Monday, July 17, 2017
Uncorking the Residential Solar O&M Market
In the early days of solar, its proponents SUNJACK LIGHTSTICK claimed that the technology was simple to install and did not require maintenance. Consequently, a significant number of early small solar installations were neither monitored nor serviced regularly. These installations are likely to suffer from suboptimal performance without owners noticing. Undetected power production losses can lead to serious financial losses—from factors including inverter failure, cable damage, installation errors, and dirty modules. Fast detection of deviations in yield is crucial to preventing both generation and financial losses.
Traditionally, manual inspections have been used to identify issues that could cause a drop in performance, but this can be costly. Thankfully, the drive to reduce costs in the solar industry and promote self-consumption is affecting the advanced monitoring of residential installations as most are connected to a computing device and/or the Internet, opening opportunities to automate some of the operations and maintenance (O&M) tasks. Advanced monitoring and diagnostics solutions can tackle this issue without the need for costly manual inspections, identifying problems as they occur and making it unnecessary to visit every home to manually measure system performance.
Potential Residential Diagnostic Providers
Inverters and data loggers with monitoring software have been part of distributed solar installations since at least the late 2000s when distributed solar gained popularity, and have been part of virtually all installations since 2012. Data loggers (external or as part of inverters) and monitoring tools have been used by installers and inverter companies as differentiators in an otherwise competitive market. While there are no public figures on active users, there are some examples of penetration in the market. SMA—a leading inverter OEM—has put its user figure at around 250,000 residential end users. Using an average of 5 kW per installation, the company is monitoring around 1,250 GW of residential solar. Solar-Log has a similar number of data loggers in the field, providing monitoring and other services to about 11.6 GW of installed capacity (including large installations). Other inverter companies like SolarEdge and Enphase have also integrated monitoring services into small-scale products.
Most smart monitoring tools have been developed and run at a loss by inverter and data logger OEMs. By doing so, these OEMs have inserted themselves in the routines of solar installation owners as the monitoring tools are the interface between the solar system and the installation owner, and OEMs could use these to move their customers to a paid service that includes diagnostic tools.
In residential and small commercial markets, significantly different power electronics components (sometimes with closed communications protocols) can be used, depending on the age of the deployment and the installer’s preferences.
If a third party wants to offer monitoring services to the residential market, it must invest in a system that is sufficiently flexible to accommodate this heterogeneity, increasing the service’s cost and therefore reducing potential profit. While inverter manufacturers are best placed to bring products to market, most of them will be limited to installations where their equipment was used.
In addition to technology fragmentation, the installer market is also highly fragmented, creating a complex sales channel for monitoring companies. Many installers also want to keep their customers from third parties so that they can sell maintenance and other services. Thus, some monitoring companies provide a backend monitoring service to installers. In this model, the monitoring company does the day-to-day monitoring of an installation through digitalized systems while the installer receives any alerts generated by the system (and hence retains its revenue stream). This business model is making inroads into the residential HVAC maintenance market, which has similarities to the residential PV market: it is highly fragmented and has suboptimal performance issues that are difficult/costly to detect before automated diagnostic technologies are introduced.
According to Navigant Research, global cumulative revenue for the residential solar monitoring market between 2017 and 2026 is expected to reach $5.4 billion, monitoring up to 40 million residential systems. Importantly, this includes diagnostic analytics and hardware, but not home visits and repairs. Navigant Research anticipates that home visits and repairs could add about $2 billion per year by 2026, although at significantly higher costs due to the labor needed for the repairs.
To hit this level of revenue, residential O&M providers need to develop the monitoring market for small systems. Companies must reeducate the public to show the value monitoring can bring to their installation. This is especially important to the retrofit market as, in some cases, the customer may need to invest in new hardware. Thankfully, these installations also have the most unrealized value as—at least in Europe and Asia—the systems receive high feed-in tariffs, and therefore even a slight increase in generation can cover the associated costs of the O&M service.