for establishing long-term partnerships are plentiful. These partnerships can enable owner/operators to better plan for unplanned market or environmental conditions. As COVID highlighted, many owner/operators and their suppliers had to deal with Force Majeure claims, and at the same time claimed them themselves. Having the right partners in place can help mitigate any impacts from unforeseen events.

This is just a start – but with a little time and investment, asset managers and owners can make sure their plants are contributing the most value to their portfolios.

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Jonathan Schwartz's picture

Thank Jonathan for the Post!

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