The term Due Diligence (DD) is frequently used in the financial market before starting a project, acquisition, merger or any type of investment that involves risks in decision-making.
In the world of photovoltaic systems, although the term is not popularized, large companies already use Due Diligence strategies to analyze the viability of implementing and acquiring these assets.
However, before describing Due Diligence strategies, this term must be conceptualized, as it is of fundamental importance for the various of the enterprise (investors, owners, financial institutions, among others).
Due Diligence is the work that is carried out before making an investment decision. This work includes stages of investigation, analysis and verification of various technical, financial, regulatory (legal and tax) and environmental aspects of each transaction that is intended to be carried out.
In the world of photovoltaic systems, Due Diligence aims to ensure that the project in which one wishes to invest is technically viable, financially sustainable, safe from a regulatory point of view and environmentally sustainable.
The assessment of technical aspects is based on several analyses, from the planning and design stages to the operation and maintenance of the photovoltaic plant.
Good bibliographical references on the Due Diligence process always provide a matrix of risks and opportunities that the project may offer. In this way, the process can be mapped in detail and it can be verified whether the project will yield the expected return.
Technical Analysis
This text will provide more details regarding the technical aspects involved in the Due Diligence process, which is the focus of this article, but the financial and legal analyses are equally important for the success of the investment, whether it is the acquisition or construction of a photovoltaic plant.
These other two aspects will be explored in more detail in later articles. In the technical analysis of Due Diligence, Some main points can be highlighted. Check out what they are below.
Irradiance study and performance prediction
Plant performance must be predicted in the technical analysis both during construction and during asset acquisition. The main bibliographical references, including IEC, NREL and IEEE, provide guidance for calculating the plant performance forecast, which will be performed based on historical data of site irradiance, ambient temperature and seasonal profile of the installation site.
Adjustment of PV module output variables with temperature and irradiance measurement
Computer simulations in software are necessary to obtain the annual generation forecast and obtain the expected performance. There are several software programs on the market that have these functionalities, both for technical and financial analysis, including: PVsyst, PVSOL, Homer, SAM, SOLergo, among others.
Figure 1 presents an example of generation forecast simulation using software designed to simulate photovoltaic plants.
Figure 1 – Example of software simulation
Analysis of the Executive Project
It is necessary to the quality of the executive projects. In this item, the assessments must be ed by current regulations and good engineering practices. The entire layout of the plant must be verified, including the choice of modules, inverters, metal structures, transformers, cabling and other equipment.
It is of utmost importance to confirm that the UFV layout is optimized, in a way that minimizes the acquisition and operation costs of the project's assets and maximizes energy generation. Figure 2 shows an example of a 2,5 MW (AC) photovoltaic plant layout.
Figure 2 – Example layout of a 2,5 MW (AC) photovoltaic plant
Equipment quality
Since all technical and financial analysis takes into the useful life of the equipment, it is of utmost importance that the equipment used has the quality to last the time predetermined in the planning stage.
Therefore, it is important that the equipment to be used (modules, inverters and structure, mainly) meet the main standards, such as IEC and IEEE regarding equipment qualification, technical specifications, durability, etc.
Furthermore, it should be confirmed that the chosen manufacturer has a good track record of supplying good quality equipment, so that the expected useful life forecast in the financial feasibility analysis is as assertive as possible. In short, the quality of the equipment and manufacturers directly impacts the financial return of the project.
Construction and installation aspects
To ensure the quality and durability of the entire installation, it is essential to closely monitor the entire construction process. From preparing the site to digging trenches, including the construction of masonry bases, placing pillars, alignments, assembling tables and electrical installations, close monitoring of the entire process is necessary. site manager (SM) and installation quality inspections during all construction phases.
Furthermore, the schedule prepared in the planning phase must be reviewed and discussed throughout the construction of the project, as unforeseen events may occur during construction.
However, there are regulatory deadlines that must be met, especially to be entitled to certain tariff benefits, therefore, constant review and adjustment of schedules will ensure that the established deadline is met.
Commissioning and other tests
Commissioning tests aim to ensure that the plant will be energized safely and that all equipment under test is fit for operation.
During commissioning, it is verified whether the work carried out in the field complies with the project specifications, such as: single and multi-line diagrams, descriptive and calculation reports, normative recommendations and good engineering practices.
Commissioning of solar plants and photovoltaic systems
The electrical and mechanical tests aim, among other things, to certify that the safety, quality and performance of the installed assets are in accordance with regulatory and contractual requirements.
Figure 3 presents a problem found frequently in commissioning work and Due Diligence checks of CS consulting, it is about by diodes with defects in two analyzed strings. As there were several modules with defective diodes in the same string, the string voltage was affected when compared to the other healthy strings.
Figure 3 – Two strings identified with defective by diodes
Performed in conjunction with curve IV (category II tests, according to NBR 16274), thermography helped to observe the problem and identify the defective modules in this string, as can be seen in Figure 4.
Figure 4 – Thermography identifying defective by diodes
Performance and O&M activities
Monitoring the performance of a photovoltaic plant or analyzing it before an acquisition is an important step towards valuing the asset and predicting revenue.
Through the calculation of performance ratio (PR) you can check whether the UFV is performing adequately and whether it has had good monitoring by the O&M team, the latter including the entire history of interventions carried out during the operation of the assets.
For PR analysis, it is necessary to have a solarimetric station in the plant and for the measured data to be reliable. This is because it is quite common in consultancies for calculating PR to notice the presence of solarimetric stations, but the sampled data is corrupted or very inconsistent, which is often caused by an inadequate configuration during commissioning, in addition to neglect in the O&M of the sensors and logger of the solarimetric station.
Calculation of Performance Ratio (PR) in photovoltaic systems
Adopting a good operation and maintenance plan will increase the plant's availability rates and consequently revenue, bringing a greater economic return.
To achieve this, it is essential that O&M contracts are well structured, that there are remote monitoring procedures, preventive and corrective maintenance plans, as well as plant management to ensure optimal performance.
Final Words
Due diligence in photovoltaic plants is a broad process that aims to ensure the technical, financial, regulatory and environmental viability of a project. By carrying out this process rigorously, several potential risks can be mitigated, which will give more confidence to investors, technical staff and other stakeholders.
For a better Due Diligence process, it is important to use guidelines and references from reference institutes, such as ABNT, IEC, IEEE, NREL and other technical articles published in reputable journals. This will ensure that projects are aligned with the best global practices within the universe of photovoltaic plants.
This article focuses on the main technical aspects of due diligence in the execution and acquisition of a photovoltaic asset. Later articles will detail the economic, regulatory and environmental aspects that are equally important in the due diligence process.
The Due Diligence process integrating all these factors (technical, economic, regulatory and environmental) reduces uncertainties and risks, which will ensure a return on investment. This, in turn, strengthens the solar energy sector and contributes to the advancement of the energy transition, aiming for a more sustainable future.
Bibliographic references
[1] ALBUIXECH, Alba Forns; WISEMAN, William. Framework for Project Due Diligence of Solar Photovoltaic Installations. 2021. Master's Dissertation, Department of Heat and Power Technology. 2021:498. https://www.diva-portal.org/smash/get/diva2:1593680/FULLTEXT01.pdf
[2] KURTZ, Sarah. Streamlining and Standardizing Due Diligence to Ensure Quality of PV Power Plants. In: SOLAR POWER INTERNATIONAL, 2017, Las Vegas. NREL.
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The opinions and information expressed are the sole responsibility of the author and do not necessarily represent the official position of the author. Canal Solar.
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