Wood Mackenzie: Global solar project O&M spending will hit $9 billion in five years

solar operations and maintenance

Solar power systems nearing inverter end of life currently account for 5% of the global PV market. This number will grow to 16% – or 227 GWDC of solar systems – by 2025, according to new research by Wood Mackenzie. The repowering and maintenance of these solar power plants will come at a cost, however.

Wood Mackenzie expects the global non-residential solar PV operations and maintenance (O&M) market to reach an annual total of $9.4 billion by 2025. Of that total, the APAC region accounts for $4.1 billion, EMEA represents $3.5 billion and AMER accounts for $1.8 billion.

“Inverter repowering is especially important in Europe, as more than 16GWDC of systems are currently over ten years old. By 2025, that number will grow to 100 GWDC. Aging solar systems are an opportunity for repowering activities, while new projects can take advantage of advanced analytics,” said Daniel Liu, Wood Mackenzie Principal Analyst.

While it is estimated that solar inverters will need replacing every ten years, some systems present earlier faults. Wood Mackenzie estimates that approximately 4.2 GWDC of solar assets will run into premature failures in 2020, with this annual total jumping to 36 GWDC in 2025.

“Premature inverter failures will grow as the global PV fleet ages. Though less than 1% of systems experience premature failure, between 10% – 12% of O&M costs are dedicated to inverter replacements,” said Leila Garcia da Fonseca, Wood Mackenzie Principal Analyst.

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The widescale adoption of auctions is driving solar LCOE further down and putting additional pressure on O&M costs, according to Wood Mackenzie.

“Europe has joined the markets that are phasing out renewable energy incentive schemes and introducing auction-based mechanisms. Auctions are emphasising the existent price-based competition for O&M services in established markets such as Germany,” added Liu. “Developers and asset owners are exploring methods along the value chain to reduce overall costs, assuming more risk. In the O&M sector, this will happen through partnerships with different players oriented to a hybrid structure.”

Another factor impacting O&M costs lies in the content of contracts signed by developers and asset owners. In the long-term, asset owners are likely to incur more costs with an a-la-carte service structure than if opting for an all-in service contract, says Wood Mackenzie.

“In reality, most O&M contracts currently signed on the lower end of the cost range (3-5$/kW/year) miss vital aspects of operating and maintaining a solar power plant properly,” added Garcia da Fonseca. “The typical scope included on current O&M contracts covers very few basic maintenance activities. With full-wrap contracts being avoided, vegetation management, corrective maintenance work and module washing are often excluded from the scope, despite being critical to keep solar power plants performing as expected. While these activities are heavily dependent on plant location and project specific characteristics, they can roughly represent 40-45% of a project’s total O&M costs.”

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