By Farid Najafi
Independent power producers (IPPs) are in the business of producing electricity and selling it to off-takers through power purchase agreements (PPAs). In recent years, the value of these PPAs have been dropping rapidly. As recently as 2011, American PPAs would average in excess of $100/MWh. Recently, a record low PPA bid was set by Jinko Solar at $24.2/MWh. So how do these companies remain profitable at these low rates? Through efficiency and automation.
A common practice adopted by inefficient asset owners is to use more manpower. At $100k/year onboarding new asset managers is an expensive, inefficient solution that doesn’t scale with a growing portfolio. When profits are getting squeezed, you have to find methods to do more with less. You have to manage more MW per asset manager without dropping the ball as your portfolio grows. The objective here is to reduce your soft costs and increase productivity through technology. Forward thinking IPPs look at software as an investment rather than an expense because they understand that automation through software can eliminate a lot of manual work.
Now, let’s walk through the operations of an IPP. They own a facility that produces power. They track production and bill off-taker for the energy generated. They also have to meet contractual and regulatory obligations, monitor plant performance, generate monthly reports/invoices and perform operation and maintenance activities to keep the plant running. With the proper software, many of these tasks can be completed in a more efficient and automated manor. Let’s talk about how in the following sections.
Reporting
Asset managers tend to have busy month-ends because they spend time manually creating management, finance and operational reports. A company with a portfolio of 500 MW spends roughly around 200 hours per month to prepare reports. You would need to hire at least two employees to have enough man-power to complete this task! This can easily be done through automation using asset management software. Reports can have a predefined setup with specific parameters and can be created on specific days of the month and emailed to asset manager. Asset managers can then validate and share reports or set the software to auto-send reports to other relevant stakeholders.
Contracts & Invoicing
PPA contracts, whether fixed, escalated flat rate or time of use (TOU) are generally managed on excel spreadsheets by asset managers. Using software, you can extract this information and track it across your portfolio. How is this beneficial? Let’s say that you have a TOU PPA contract with PG&E. Rates vary based on the time from weekdays to weekends, and even the season. This information can be uploaded into asset manager platforms with a few clicks and the system can now collate this contract against your monitoring data and swiftly generate monthly invoices.
The process of tracking invoices is generally done by the accounting department in a pre-existing system like Quickbooks, Netsuite, or others. These modern solutions have the additional flexibility to connect and exchange information through an application programming interface (API). A different asset management software can export its auto-generated invoices to the accounting department’s current software using API technology.
Analytics
Through analytics you can visualize and plot data to gain insight into your business. You can establish KPI’s that your team members can see and track. You can compare data between plants such as actuals vs. forecasts production. You can benchmark performance in geographical location. You can even do preventative maintenance based on pattern of tickets etc. Software enables you to make data driven decisions and multiplies your productivity.
Farid Najafi is the president of Arbox Renewable Energy, a software company that provides an asset management platform to solar companies. The Arbox Hap platform helps clients manage their growing portfolio of solar assets efficiently.
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