Originally posted on pv magazine USA and pv magazine International.
kWh Analytics is introducing a new tool to address the solar industry’s systemic overestimation bias and accelerate the adoption of a more data-driven approach to arriving at production estimates.
Finding a way to address and correct the industry-wide bias toward optimistic performance expectations is important because accurate production estimates are a key ingredient to the financeability and growth of the sector, said Hao Shen, director and head of data products at kWh Analytics.
On a weather-adjusted basis, solar assets underperformed their target production on average by 6.3% between 2016 and 2019, according to a recent report by kWh Analytics. One-quarter of projects studied by the company missed their production targets by more than 10%, after accounting for weather.
Production estimates factor into the market valuation of a solar system and the financial models underpinning a solar power plant’s economics, but until now asset owners have not had access to data that could contextualize their portfolio’s performance, kWh Analytics said.
According to Shen, the use of market data to improve the financeability of an asset is an inevitable step in the maturation of the asset class, and kWh’s Solar Technology Asset Report (STAR) Comp took aims to address this gap for solar.
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Using its STAR Comps, asset owners and investors can input their metadata and receive objective performance yield, weather and loss assumption metrics reports that show how a solar asset stacks up relative to a peer set of comparable industry systems, Shen said.
The solar industry needs these types of risk management tools now because its continued success depends on its ability to reliably deliver the results that it promises to investors, he added.
“The use of objective market data will force accuracy,” said Jigar Shah, co-founder and president of Generate Capital.
In June, kWh Analytics likened the solar industry’s bias toward overly optimistic pricing to the big three credit rating agencies’ pre-financial crisis, saying that the independent engineers that are hired by solar developers to give solar production estimates have an inherent profit motive for giving aggressive projections. At that time, it said that investors needed to take a step back and adjust to the reality that unreliable energy estimates have been baked into projections.