PV Power Plants: Reducing Investment Costs, Sharing Risk

In the competition with conventional energy carriers, solar power prices are falling dramatically. It is a difficult situation for project developers and investors who install and operate large PV power plants. In tenders and auctions for new power generation capacities, they are awarded contracts only if they guarantee very low prices and high reliability in the supply of electricity. To support them in this, an international team has developed the SMA Profit+ Solution.

At the beginning of 2017, 22 experts from various countries and business divisions came together for a workshop at the Günther Cramer Solar Academy at SMA headquarters in Niestetal near Kassel, Germany. Their task was to develop new concepts to precisely adapt the business model in the large-scale power plant segment to the changing market conditions. In addition to enormous pricing pressure, customers in this area in particular are struggling with a significant increase in the risk profile of projects. In particular, the new concepts should cater for the needs of project developers and investors who have a special interest in the long-term performance of the power plant due to their broad investment horizon. The result was completely open. For the participants, the only certain thing was that counteracting the dramatic price drop in power purchase agreements by reducing product quality and thereby increasing the risk of system failure is not a solution for their customers in the PV power plant sector. “Over the two days, we considered all the angles and tackled business models from other industries, mega trends, the developments in the photovoltaic market and the particular strengths of SMA in great detail,” reported Florian Bechtold, who is leading the initiative as Head of Product Management in SMA’s Utility business unit.

Excellent product quality plus services increases profitability

The workshop resulted in a range of ideas, the best of which the team presented to a steering committee that decided which approaches were to be pursued further. ”We then developed the selected concepts further in a core team,” explained Bechtold.

At first, the team experienced a setback. “It turned out that the leasing model we favored is not financially viable. It was really disappointing,” recalled Pamela Fiume, a market intelligence professional who is the team’s market expert. “Nevertheless, we didn’t give up and considered how we can best leverage SMA’s unique selling propositions that are so important for the PV power plant sector, our financial solidity, the high product quality and our excellent service expertise to increase the competitiveness of our customers while minimizing risks across the entire service life of the system.” After only a few weeks, the result is three potential variants, which combine the SMA product range with a comprehensive service package.

Powerhouse: The Sunny Central 2750 offers a very high power density and can be used worldwide in large PV power plants up to the gigawatt range.

Now, things are getting particularly exciting for Florian Bechtold, Pamela Fiume and Patrick Thomas, who completes the core team as head of project sales. They are presenting the offers to key SMA customers in the major markets of India, France, Italy and the U.S. to get their opinions. “In total, we’ve spoken to more than 20 representatives from various customer groups so that we can better tailor our solution to their requirements,” reported Thomas.

In these discussions, the team received positive responses and gained valuable additional knowledge. “The discussions also showed us how well we understand our customers and their business. We had already dealt with many of their questions and requirements in advance,” said Fiume. Florian Bechtold was impressed with the high quality of the discussions. “I found it remarkable that our dialog partners talked about their assumptions in project calculations so openly and devoted so much time to us. This was a clear sign of their interest in new collaborative approaches.”

Endurance test: To ensure that SMA inverters deliver maximum yields even under the harshest conditions, they are put through extensive testing at our testing centers.

Back in Niestetal, Pamela Fiume, Florian Bechtold and Patrick Thomas compiled the results of their discussions and finalized the new SMA solution. Their concept: As part of the Profit+ solution, SMA will supply project developers and investors with long-term perspectives with high-quality and reliable central inverters and medium-voltage solutions at a reduced price, commission them and perform monitoring, remote analytics, maintenance and repairs for up to 20 years. The annual service fee charged by SMA depends on the availability of the inverters. “With the Profit+ Solution, we’re reducing our customers’ investment costs and removing part of the risk across the entire project life cycle. However, at the same time, we’re sharing in the proceeds, as the higher the availability of the inverters, the more electricity the PV farm provides and the higher the service fee that is paid to us,” emphasized Thomas. “Inverter availability is a decisive factor for the profitability of every system. Ultimately, inverters only account for seven percent of the investment costs but are responsible for half of all downtimes.”

A high level of availability is decisive

Is SMA not taking on a high risk of loss? Florian Bechtold smiled. “Naturally, we’ve also asked ourselves this question. SMA has over 35 years of experience in the development and production of technologically mature and high-quality inverters. SMA central inverters with an output of 27 gigawatts have already been installed worldwide and every inverter goes through intensive testing before delivery. We also have a global service infrastructure. Accordingly, the availability of our inverters in the field is more than 99 percent. This means that we can calculate our risk very accurately and, at the same time, make SMA’s quality promise tangible for our customers.”

SMA inverters in PV systems on all continents can be monitored 24/7 from the monitoring centers in Germany and the U.S.

The SMA Managing Board is also convinced of this. The mood was very positive when it tasked Florian Bechtold and Patrick Thomas with acquiring international pilot projects. Only a short time later, they are setting out again in search of international customers. “We’re currently holding talks with investors and project developers in Germany, France and the U.S. and, although our offer is new on the market and requires explanation, the feedback is promising,” said Thomas, describing the current situation. Like Pamela Fiume and Florian Bechtold, he can hardly wait until the first large-scale PV project is launched as part of the SMA Profit+ Solution—and until SMA introduces more new solutions to the market that have emerged from the workshop at the Günther Cramer Solar Academy.