by Cedric Brehaut, Executive Consultant, SoliChamba Consulting
Following our recent review of the Top U.S. Utility PV Asset Owners, let’s look at the competitive landscape in asset management and operations & maintenance (O&M).
GTM Research defines asset management as the ‘ongoing management of financial, commercial and administrative tasks that are necessary to ensure the financial performance of a solar PV plant or a portfolio of plants’, vs. O&M as the ‘set of activities, most of them technical in nature, which enable power plants to perform their task of producing energy at or above the expected level of performance, in compliance with applicable rules and regulations’. In this framework, asset management includes oversight of O&M but not execution of O&M, and the landscape for these two markets is clearly distinct. Agree or disagree with this view of the world? Please join the discussion at Solar Asset Management North America (28-29 March, SF).
Asset Management: An IPP World
GTM Research and SoliChamba Consulting’s recently released report ‘Megawatt-Scale PV O&M and Asset Management 2016-2021’ features a list of the top 30 asset managers of U.S. utility-scale PV plants, and the table below identifies the top five players:
SunEdison is excluded from this table because its portfolio is in flux. While the firm reported an asset management portfolio exceeding 1 GW in the U.S. at the end of Q3 2016, the ongoing sale of the bankrupt developer’s assets is likely to impact the numbers. SunEdison’s AM and O&M portfolio in the U.S. and other markets will be re-assessed in an upcoming GTM report about Asset Management.
Independent power producers (IPPs), who own the assets and typically perform asset management in-house, dominate the top of the rankings, and make for 4 of the top 5 utility-scale PV asset managers in the U.S.
Most IPPs and financial investors, however, only manage the assets they invest in, so we must scroll further down the list before finding the top asset managers who serve third-party owners as well. Besides SunEdison, the top third-party asset managers list also includes project developers like Recurrent Energy and affiliated service providers (ASPs) like Bay4 Energy Services and EDF Renewable Services, as well as independent service providers (ISPs) like Radian Generation and CAMS. The aggregated asset management portfolio of these 5 players, however, remains smaller than the portfolio of any of the top 3 leading owners in the table above. The market for third-party asset management services remains small in the U.S. and its growth is probably limited by the dominance of IPPs and large portfolio owners who tend to self-perform.
O&M: Service Providers Rule
GTM Research’s O&M and asset management report also identifies the top 30 O&M providers managing U.S. utility-scale PV plants, and the table below identifies the top five players:
In a stark contrast with the asset management landscape, only one IPP ranks in the top 5 O&M providers. Integrated developers First Solar and SunPower and service providers SOLV and MaxGen Energy Services are the gorillas, while IPP Sempra U.S. Gas & Power takes the #5 spot. SOLV, a division of Swinerton Renewable Energy, is a unique example of an EPC firm successfully and rapidly capturing O&M contracts for a large portfolio of plants they did not build, which is remarkable in a market where new construction activity remains strong. Enphase Energy exits the rankings after seeing its utility O&M portfolio shrink significantly and selling the C&I business of its Next Phase Energy subsidiary to MaxGen. For the same reasons described previously, SunEdison was excluded from the table above despite reporting approximately 1 GW of megawatt-scale plants under O&M in the U.S. at the end of Q3 2016, a number that probably shrank since then as the developer’s bankruptcy continues to unfold.
The top 5 players identified above managed over 10 GW of utility-scale PV plants at the end of Q3 2016, and this number likely grew in Q4 so we can expect that all top 5 players exceeded the gigawatt mark by the end of 2016, with 4 of them exceeding 2 GW. It is important to keep in mind that both SunPower and MaxGen also perform O&M in the C&I segment (not included in the numbers above), while the other top competitors are exclusively active in the utility segment.
Unlike in Europe, where the largest O&M providers are present across multiple countries, the most successful O&M firms in the U.S. are focused on the domestic market. Both First Solar and SunPower have O&M activities in other parts of the world but the clear majority of their fleet is in the U.S.
The Looming Shadow of Self-Performing IPPs
Many of the large IPPs that own utility-scale solar PV portfolios in the U.S. have been relying on each plant’s developer or EPC for operations and maintenance, except those that develop their own projects. As owner-operators grow their solar portfolios and their experience, they may decide to bring O&M in-house. Players with existing O&M teams for wind power plants are particularly good candidates since the jump to solar O&M is smaller from wind O&M than from coal, natural gas, or nuclear power O&M. Intense competition and the resulting price war, however, could slow down this in-sourcing trend: at current price levels, bringing O&M in-house may not yield a clear cost advantage to IPPs, especially if they need to build or expand teams and infrastructures to operate solar assets. Mergers and acquisitions could provide another path to in-house O&M. For sure, the involvement of large IPPs in operations and maintenance is a trend to watch closely in 2017 and 2018.