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AfrElec RENEWABLES AfrElec

Global O&M solar market

set for fast growth, but

new entrants will struggle

ASIA GLOBAL solar operations and maintenance volume of assets in a given region are therefore
spending is predicted to rise fourfold to $15bn by best placed to offer competitive pricing.
2030, but low margins could deter new entrants However, EMEA is the only region expected
from entering the market and reduce profits for to see an overall per-megawatt cost reduction;
established players. that’s largely due to projects located in low-cost
Increasingly competitive auction prices, cou- labour markets in the Middle East and Eastern
pled with rising labour and supply chain costs, Europe. Elsewhere, a shortage of skilled work-
mean service vendors face challenges to stay ers and manufacturing supply chain issues are
profitable. likely to offset potential savings from technology
Total global solar installed capacity is improvements, pushing up overall costs.
expected to reach 2.2TW by 2030, Wood Mac- Competitive renewable energy bidding for
kenzie said in a recent report. solar PV service contracts has become the norm
The US will be the most attractive single in most major markets. Such auctions have
market, accounting for US$3.5bn of the total. driven down operating expenditure for asset
On a regional basis, however, APAC leads with owners significantly over the last decade. How-
US$5.7 billion of the total spend. ever, they result in low prices that pressure the
Globally, low margins are a major barrier to entire industry value chain.
new entrants; as a result, we expect larger service With service providers increasingly finding
providers to keep their lead in overall market their margins squeezed from both directions,
share. asset owners shouldn’t expect this situation to
Utility-scale projects will continue to dom- continue in the long term.
inate new capacity. The Americas region leads Wood Mackenzie said that its pricing survey
this trend, followed by APAC and EMEA indicated that full-scope agreement pricing was
respectively. beginning to stabilise.
In Europe, the market share of utility-scale It’s worth noting that low contract prices are
projects will grow from 32% in 2020 to 50% in a misleading reference figure in the industry
2030. Globally, average project size is 83 mega- anyway; critical O&M activities are increasingly
watts, 14% larger than reported at the beginning excluded from scope to keep upfront prices
of 2021. The trend towards larger average project down.
capacities helps optimise O&M pricing, as sys- At the same time, in the short term, manu-
tem density is an important cost driver. facturing shortages, tariffs and rising commod-
Nearly half of global O&M spend over the ity prices all increase spare part and equipment
next ten years will be for corrective repairs, costs. And, in the long term, higher labour costs
including inverter replacements. This is a clear are likely to be an issue, especially in countries
driver for potential repowering activities and like China and India with particularly high real
advanced analytics solutions — it also empha- GDP growth.
sises the benefits of full-scope contracts where As a result, Wood Mackenzie said it expected
service providers have warranties in place. per-project, 20-year lifetime O&M costs to esca-
Economies of scale are key to achieving cost late over the next decade.™
reductions for full-scope service agreements.
O&M providers looking after a significant

P6 www. NEWSBASE .com Week 05 03•February•2022