Bankability - Reducing Risks and Building Trust

Higher equipment costs, challenges with logistics, and pressure on auction prices are a reality. Defining solid business cases with a focus on risk reduction when developing new projects, therefore, is becoming increasingly important.

Let´s look at some factors that pose a risk and how to alleviate the problems and define a trustworthy business case.

The underperformance of PV plants is a problem

1 in 8 solar assets underperforms in relation to their downside P99 scenario estimates, thereby exposing newer loans to default risks, according to the 2021 Solar Risk Assessment by kWh Analytics.

Obviously, this represents a substantial challenge for developers - when the actual revenues and costs do not meet lifetime value assumptions. Because of this, financers now, to an increasingly higher degree, request direct insight into the day-to-day operation of solar assets.

Trust has to be built in the business case to tackle this challenge.

Firstly, an assumption about, e.g., plant availability and equipment performance over the plant's lifetime, needs to be founded on realistic parameters. Suppose one is to set ambitious targets, e.g., availability. In that case, it is mandatory to have operational systems (SCADA, Asset Management) in place to make it possible to meet those targets. The same is valid for operational costs, where these systems should support operations and automate reporting, optimization, and decision support.

Considering losses, there are two categories of deviations coming into play that heavily impact a plant's performance and need to be understood and considered during development: Uncontrollable conditions and Controllable losses.

Uncontrollable conditions

These are issues that typically need to be addressed during the development phase.

Equipment degradation

Considering the lifetime of a PV asset is 25 years, a low degradation rate is a significant factor in maintaining an output similar to what is initially scoped in the business case. Not all manufacturers can provide modules that keep the yearly degradations within the warranted ranges.

Weather conditions

Predictions of production and RoI when planning a PV plant and carving out a business case are highly dependent on the analysis of the weather conditions at the site. Often, these weather conditions turn out to be substantially worse than expected, thus impacting the output of a plant, making it lower and hence the ROI lower than initially assumed in the business case.


Solar irradiation prediction is always part of planning a PV facility. Historical data of irradiation can be obtained, but unfortunately, the predictions are often not consistent with the irradiation obtained after setting up a PV plant, as it depends on the tilt, tracking, and shading of PV panels.

Grid availability

Production curtailment will fall into this category and requires systems to identify such situations and estimate the affected production.

These four issues are examples of uncontrollable conditions that significantly impact the perceived value of solar assets and their bankability; They are uncontrollable but can be assessed as best as possible using project development using actual historical figures.

Controllable losses

The controllable issues that impact production can be corrected with maintenance activities. (some of these can be considered uncontrollable, e.g., some shading cannot be fixed, e.g., from buildings and other structures. Also, soiling can be regarded as uncontrollable, e.g., sandstorms. However, soiling can be corrected with the appropriate measures and systems in place)

Equipment failure - equipment breakage leads to production failure as ordering, receiving, and repairing components after breakdown takes time. As a PV plant gets older through its 25+- year lifespan, this may occur at an increased frequency, potentially leading to substantial downtime and production limitations.

In general, panel cleaning based on fixed schedules will lead to underperformance as cleaning costs vs. actual production losses are not considered.

Shading may lead to production losses not taken into consideration during development.

A suggested solution

The factors that make up the uncontrollable issues are essential to consider and document during project development. In addition, it is necessary to have tools in place that make it possible to record underperformance due to uncontrollable issues so that, e.g., claims regarding the warranty of the plant can be addressed and appropriately documented.

Having a SCADA and asset management system in place, aggregating data from sensors in the physical components of the plant will give you a real-time and historical picture of what is going on. This will provide confidence in the validity of performance assumptions, and historical performance numbers will prove it. Understanding where the actual losses occur (production and revenue) will give you the insight needed to manage the problems when they occur.

SCADA and asset management will also enable a rearrangement of the way your workforce operates - operations automation saves costs

Your organization can focus on an on-demand and more agile way of working, thus saving costs regarding human resources, focusing on the controllable deviations, and quantifying where profits are lost. You get data-driven, automated, and high-level decision support from SCADA/AM.

Equipment degradation: Have a clear picture of realistic degradation numbers and have documentation in place for possible warranty claims

Equipment failure: Change trackers, inverters, sensors, and other physical gear before they wear out.

Soiling: Deal with soiling the moment it happens.

Shading: Understand and manage shading losses effectively.

Maintenance operations: Transform operations to a commercial set-up where O&M service providers are incentivized/penalized on data-driven performance metrics.

Result: increased bankability and revenue

With a SCADA and asset management system in place, you can reduce operational costs by making maintenance more effective. Leveraging the possibilities of a data-driven strategy, you can reduce risks, increase revenue, and the bankability of PV investments by getting a better insight into your operations.

Also, the actual value of a PV asset should be set higher with such systems in place, considering that many assets are conveyed to third parties.

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