24 September 2015 by Jason Deign, Solarplaza
Standardised measures around plant performance may boost the secondary market for PV projects
Testing and advisory service provider DNV GL is setting up a joint industry project that will work on a set of standard measures for PV plant performance. This should make it easier to transfer PV projects, improving the liquidity of the secondary market. The release is expected to happen in 2016.
There is growing interest in selling and buying operational PV plants in established solar markets such as France, Germany and the USA. But “the process can be made more uniformed and cheaper,” said Paul Raats, the DNV GL manager for the project.
“When a buyer buys a plant he wants to know what risks are involved, so he hires an independent expert to do due diligence on the plant,” Raats explained.
“The consultants in our industry cover more or less the same kinds of topics in their due diligence processes, but the methodologies differ, which makes the plants and their transactions limitedly comparable. A more uniform way of doing due diligence helps getting transaction’s costs down.”
In particular, there is no current standard for critical measures such as plant performance ratios. It is difficult for plant portfolio owners to make accurate assessments of the value of plants when different methodologies are used.
Raats said there are currently different ways of calculating performance ratios. “We would like to develop a standard, what we call a DNV GL recommended practice, that enables a uniform way for PV transactions taking place,” he said.
In addition to performance ratios, the recommended practice aims to cover measures such as energy performance assessments, maintenance reserves and module degradation. “These kinds of parameters will benefit from univocal definitions among transaction partners,” Raats said.
With the RP in place DNV GL foresees that equity investors will be able to carry out due diligence in a more cost efficient and easy way. It will also help make lending more efficient by simplifying the reports that banks have to review in order to make loan decisions.
Raats mentioned that especially one group will benefit from this RP: owners or prospective buyers of smaller plants. In the absence of a standardised measurement process, their cost of due diligence is currently “disproportionately high,” he said. “It can be done much cheaper.”
DNV GL has just started to reach out to interested parties to compose a multidisciplinary joint industry task force that can help with the development of the recommended practice.
Talks are already underway with industry representatives, including banks and project owners, in markets such as the UK and France.
Raats said the recommended practice, which parallels works with standards on newly built solar plants, would initially be most applicable to the European and North American markets.
It could also be used later on in emerging markets as they mature. “The standards can live for years and be updated from time to time,” Raats commented.
- Paul Raats is one of the speakers at the Solar Asset Management Europe event this October in Milan, Italy. Register now for your pass.