PREDICTABILITY: THE NEXT STEP FOR POWER PLANT OWNERS TO GUARANTEE A POSITIVE RETURN ON THEIR SOLAR ENERGY INVESTMENT

Boris Schubert, Charly Bray, Adam Han, Gaurab Hazarika

INTRODUCTION
INDUSTRY MODULE AND SYSTEM WARRANTIES

Anyone involved in specifying the requirements for a utility-scale photovoltaic (PV) power plant knows how tenuous the realization of those requirements are. The historical data to predict performance is light. Expected returns are presumptive. Warrantees are inconsistent. Assigning responsibility, should things not live up to expectation, is elusive at best. What would this high-end solar market give to have guaranteed plant performance that is linear and predictable? What would they give to have the risks of designing, building and operating a solar plant removed from their shoulders? What would they give to have a partner of international renown and decades of field-proven experience make this happen? Predictable, linear and guaranteed plant performance is standard practice at Q-Cells.

MODULE POWER OPERATION YEAR

BUILDING MOMENTUM IN A MATURING MARKET Building a path to market maturity is a step-by-step process. Every market must adapt as it graduates through a series of changes until it can deliver sustainable results for its stakeholders. The market for utility-owned and utility-scale solar projects is no different. In fact, it is currently sitting at a tipping point that can impact its momentum all the way to the top. Every maturing market starts at the bottom of the stairs with a simple interest – an interest among investors, innovators, customers, governments, etc. to pursue a common goal. Over time, that interest reaches the second step with a strong belief of potential success and thus, confidence spreads. Momentum builds. At some point, experimentation and field tests give way to business models. This is when the market must start delivering as promised – the actual must meet or exceed the expected. For that to happen, the market must advance and show predictability, reproducibility and scalability. Only then can a market truly deliver the sustainable results found at the top of market maturity. When it comes to PV energy, the U.S. is an emerging giant. In the U.S., the electric utilityowned and utility-scale projects are expected to fuel much of solar energy growth. Most utility-scale power plants are larger than 10 megawatts (MW) and those that are actually utility-owned can range from small multi-hundred kilowatt to multi-megawatt systems. These two segments (utility-scale and utility-owned) offer huge potential to the solar market. They are forecasted to double annual solar energy capacity through 2015. According to Greentech Media analyst Shayle Kann, “installations of so-called utility-scale solar projects will reach about 3,000 MW annually, worth $8 billion, in five years from 58 MW in 2009.”1 Greentech Media also states that lower solar module prices will bring the potential value of solar power investments to a broader range of investors, including utility companies, institutional investors, family offices, municipalities and public services.

1

Ben Sills and Christopher Martin, “U.S. utilities to Double Solar Investment Annually,” Bloomberg, November 30, 2010.

The initial cost of developing the project. simple metrics such as the static capex-focused $/kWp indicator were used to measure a project’s value or potential. the concern remains: can an investment in a large-scale solar power generation project deliver a predictable and valuable return over the lifetime of a plant? PREDICTABILITY – IT’S A MATTER OF METRICS In many fields. they painted an inaccurate and short-term portrait that miss-set expectations and all too often set projects up for failure. In the early days of PV. INITIAL COSTS + LCOE = Σ ( N n=1 ONGOING COSTS (1 + DR) n ) ) Σ ( N n=1 (YEAR 1 EXPECTED KWH) * (1 – ANNUAL DEGRADATION)(n–1) (1 + DR) n DR = DISCOUNT RATE Over the past few years. As LCOE is often stated. To get the LCOE right. it is imperative that all lifetime component costs and total lifetime energy output is properly calculated. As a result. . the market momentum will slow or even cease. Ongoing costs to ensure that the system generates the output as expected should be included as well. Without accurately predicting (and ultimately reproducing and scaling) the value or return of such large-scale solar investments. whether it is financial services. the PV industry has turned to levelized cost of electricity (LCOE) as a standard performance indicator for power generation investment assessments. energy or real estate. Although PV component costs may be coming down. Unfortunately.PAGE 2 There is a catch in this forecast and it has to do with predictability. unless the solar market can ascend to the third step of market maturity. these and other simplified metrics were not focused on lifetime costs versus lifetime returns. LCOE creates a broad assessment of the cost it takes to produce a lifetime of power. determining predictability boils down to knowing what to measure. the return for the investor and the cost of building the project are the most important cost components in this assessment. it measures the net present value of total life cycle costs of the project divided by the quantity of energy produced over the system life.

or Engineering. In real life. THE PERFORMANCE GAP At the core of any model that offers predictability lies the need to have the actual results be as close to the expected results. A U CT LC AL OE PERFORMANCE GAP C EXPE TED LCO E COST TIME In the past. Procurement and Construction (EPC) − Modules − Balance of system − Labor Land cost if applicable Other costs • • • • • • Regular annual Operations & Maintenance (O&M) Major maintenance Taxes – property taxes and any other related taxes Lease cost if applicable Annual insurance Any carried interests if applicable Other costs While LCOE is straight forward and the model presents a more complete picture of a solar plant’s operational capability than previous models. it still measures the sum of the parts rather than the whole. the LCOE model helped fine-tune the assumptions feeding the LCOE that was expected from PV power plants.PAGE 3 Typical cost components prior to the project becoming commercial (Initial Costs) are: • • • Typical components of the annual ongoing (Ongoing Costs) are: • • • Development costs Investor return Cost of building the system. however. but only summing the parts allows assumed variables and unknowns that fail to live up to their assumptions to multiply in effect on other parts of the system. . This difference might seem academic. this leads to a Performance Gap between the LCOE that is expected and the LCOE that is actually achieved. The realized should be in line with the idealized.

By measuring Performance Ratio. these assumptions can lead to a significant gap between expected and actual LCOE which. modules. a power plant Performance Ratio measures the system’s efficiency in converting solar irradiation into electricity. To identify an expected LCOE. balance of system) • yield • module degradation • annual costs • average system uptime If not managed carefully and communicated transparently. . If a guarantee can be issued against that value.: • irradiation • installation time line. The Performance Gap generates uncertainty during the critical financial assessment phase of PV investments. PERFORMANCE RATIO – AN INDICATOR OF TOTAL PV POWER PLANT PREDICTABLE PERFORMANCE Simply put.g. commercial operation date • actual system capacity • capex (e.g. but also can act as a lifetime guarantee to mitigate risks to the power plant owner. The result jeopardizes acceptance of the power plant and can ultimately compromise acceptance of utility-owned and utility-scale generation as a whole. can expand to the point of a system failing to deliver against its business plan. over time. In other words. accurately assessing the value of the plant. So how does one close the gap? Wrap LCOE in a quality-based model that represents not only the system-wide effectiveness of the power plant over time. power plant owners and operators can immediately and fully predict the performance of the plant over its lifetime. numerous assumptions have to be made. Because the Performance Ratio looks at the whole rather than the sum of the parts. the aspiration gap of the expected versus actual LCOE disappears.PAGE 4 This Performance Gap exists because of uncertainty in the planning phase caused by erroneous assumptions from limited data and lack of operational insight by utilities and investors. tie the sum of the parts together to fully represent the whole and you end up with predictability. e. this indicator provides a straightforward basis for assessment.

would be higher than a fixed-tilt system. Evaluating Specific Energy is also very useful for a financial analyst looking to evaluate expected rates of return between different system designs and/or geographical sites. The reference irradiance usually is the irradiance at the reference condition. Specific Energy is useful in comparing different technologies or design configurations from one another or comparing the expected production between different geographical locations. the limitations of Specific Energy are revealed when measuring how a system performs under real-world conditions. to get a fully holistic picture of a system’s quality factor to evaluate whether a power plant is performing as expected. The denominator term of PR is Reference Yield. This allows the designer or analyst to scale yield to any desired system size. it is necessary to normalize the Specific Energy to the actual weather. Though very useful while planning a system. then. Specific Energy is determined by taking the total energy yield of the system in kWh and dividing it by the nameplate DC power in kW. Temperature differences are not taken into account by a PR evaluation since there is typically not enough effect on system performance over an extended period.PAGE 5 LOOKING UNDER THE HOOD OF THE PERFORMANCE RATIO Performance Ratio (PR) is a dimensionless quantity used to describe the amount of available sunlight converted to AC electrical energy. The in-plane irradiance for a tracker. This value is dependent on the angle and orientation of the PV system. generally measured at the revenue meter for the power plant. . Total in-plane irradiance is taken on the basis of time for the evaluation (usually monthly or yearly) and is expressed in kWh/m2. It is calculated by dividing the final PV system yield (also known as the Specific Energy of the system) by the Reference Yield. The in-plane irradiance. is both system-design dependent as well as weather dependent. System designers frequently use Specific Energy comparisons in software simulations of systems to optimize their design and make choices between technologies and between different sites. changes in Specific Energy may merely reflect changes in weather as opposed to system degradation. for example. Therefore. Since the amount of sunlight varies from year to year. Sunlight is the main driver for PV system performance and PR uses the amount of sunlight irradiation as the only term for normalization. Comparing Specific Energy projections allows quick evaluation of energy generation potential. The reference condition is almost always the Standard Test Condition (1000 W/m2) in the case of flat-plate PV. The Specific Energy indicates how much energy per unit of power a given PV system is capable of producing. which is calculated by the total in-plane irradiance divided by the reference irradiance.

The Performance Gap is no longer a surprise and predictability is achieved. Only players with integrated systems experience can wrap or bundle their offerings based on the real-world experience of product performance.PAGE 6 SYSTEM-WIDE PREDICTABILITY DRIVES SYSTEM-WIDE GUARANTEES…EXCEPT FOR THE SUN No one can guarantee exactly how much sunlight will be available for power production in a given month or year. PR is quickly becoming the preferred qualitative metric because it presents a very easy way to measure how well the actual yield of a system compares to its expected yield. a system-wide guarantee driven by a PR is better in every way than any combination of component guarantees.000 mile warrantee because it is specified. integrators need to develop a multi-leveled PR framework that covers the total timeline from preconstruction to installation to end of useable life – from Design. In other words. tested and maintained by people who know the vehicle inside and out and consider it a single operational entity rather than a collection of parts. to Build. built. an experienced integrated system developer possesses a thorough knowledge of field-tested system performance down to the level of the module and even the cell. a car can come with a single 200. high-performing PV power plants. In order to constantly deliver predictable. TURNING A PERFORMANCE RATIO INTO A PERFORMANCE GUARANTEE THAT OVER-DELIVERS ON COMPONENT GUARANTEES Because a PR can evaluate the effectiveness of the system’s “whole” rather than the sum of the parts. this system must be managed by a solar player with the breadth and depth of knowledge to deliver the data needed to offer true performance guarantees of a whole system. It is important to note that PR is most useful at evaluating system performance on longer periods of time and is typically intended to be used on a monthly or yearly basis. designed. Once a system design is established and the performance model has been substantiated. system owners can quickly know how well their system is performing relative to its expected output. to Run: DESIGN TECHNICAL DEVELOPMENT SERVICES BUILD PROVEN INSTALLATION METHODOLOGIES RUN FIXED-PRICED OPERATIONS AND MAINTENANCE . With a project-level perspective. The PR analysis allows the owner and/or operator of the system to know how well their system is operating just by measuring energy delivered at the meter and plane of array irradiance at the solar project site. However.

Example services that are performed at this stage are: • • TECHNICAL DEVELOPMENT SERVICES • • • • • • • • • Yield analysis Site assessment Foundation design (maximized use of land.PAGE 7 Implemented as a package. and light environmental footprint as no concrete foundation is used) Electrical design including Interconnection Delivery schedule Long-term forward pricing (utility-scale project development cycles easily exceed 24 months) Bankable module design and supply chain Bankable EPC and O&M agreements including EPC delivery guarantees Close partnership to best-in-class inverter technology providers Technical. utilities not only benefit from necessary experience at the Build and Run stage but automatically benefit from up-front design expertise as an integral part of the solutions package. estimators and engineers work closely with customer representatives to adjust standardized MW-block products to project-specific requirements. Up front. DESIGN During the Design phase. By engaging PV providers who are focused on integrated solutions. .and risk-free solution to large-scale PV power plants. technical development services assist owners and developers to set the stage for success. This is critically beneficial to those who are involved in the RFP process or overall system deployment of utility-scale projects. this framework gives owners a worry. EPC-related support during PPA negotiations Close cooperation with owners’ and/or lenders’ engineers These comprehensive services ensure efficient and non-iterative design during preconstruction/project development which ultimately leads to a quicker financial close.

structural module assembly • Electrical: trenches & cabling. commissioning Phase 0 Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6 SITE PREPARATION MOUNTING SYSTEM FOUNDATION TRENCHES + CABLING MOUNTING SYSTEM ASSEMBLY STRING CABLING + COMBINER BOXES MODULE ASSEMBLY MODULE CONNECTION + INVERTER INSTALLATION Sub-team O: Civil Sub-team 1: Structural Sub-team 2: Electrical .PAGE 8 BUILD Proven installation technologies need to contain integrated. This phase should entail: INTEGRATED PROVEN INSTALLATION METHODOLOGIES Each delivery team’s tasks need to be clearly divided into several sub-teams with the following deliverables/steps: • Civil: site preparation. roads. fencing • Structural: mounting system foundation. string cabling & combiner boxes. interwoven and scalable assembly schemes to ensure that the eventual system will operate as a cohesive power plant. module connection & inverter installation. mounting system assembly.

STR 1 Phase 0: Site Preparation Phase 1: Mounting System Foundation Phase 2: Trenches + Cabling Phase 3: Mounting System Assembly Phase 4: String Cabling + Combiner Boxes Phase 5: Module Assembly Phase 6: Module Connection + Inverter Installation Sub-team O: Civil Sub-team 1: Structural Sub-team 2: Electrical TEAM 1 First MW Block Second MW Block TEAM .PAGE 9 INTERWOVEN • • • • After civil sub-team prepares the site. after seven weeks the second block STRING ONE WEEKS 1 2 3 4 5 6 7 8 9 .. electrical and structural sub-team work as one string on two MW-blocks in parallel Each deliverable is designed in a way that the sub-team performs each step per block and week Therefore. the first block is ready for commissioning.. structural and electrical sub-teams always “own” one specific block per week After six weeks of installation.

For example. Phase 0: Site Preparation Phase 1: Mounting System Foundation Phase 2: Trenches + Cabling Phase 3: Mounting System Assembly Phase 4: String Cabling + Combiner Boxes Phase 5: Module Assembly Phase 6: Module Connection + Inverter Installation Sub-team O: Civil Sub-team 1: Structural Sub-team 2: Electrical TEAM 1 First MW Block Second MW Block TEAM 2 First MW Block Second MW Block . two teams deliver 2 MW blocks weekly after week six.. number of delivery teams can be scaled up.... STRING TWO 1 2 3 4 5 6 7 8 9 . four teams can deliver 4 MW blocks weekly STRING ONE WEEKS 1 2 3 4 5 6 7 8 9 .PAGE 10 SCALABLE INSTALLATION • For additional speed.

the whole does perform greater than the sum of the parts. while the industry standard warrantee of a typical module is expected to stepwise degrade over time. the exact timing is unknown and therefore any expectations based on that unknown will be equally elusive. But. Even though Q-Cells modules have a warrantee that exceeds the market standard of 20 years. O&M services can include: • Monitoring and reporting − Remote monitoring and annual reporting − Onsite fault intervention − Service hotline • Site and equipment inspection • Maintenance − Testing of electrical equipment − Greens maintenance − Module cleaning • Repairs − Site surveillance and intervention − Insurance FIXED-PRICED OPERATIONS AND MAINTENANCE PERFORMANCE RATIO SYSTEM-WIDE GUARANTEES FROM Q-CELLS – BUILDING A BETTER SOLAR MARKET FOR UTILITY-SCALE PROJECTS When an integrated PV solutions provider like Q-Cells is driving the design. when Q-Cells is engaged in an end-to-end project where the company has responsibility throughout the entire lifecycle. As long as they provide these O&M services with capped fees.PAGE 11 RUN Fixed-priced O&M services provide owners with necessary certainty to financially assess the power plant’s long-term costs. building and running of a utility-scale solar power plant. their unmanaged degradation over time is as unspecified as any other. . the project can be managed so that the effective performance is not only linear (Predictable and Guaranteed). By way of example. it surpasses other warrantees by significant amounts – a triple win for the power plant owner or operator. integrators are able to provide a total power plant PR guarantee.

Q-Cells has the breadth and depth of knowledge and more than a decade of field-proven experience around the world to deliver predictable and sustainable results. .000 mile warrantee on any individual component as a car manufacturer would for the entire vehicle. A Performance Ratio guarantee that secures the total performance of a PV power plant is the key to mitigating risks for power plant owners and advancing the PV market. Just as no parts supplier would offer a 200. The only thing Q-Cells cannot guarantee is the sun.PAGE 12 OVERVIEW OF INDUSTRY MODULE AND SYSTEM WARRANTIES MODULE POWER 100% Power plant performance ratio package Standard module performance warranty 95% 90% 85% 80% 75% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 OPERATION YEAR CONCLUSION PV is prepared to enter prime time in utility-owned and utility-scale generation as new models for setting and evaluating plant performance are utilized. A model such as the Performance Ratio allows PV solution providers the means and the track record to help utilities and owners achieve a predictable return on investment. It will also help specifiers or others responsible for defining the requirements of these power plants ways of refining operational assurances. only an integrated PV solutions provider of utilityscale solar PV power plants can guarantee and deliver on a system-wide warrantee that covers the entire life cycle of the plant.

Marion. “Assumptions and the levelized cost of energy for photovoltaics.” SolarPro Magazine. J. and Stu Knoke. D. Nuclear Energy Agency and Organisation for Economic Co-Operation and Development. United Nations Environment Programme report. Wenger. A. Hayden. Veselka. Authors: B. Narang. Division of Technology. Boyle. Industry and Economics. You.PAGE 13 REFERENCES Darling. February 4. Prepared for the 31st IEEE Photovoltaics Specialists Conference and Exhibition. November 2010. and Alfonso Velosa. Mat and David Williams. “Financial Risk Management Instruments for Renewable Energy Projects. Lake Buena Vista. June/July 2010. Rich and T. . and L. Taylor. Adelstein. T. B. 2004.” National Renewable Energy Laboratory report. Rick. Tidball. Rodriguez. H. Arizona Public Service Co. PowerLight Corp. and D. Dave. Bluestein. June/July 2011. and K. Mitchell. Report published jointly by International Energy Agency. January 3-7. Seth B. “Projected Costs of Generating Electricity. Hammond.” Energy & Environmental Science. G. Fengqi. Williams.” SolarPro Magazine.. H. Florida. 2011. NREL. Kimber. 2005. “PV Performance Guarantees: Managing Risks & Expectations. Joel. “Large-Scale PV Operations & Maintenance. “Cost and Performance Assumptions for Modeling Electricity Generation Technologies. Fletcher. B.” 2010 Edition. Shugar. Canada. Nick. Townsend. “Performance Parameters for Grid-Connected PV Systems. Thomas.” Summary document. First Solar.” National Renewable Energy Laboratory report.

operations and maintenance.com WEB www.q-cells.com © 2011 Q-CELLS.q-cells. Q-Cells North America minimizes uncertainty and risk. construction. designs. processes and partnerships to deliver utility-grade solar PV solutions customized for local energy markets. financing. and helps customer achieve a higher return on their investment in solar energy. All rights reserved.com . design. part of Q-Cells SE. Q-Cells North America offers the full spectrum of PV solutions – from the core technology of cells and modules to power plant development. 2011-10_01 CONTACT Q-CELLS 95 Federal Street San Francisco. The company brings a decade of global leadership in solar PV to North America. With proven capabilities across the solar value chain. CA 94107 TEL FAX 415 541 9300 415 541 9301 EMAIL infona@q-cells. www. builds and manages financially sustainable solar photovoltaic (PV) solutions. combining best-ofworld technology.ABOUT Q-CELLS Q-Cells North America.

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