kWh Analytics Reveals Top 14 Risk Management Challenges in Solar Generation

2024 Solar Risk Assessment Report highlights the remarkable progress and resilience of the solar industry in the face of evolving challenges.

The renewable industry's ability to collaborate and innovate remains one of its greatest strengths.

Originally posted on Business Wire

SAN FRANCISCO--(BUSINESS WIRE)--kWh Analytics, the market leader in Climate Insurance, today announced the release of its 6th annual Solar Risk Assessment, a comprehensive report designed to provide an objective and data-driven evaluation of solar risk. The annual report includes contributions from leaders in the solar energy industry spanning technology, financing, and insurance.

In 2024, the solar industry continued its rapid growth trajectory, fueled by the Inflation Reduction Act and increasing demand for clean energy. This year’s report expands the analysis to include Battery Energy Storage Systems (BESS), recognizing the increasingly critical role that storage plays in the renewable energy ecosystem.

“We’re seeing burgeoning growth in solar, wind, and battery storage,” said Jason Kaminsky, CEO at kWh Analytics. “However, to meet renewable energy deployment goals, the focus needs to be on smart growth - relying on data to inform decisions and utilizing resilience measures to protect assets. We are grateful for the collaboration of the solar, BESS and renewable insurance thought leaders included in this year’s report, recognizing that the clean energy future requires mutual understanding between operators protecting assets and underwriters pricing risks.”

The 2024 report offers detailed research on top risks including extreme weather, operational risks, and battery risks to help industry organizations overcome market hurdles and expand lines of business. Top 14 risk findings include:

Extreme Weather Risk

1. kWh Analytics: Industry standard modeling assumptions can underestimate solar project losses from weather-related physical damage by 300+%

2. Kiwa PVEL: No modern module will experience power loss >3% when the cells are severely damaged by hail

3. Waaree: During hail testing, positioning glass/glass modules in hail stow mode resulted in only a 0.8% power loss, well below the 5% threshold permitted by IEC guidelines

4. Alliant Power: Renewable energy project owners can reduce insurance costs by up to 50% in high-risk zones by investing in resilient solar site design and maintenance

5. Longroad Energy and Nextracker: 75 Degree Tilt Can Decrease PV Asset Damage Probability by 87%

Operational Risk

6. kWh Analytics: Aggregating portfolios of 4 or more sites can cut the risk of extreme downside scenarios by 50%

7. Solarlytics: Voltage Collapse Can Reduce Production by More Than 20%

8. Univers: O&M corrective action statistics show a 14% surge in winter compared to summer in 2023

9. SolarGrade: Safety problems requiring partial or total de-energization found in 11% of PV systems inspected by auditors

10. Clean Power Research: Unmitigated soiling of PV systems can reduce annual energy production by 50%

11. kWh Analytics: Inverters cause 59% of lost energy, but DC distribution issues last 2.2x longer than they’re worth

Battery Risk

12. Lloyd’s: Global role of Battery Energy Storage Systems poised for 13x growth

13. Powin: Conventional State of Charge measurements are error-prone and can result in an average error of 7% in estimation of energy available for dispatch

14. SEVO IFP: 26% of Energy Storage Systems Face Fire-Detection and Fire-Suppression Challenges

“Overcoming these challenges will require ongoing collaboration and innovation among industry leaders,” said Isaac McLean, Chief Underwriting Officer at kWh Analytics. “In this dynamic landscape, asset owners play a critical role in protecting renewable energy investments by securing comprehensive insurance coverage and seeking multiple quotes from brokers to ensure accurate protection.”

To access the complete 2024 Solar Risk Assessment, please visit www.kwhanalytics.com/solar-risk-assessment.

About kWh Analytics

kWh Analytics is a leading provider of Climate Insurance for zero carbon assets. Utilizing their proprietary database of over 300,000 operating renewable energy assets, kWh Analytics uses real-world project performance data and decades of expertise to underwrite unique risk transfer products on behalf of insurance partners. kWh Analytics has recently been recognized on FinTech Global’s ESGFinTech100 list for their data and climate insurance innovations. Property Insurance offers comprehensive coverage against physical loss, with unique recognition and consideration for site-level resiliency practices, and the Solar Revenue Put production insurance protects against downside risk and unlocks preferred financing terms. These offerings, which have insured over $27 billion of assets to date, aim to further kWh Analytics’ mission to provide best-in-class Insurance for our Climate. To learn more, please visit https://www.kwhanalytics.com/, connect with us on LinkedIn, and follow us on Twitter.

Contacts

Nikky Venkataraman
Senior Marketing Manager
kWh Analytics
E | nikky.venkataraman@kwhanalytics.com
T | (720) 588-9361

Solar asset underperformance hurts equity owner's bottom line

Full article available on PVTech.

“Last year analysis by renewables performance aggregator and insurance provider kWh Analytics highlighted the extent of solar asset underperformance against P50 estimates in the US. Here, the company’s Sarath Srinivasan details some of the reasons behind that underperformance.”

Underperforming solar assets shade the entire industry. Here is how to fix it.

Full article by Brian Lynch available in PV Magazine.

Underscoring what some call the solar industry’s “systemic overestimation bias,” kWh Analytics found that the average solar asset underperformed its target weather-adjusted production by 6.3% between 2016 and 2019 (early life); one-quarter of the projects that were studied missed their production targets by more than 10% after accounting for weather.

These data points are unsettling, but are they surprising? After all, what accounts for the industry’s overly optimistic bias towards over production?

In short, self-interest. When the developer, EPC company, and long-term owner are all financially motivated to assume generous production, they generally will. The inevitability of real-world data crashing this party was bound to happen.

A recent IEA renewables report reiterates how solar has evolved beyond being an accessory in the nation’s energy mix to being the lowest-cost, highest-growth energy generation source going forward.

This inflection point represents an opportunity for the industry to shift its attention away from constant cost-out and toward putting our collective effort into building projects that reliably generate cost-effective clean energy.

The ever-increasing deployment of solar assets can’t be contained. For the health of the whole industry, we owe it to ourselves to deploy better projects.

Solar Asset Management in 2021: Asset Bankability and Plant Performance

Originally posted by SolarPlaza in the Solar Asset Management in 2021 whitepaper.

From the minute a solar plant starts exporting energy to the grid, a key concern for asset managers is to ensure it meets its performance targets. The U.S. industry as a whole suffers from an average 6% underperformance, according to research from kWh Analytics, a solar risk mitigation firm. The level of energy loss is around 1% to 1.5% across 50 GW of utility-scale plants surveyed by aerial inspection specialist Heliolytics.

Underperformance thus appears to be mostly a problem for small systems, with figures from the U.S. Department of Energy suggesting a performance shortfall of up to 8%. In any case, the numbers show a clear trend towards asset owners and managers overestimating the likely performance of their plants, with potentially significant impacts on profitability.

Some of the losses seen by asset managers are recoverable, for example, when due to dust or vegetation shading. This category, which Heliolytics CEO Rob Andrews refers to as ‘scope 1,’ includes issues that can be fixed and can be split again into limiting or binary losses. An example of a limiting loss might be an incorrect tracker alignment, which still allows for some production, while a binary one could be something like an inverter failure, which stops operation altogether.

Because of their all-or-nothing impact on production, binary failures are given priority in remediation efforts. And plant performance strategies generally should first seek to deal with scope 1 items, which can account for 1% to 1.5% energy loss within a project, Andrews says. However, a growing concern as plants get older is non-recoverable performance or ‘scope 2’ losses, such as long-term module degradation or erosion of components.

“These are difficult to address because they are not necessarily going to be things that are going to impact on any one stakeholder’s KPIs in any given year,” Andrews says. “However, these things can have a big impact on the long-term performance of a project.”

Norton Rose Fulbright Currents Ep112: Solar Risk Assessment Report 2020

Available on Norton Rose Fulbright or Apple Podcasts.

“In Episode 112, Richard Matsui, CEO and co-founder of kWh Analytics, and Dana Olson, solar segment leader at DNV GL, are back to discuss the second annual "Solar Risk Assessment" report in which they, along with industry experts from nine other companies, share their quantitative insights on solar production risk. We get into the trends that are being seen in the market, the underperformance that is being found, what is causing it and much more. "

Bank of America on Utility-scale solar: Trending a bit below output expectations?

Originally posted on Bank of America by Research Analyst Julien Dumoulin-Smith.

Key takeaways

• We recently hosted a conference call to breakdown trends on utility-scale solar asset under-performance: why & where?

• In among the first most meaningful studies of US trends, under-performance driven by factors incl short-term shading

• 3% underperformance overall, but when excluding 1st year of ops underperformance is 1.7%: compounding effect on equity FCF

Latest takeaways on utility-scale solar production trends

We recently hosted a conference call with Richard Matsui, CEO of solar risk management company kWh Analytics, and Dana Olson, Global Solar Head of independent engineering certification accreditor DNV GL. Discussions emphasized key takeaways from their recent joint Solar Risk Assessment (SRA) '20, which stressed wider under-performance of solar assets relative to anticipated levels than previously contemplated. This follows an even more pervasive trend of over-estimation of output in the wind industry. Notably, thus far there has been limited data to measure this trend holistically in solar and the latest study represents input from among the largest incl NEE.

Solar production underperforming initial assessments

With the latest SRA '20 report, kWh Analytics highlights trends indicating utility-scale solar assets critically underperforming modest energy production expectations. Across its data set of 300K+ operating solar projects in the US (~20% of the US solar assets installed), kWh Analytics found that P90 production downside scenarios actually occur around a 1-in-3 year probability (rather than 1-in-10), with P90 scenarios of initial independent engineer assessment forecasts actually closer to P50 scenarios. Discussions emphasized rather than underlying asset underperformance, trends could also well be driven by production overestimates in independent engineer (IE) forecasts, with project developers often consulting multiples IEs with production estimates varying by ~3%. Similarly around production trends, DNV highlighted that based on 39 projects (~1.2GW) that it had conducted the initial pre-construction assessment for as the IE, it found ~3% weather adjusted under-performance for energy yield (based on EIA operational data) relative to its initial expectations. That said, DNV notes that a meaningful portion of the underperformance is driven by initial start-up issues for projects, with underperformance dropping to ~1.7% when removing the first year of operations. We emphasize this as a meaningful read-through to our YieldCo coverage, with CAFD underperformance often attributed to poor renewables resource, with potentially overestimating underlying energy yield, with cash impacts exacerbated by fixed associated project O&M expenses. Indeed discussions emphasized a need for project sponsors to scrutinize underlying assumptions for solar production estimates from developers given the meaningful impact of lower revenues to associated cash flows back to sponsor equity and project returns, particularly given tight return profiles and competitive cost of capital for assets.

Inverter availability a key driver of non-weather loss

Additionally, discussions highlighted that analyzing a 3GW fleet of utility-scale assets showed inverter availability of ~97%, relative to 99% availability assumed in production estimates, driving production underperformance relative to expectations. Inverters are highlighted as responsible for ~80% of non-weather production loss across the fleet. Further, discussions emphasized varying quality across inverter OEMs (of 12 within portfolio, with top performing OEM's inverters having 99% availability relative to worst-performing at 94% availability). Further exacerbating inverter availability issues, discussions noted inverter OEMs often require inverters to be serviced by the OEM rather than asset owner given potential warranty issues, though owners often carry spares.