Now, this should not come as any surprise at all: Many leading personalities from the Indian solar sector feel that the quality of many solar power plant installations in the country could be suffering as developers try to execute costs at really low costs to meet the low tariffs that are resulting from many of the government auctions.
I mean, it is not as if we need a new report to say this.
For the past few years, it has been an open secret that some EPCs and developers have been cutting many corners while developing solar power plants. For some, it is just a question of completing a project as soon as possible – call this the short-term trader mindset. For many others, it is simply a necessity, as they had bid at very challenging tariffs that can be met only if the initial costs of solar power plant implementation is very low. And in order for that to be very low, there necessarily need to be compromises on quality. The term “Cheap and Best” exists only in advertisements.
In real-life, quality almost always (unless you are super lucky) has a price tag on it.
I have seen instances in solar power plants started having troubles within 6 months from the time they were commissioned. In different plants, the problems were different. In some, the inverters had trouble functioning in the dusty and hot environment they were kept in. In one installation, many panel arrays had stopped working after water logging had affected the electrical connections on those panels. In one notorious instance, a significant percentage of the panels fell to the ground owing to the poor design and erection of the mounting structures.
While the types of failures and the reasons for failures could have been different for the different cases, they all had one aspect in common: All of them were power plants whose developers had seriously compromised the quality of installations with their desperation to cut costs.
Which is a really foolish thing to do, as most of us already know. As they say, a cheap product of poor quality might make us happy for a few moments during our time of purchase, but will leave a bad taste in our mouth for a very long time afterwards. This perfectly applies to the cases of poor quality solar installations mentioned above.
Now, if you are a prospective developer, you might be tempted to ask: “Are you saying it is not possible to build utility scale solar power plants at super competitive prices?”
I am not saying that. I am only saying there is a big difference between a competitive cost and a cheap product. A cheap product most always is of low quality (unless it is some kind of an offer), while good quality products are available at competitive, but not cheap prices.
As solar power developers, you should try to keep down costs to a minimum, but without affecting the quality of the power plant.
So, in the context of solar power plants, how does a developer ensure that he is able to build a good quality plant at a competitive price?
I can think of two steps:
Step 1 – Choose a good quality EPC
Step 2 – Ensure that you pay the EPC’s the right price so that he is not forced to compromise on quality!
Choosing the Right EPC
In my opinion, the key to do this to choose the right EPC.
I am sure you will not be surprised if I tell you that the EPC is the key to a successful solar power plant. So should it be any surprise that the right EPC can ensure that you get a good quality solar power plant?
I am reminded of some of the assignments we did for developers in the past two years in which the developers wanted us to assist them in every step of their solar power plant development. We did indeed help them on a number of things – from helping them understand every aspect of the PPA to financial modelling to identifying the right land bank.
But right from the beginning, we told them the most important assistance we could provide them was choosing the right EPC.
And once we had chosen the right EPC, we also saw how the EPC was not swayed by the constant clamour for cost reductions. I was witness to instances where the EPC flatly refused to go with any brand other than the ones he had shortlisted because he felt they were the most suitable ones, even if not the cheapest. The clients initially murmured, but once they realized that it is for THEIR ASSET’s performance that the EPC is fighting, they went along with the EPC.
Overall, from what the leaders from the Indian solar industry feel, and what we at Solar Mango have seen, a number of developers are shooting themselves in the foot by cutting corners, without knowing they are cutting off their solar power plants’ future performance too.
Pray don’t fall for that temptation!
Assisting the EPC do a quality job – balancing the price with quality
Once you have chosen the right EPC, it is important that you allow enough freedom for the EPC to take the right technology decisions. Here, I have seen many developers trying to push the EPC into a wrong choice because that wrong choice was far cheaper. While most good quality will not agree to selecting a poor quality product, it is imperative that you as a developer facilitate and not constrain, the EPC from making the right choices on quality.
While on the topic of quality, we need to point out what we mean by quality:
- Quality of solar power plant design
- Quality of components used for solar power plants
- Quality of the actual construction of the solar power plant
- Quality of operations & maintenance of the solar power plant
Quality of Solar Power Plant Design
- Actual layout and orientation of solar panels – including decisions on spacing between panels
- Design for the optimal mounting and mounting structures for the type of soil at the land
- Evaluation for single or double axis tracking and decision on the same
Quality of Components Used for Solar Power Plants
- Quality of solar panels – good solar panels cost good money, period. Of all the components, solar panels form the bulk of cost for a solar power plant (50-55%), so don’t cringe on this. Ensure that your EPC chooses only solar panels from Tier 1 solar panel makers. (See here for a blog post on different tiers of solar panels)
- Quality of inverters – Sure, inverters make up less than 10% of the cost of the solar power plant (for utility scale power plants), but they really are the brains of the solar power plant. Inverters also happen to be one of the few equipments in a solar power plant that requires regular maintenance. Choose a low quality inverter, and you and your maintenance team will be firefighting every day, leading to significant losses in generation.
- Quality of mounting structures – Most developers give little thought to mounting structures – they are after all just a bunch of steel or Aluminium structures, is their perspective. But it pays to pay significant attention to the mounting structure as it bears the brunt of a number of natural and man-made elements during the 25 long years of the solar power plant. Today, there are a standard set of quality benchmarks that any EPC will consider for mounting structures before choosing the right one.
- Quality of the solar power plant monitoring system – Today, you can get pretty advanced monitoring systems for solar power plants. These are essentially software that continuously monitor the health and output of the solar power plant and update the developer on a continuous basis should something go wrong – such updates can even reach you on your smartphones so you can get to know of any problem immediately and take corrective action, thus preventing any significant loss in output. Monitoring software systems cost less than 1% of the total solar power plant but they can be a handy tool that ensures a significantly higher output from the power plant. Many inverter makers themselves make the monitoring systems today; in addition, there are also inverter independent monitoring systems available. Whichever of the two above you choose, make sure you choose one that gives comprehensive and timely updates in a convenient way. If it costs 20% higher than a mediocre monitoring so be it, because the actual addition to the cost is 20% of 1%, or just 1/500th of the total!
- Quality of other balance of system on both AC and DC side – Many developers feel quality supervision is required only till the inverter – after that, it is after all the typical electrical equipments they have been using for a long time, such as switchgear and transformers, and of course AC cables! Well, these might be conventional equipments with nothing novel about them, but they still have to do heavy duty for 25 years. It matters not whether or not they are new. If the transformer does not work, you are not going to put out electricity to the grid, and BAM!, there goes your money.
Quality of Actual Construction of the Solar Power Plant
- Having an owner’s engineer who acts on the behalf of developer and oversees that every important aspect of construction is followed during the power plant construction
Quality of Operations & Maintenance of the Solar Power Plant
- Timely maintenance
- Incorporation of preventive maintenance of key components such as inverters
- A clear checklist of items to be maintained on a regular basis and review of the same – in this context use of O&M software could be useful
- Review of best practices for solar power plants worldwide and incorporation of the same in these
After all these, you might justifiably ask me the question: What indeed could be the optimal costs for a small-medium MW scale power plant (in the range 1-10 MW). You can get to know more about this from here!
Other aspects of quality & systems to be kept in mind
- Many developers do not appreciate importance of some of the supposedly minor items in a solar power plant. Take for instance the security systems. While almost no one talks about it, investing a bit into good quality security cameras can ensure that there is no theft or disruption from other sources, which can result in significant loss of generation
- Investing in human resources on the developer’s side – Many developers putting up small-scale solar power plants (105 MW scale) do not come from the solar power industry, perhaps not even from the energy sector. Solar Mango has assisted doctors, software entrepreneur, journalists and even in one case an archaeologist to put up solar power plants. Not surprisingly, these folks rely on the EPC to a large extent to ensure smooth running and power generation month after month after month. But consider this: It is their power plant and they are the owner. It is thus in their interest to have someone from their side (employed and paid by them), who oversees the power plant on a regular basis. The cost is effectively one person’s salary, but this can result in significant increases in generation or savings over 25 long years
- Pay special attention to the selection of trackers. While the use of trackers in solar farms is pretty common in the US and Europe, this has not taken off significantly in India. It could be lack of awareness, or lack of interest in putting in the additional investment. However, studies by Solar Mango after detailed investigations of real world performances shows that trackers indeed provide an excellent return on the additional investment made on them. We hence would recommend any solar power plant developer to at seriously consider the use of trackers. The caveat however is to choose a good quality tracker. This is all the more important for trackers than for components such as panels – because trackers are perhaps the only component in a solar power plant that comprises a lot of movement, with motor and all. Thus, the maintenance requirements for trackers could be much higher than it is for the rest of the solar power plant. If a developer wants to save a few lakhs and invests in a poor quality tracker, he can end up spending considerable money in its O&M later on, not to mention the generation lost if the tracker breaks down regularly.
Cost of Poor Quality (or) Benefits from Focus on Good Quality
Let us look at a hypothetical example, but what are presented below could well represent a real life scenario too!
Consider a 1 MW power plant that has the following characteristics:
Total # of units generated per MW / year: 16,00,000
Tariff: Rs 6.5/kWh
Let us look at some possibilities when it comes to panels, design and inverters; we look at three scenarios, scenario 1 in which all the three (panels, design and inverters) are done poorly and then the other end, where all these are done well.
|Panel degradation||Generation loss from shading, poor electricals||Inverter uptime||Total units lost (%)||# of units lost/MW/annum||Total loss/year (Rs lacs)||Loss for 25 yrs (Rs lacs)|
From the above table, it can be seen that for the third scenario when quality has been maintained in design, execution and component selection, the total monetary loss owing to generation loss for the plant over 25 years amounts to just under Rs 40 lacs, whereas for a scenario where quality has been compromised all across, the monetary loss could be almost 100 lacs more!
Essentially, over 25 years the developer stands to lose Rs 1 crore more owing to cutting corners in design and components.
Now, all these cutting corners probably saved him 5-10 lacs per MW in the beginning, but he loses over 10 times what he saved in the beginning over the project lifetime.