Asset Management Best Practice Guidelines (Version 2.0)

Asset Managers can be involved in all phases of the solar power plant’s lifecycle, from development to decommissioning. Most of the content of the Guidelines focuses on Asset Management during the operational phase – the longest phase of the project lifecycle – but this chapter presents an overview of lifecycle Asset Management with roles and tasks in all project phases.

3.1. The key stages of a project

Over the lifetime of an asset, from inception to disposal, the generating plant and its operating company – typically a special purpose vehicle (SPV), which is the primary counterparty to the contracts and ownership documents that underpin the value of the plant – move through a number of definable stages.

These stages are typically marked by changes in contractual liability and obligation, and the transitions or ‘stage-gates’ between phases are usually marked by the execution of contractual documentation, such as contracts or 3rd party certification defined by the contracts and underpinned by appropriate supporting documentation.

An effective Asset Manager will ensure that at each of these ‘stage-gates’, risks are managed effectively through the transition and activities during the phases between the stage gates are well managed on behalf of the plant owner, from a financial, technical, as well as contractual perspective.

This activity may be described as ‘lifecycle project management’ and the characteristics of the stages on either side of the operational phase are outlined in this chapter. Asset Management activities covered throughout the rest of this document relate to the management of the plant and SPV during the operational phase.

3.2. Overview of the role of asset manager through the lifecycle of the project

Typically, an Asset Management team or function will draw upon, support and oversee the activities of other teams of specialists in each phase. In the case of the operational phase, this will typically mean the O&M contractor, with the Asset Manager acting in a supervisory role with responsibility for managing escalations and validating delivery.

At other stages, the Asset Manager will work with the key delivery partners shown in Table 1 to ensure that value is protected, risks managed, and contractual obligations are fulfilled.

3.3. Core competencies needed for lifecycle project management

Throughout the lifecycle of the plant and at each stage, the Asset Manager will manage six core competencies – listed below – across the technical, financial, and contractual functions of the role. In this section we focus on those competencies, which are particularly important to maintain throughout the stage-gates of the project lifecycle.

Stage-gate management The Asset Manager should ensure, at each transition between stages and at milestones (such as construction milestones or interim acceptance testing), that the required documentation associated with risk management, value protection and performance is validated and stored.

Documentation management The Asset Manager should ensure that there is an index and dynamic mechanism for the storage, version control and retrieval of static and dynamic documents which underpin the value of the plant and relate to the technical, financial and contractual management of the plant. A best practice is to utilise software which provides ‘full text indexing’ and/or meta-data tagging when storing new or onboarding information.

Information management is something the Asset Manager will develop throughout the lifecycle of the plant, through an Asset Register. Operational data also needs to be considered utilising systems such as SCADA. Inspection and testing data is ideally stored within a Digital Twin of the asset to enable the Technical Asset Manager to better understand the holistic view of asset health and performance.

Risk management The Asset Manager will have a mechanism for tracking key risks through each phase of the project lifecycle.

Ideally, this register is pre-loaded at the development phase of the project lifecycle, with key risks being identified as part of the owner’s decision to invest and through the due diligence activity of the legal and technical advisors.

It is recommended that Asset Managers consider requesting the certification of power plants through their life cycle to international standards via available international certification schemes or conformity assessment systems. See also Chapter 4. Risk management in the operational phase of the Asset Management Best Practice Guidelines and Chapter 2. Risk management from Ready-to-Build until COD of the EPC Best Practice Guidelines (SolarPower Europe, 2020).

3.4. Activities at key stages

The best practice activities for the Asset Manager at each stage are outlined below. This is an addition to the core financial, legal and technical responsibilities detailed in the rest of this document.

Crucially, there is a key role to play within the Asset Manager’s remit of tracking and managing risk throughout the lifecycle of the plant and the stage[1]gates between stages offer an opportunity for the Asset Manager to put in place controls.

Stage 1: Development, engineering and procurement (pre-construction)

This phase covers all the activity undertaken, up to the point where the project may be described as ‘shovel-ready’. Usually, the activity at this stage is focused on the technical and financial development of the project, with a series of transactional milestones such as investment committee approval, EPC execution and financial close.

Typically, this activity is driven by the developer and the transaction team of the owner, supported by legal and technical advisors. However, it is at this stage that timely contributions from the Asset Manager serve most effectively to avoid problems later in the lifecycle of the project. Invariably the AM team will be the only group with long-term involvement in the project lifecycle. An experienced AM service provider will know the issues that can emerge later in the process as a result of ambiguous drafting of EPC terms.

This might be illustrated by the example of documentation requirements associated with the earthing of the plant. Typically, a subject of little interest to the deal team and therefore might be reflected under all-encompassing, but generic terms, such as “the contractor will provide all relevant documentation relating to the earthing of the plant” and “all relevant ‘as-built’ documentation”. With timely involvement from the EPC contractor in collaboration with a sound technical advisor a full list of required documentation can be defined, making the job of the Technical Advisor at the point of post-construction acceptance much less liable to interpretation at a point where pressure to complete is high.

In addition, the Asset Manager should be involved at the transition between transaction and construction to ensure that immediate obligations can be met which might otherwise be missed as the legal teams construct and distribute the hard copy forms of the deal bible. For example, a construction bonus may have been agreed with the landowner and with lease agreement typically not requiring the landlord to issue an invoice, this type of payment can be missed during the period immediately after signing.

As a best practice, the AM provider should be able to undertake a review of all key documentation at point of signing and prior to construction starting:

• EPC documentation – requirements relating to milestone sign-off (see also the EPC Best Practice Guidelines (SolarPower Europe, 2020));
• An agreed form of project summary document including summary of key contracts in place (and t.b.d., such as insurance) and key obligations and timing therein;
• An agreed form of risk and variation register or RAID (Risks, Actions, Issues and Decisions) log (to ensure that ‘orange’ issues raised through legal, technical or commercial due diligence are flagged for monitoring as the project goes live, and any ‘red ‘flagged items have suitable mitigation actions in place);
• Contract audit – to identity timing of key obligations and expiries (for example, energy import pricing may be on a temporary tariff throughout the construction period and revert to more expensive default tariff during the first year of operation);
• Documentation Management System to allow a smooth transition from legal ‘Deal bible’ to operational documentation management

Stage 2: Construction

During the construction phase the Asset Manager will be focused on tracking adherence to planned milestones and ensuring that documentation at each stage of build, relating to components of the plant, is in order. In addition, variations to the plan should be captured. See also the EPC Best Practice Guidelines (SolarPower Europe, 2020).

Stage-gate: Transition from construction to operations

Crucial is to ensure appropriate documentation is captured at the commissioning and testing stage. Working closely with the clients and Technical Advisor, the Asset Manager will be ensuring the comprehensive management of documentation relating to commissioning components and capturing issues emerging from audit to ensure effective triage and timely resolution.

Stage 3: Operation under EPC warranty

EPC Contractors usually provide a 2-year performance warranty period after the Commercial Operation Date (COD). During the warranty period, it is the responsibility of the Asset Manager to monitor, calculate, report and follow up the values of Performance Ratio and other KPIs guaranteed by the EPC Contractor.

Within this scope, it is the responsibility of the Asset Manager to:

• Manage the interventions done within the scope of the warranty in order to safeguard the performance commitments undertaken under the contract;
• Periodically inform the Asset Owner about the condition of the contracted performance indicators;
• Immediately alert the Asset Owner whenever the levels of the indicators have values or tendencies that could indicate a risk of failure.

As part of best practice, the Asset Manager should pre-empt issues of equipment life expectancy through the effective management of an asset register.

During the warranty period, issues can occur in the plant, which the EPC provider is liable for. The Asset Manager is in charge of resolving these issues in line with what is described in section 6.5. Warranty management.

Stage 4: Operation under ownership

The activities to be covered by the Asset Manager in the operational phase are described in chapters 6, 7 and 8 of these Guidelines.

Stage 5: Decommissioning & disposal

Once the solar asset reaches its end of life, the Asset Manager should provide the Asset Owner with recommendations of options to do the decommissioning & disposal in line with applicable legal requirements. It is a best practice for the AM service provider to create a matrix of obligations and actions and track its fulfilment.

3.5. Lifecyle lessons learnt and feedback loop

Projects that have reached the operational stages of the lifecycle represent a significant learning opportunity from a technical, contractual and financial perspective.

The experience and operational data available to AM service providers and Asset Owners can educate the stakeholders and improve their investment decision processes in two ways:

• Providing realistic, tested and proven assumptions (both from a technical-operational perspective and from a financial-commercial one); and
• Identifying areas of improvement impacting positively the overall investment return.

Carrying out lesson learnt from the operational phases is an ultimate driver of additional value to be extracted from the PV plants. More specifically the feedback loop has proven effective in identifying added value opportunities such as:

• Re-assessment of yield assessment based on reliable site data and generally improving the overall production expectations;
• Fine tune contracting strategy (simplification of complex or redundant processes set forth in complex contracts, for instance the final acceptable processes);
• Re-definition of scope of work of main service providers rebalancing pricing and services wrap;
• Strengthen criteria for election of key component suppliers and manufacturers; and
• Increase sophistication and appropriateness of spare parts strategy on a site and portfolio basis.

To take full advantage of the knowledge created by the operational phases of the lifecycle, AM service providers and Owners must deploy a data driven and analytical approach from the very early stages of operation of the PV plants. This data is vital to establish and carry out a meaningful risk assessment and overall review of the PV plant as an investment. As described in the Introduction (see Figure 3), this risk driven approach is the foundation leading to stabilising operations and therefore reduce the overall volatility of the investment in the PV plants.