“Great Opportunity For Large, Specialized O&M Firms In The Solar Market”-Kearney

Kearney, the global management consulting firm has just released a report for the renewable sector, titled “Digital-led excellence in operations and maintenance for renewable energy assets“. Some key insights from the report include:

• A mid-sized Indian IPP (2 GW) typically manages 10+ asset vintages across states, creating highly inconsistent O&M environments

• Over 70% of RE asset data goes unused in India due to silos and limited OEM access

• $4-6M annual loss per GW in India due to inefficient O&M; poor practices lower IRRs by 2-3%

• India lacks specialized O&M training, leading to overdependence on a small talent pool

  

  Jakson Green Secures 1 GWp O&M Contracts, Expands Solar Biz

  Also Read

• India’s digital O&M tools ecosystem is nascent, dominated by proprietary and often unscalable solutions

  

  Waaree RTL Sees Its O&M Biz Growing 2-3 Times From Next Year

  Also Read

• Case studies show Indian players have improved CUF by up to 5% and reduced solar soiling losses by 30-40% using analytics, drones, and digital twins.

Kearney has worked with multiple clients in India to support a transition from OEM dependent O&M to data-driven in house models. SaurEnergy was in touch with Bhaskar Rakshit, Partner at Kearney, and Kunal Kaushal, Principal at Kearney, co-authors on the report, for their responses.

Q1. What was the genesis of this report?

The report stems from Kearney’s extensive experience with 50+ renewable energy companies globally, including all major players in India. During our engagement, we observed a critical disconnect – with ever-growing and rapid expansion in the industry, many companies are focusing primarily on new project development, while not giving adequate attention to the operations and maintenance their existing assets and think that majority of the generation loss is on account of resources/ uncontrollable factors. This has led to a significant “value leakage,” where companies are foregoing millions of dollars due to suboptimal generation from their renewable plants. As our report highlights, this can potentially erode the Internal Rate of Return (IRR) by 2-3 percentage points from what was conceived at bidding stage. We wanted to highlight the significant quantum of opportunity available to renewable energy companies and discuss how digital-led processes, use-cases and operating model can transform O&M from a cost center into a strategic driver of profitability and long-term value creation. 

Q2. Is the O&M issue in India a continuation of global trends or is the potential for improvement higher/lower here?

The fundamental O&M challenges are indeed a global trend, driven by rapid portfolio expansion during industry’s growth. While different geographies vary in their O&M excellence maturity, our report finds the potential for improvement particularly high in India and within that for wind power assets, especially with the current market situation. This is due to a confluence of factors unique to the Indian market. Portfolios are often highly diverse, comprising multiple OEMs, varied technologies, and assets of different vintages, sometimes inherited through acquisitions. Such a diverse portfolio creates a complex O&M environment and leads to ad-hoc processes of preventive maintenance, quality of breakdown maintenance, inventory management, and governance mechanism across sites. This complexity, coupled with shortage of skilled talent in the renewable energy space and a nascent partner ecosystem for specialized O&M services, creates significant inefficiencies. While these challenges are acute, they also represent a greater opportunity. As demonstrated by the Indian case studies in our report, implementing digital-led O&M can unlock substantial performance gains and value, arguably more so than in more mature, homogenous markets.

Q3. We have seen O&M costs in solar come down with increasing automation linked to cleaning etc. What is happening on the SCADA side that is notable?

O&M costs is a relatively insignificant contributor to the profitability of renewable assets – even a meagre 0.5% capacity utilization factor can significantly over deliver against any cost increase due to better O&M partner, stronger contract or better practices including leveraging digital. This is a very important aspect that any market leading IPP should understand. The most notable trend on the SCADA side is its evolution from a simple monitoring and control system into a rich data source for advanced analytics. Historically, majority of operational data, including granular performance parameters from SCADA, went unused by operators. Today, leading companies are breaking down these data silos. They are integrating SCADA data with weather feeds, equipment sensors, and maintenance logs to power machine learning models. For instance, SCADA data is now increasing being used for identifying early signs of inverter failure in a solar plant, or for the dynamic optimization of wind turbine yaw and pitch angles. The key shift is from using SCADA for reactive control to leveraging its granular, real-time data for predictive and prescriptive analytics, directly enhancing energy generation, improving reliability, and reducing costs. 

Q4. As developers look to ‘recycle capital’ by selling projects, how much of a factor does project O&M make to the sale price?

Project O&M and resulting plant generation and its comparison to P50 levels for solar plants and P75/90 levels for wind plants, is a critical factor that directly influences the sale price when developers look for divestments. As the investors are getting more knowledgeable about the industry, potential buyers are placing substantial emphasis on asset’s historical operational performance and future revenue predictability during the asset due diligence. As our report quantifies, inefficient O&M can erode the project’s IRR by 2-3 percentage points, which would lead to a massive difference in valuation. A project/ company with a demonstrated history of O&M excellence — demonstrated through high availability, high efficiency, standardized processes, and robust data analytics — is significantly de-risked. It promises reliable cash flows, commanding a premium valuation. Conversely, a project with a poor O&M track record signals higher operational risk and potential for underperformance, leading buyers to discount their offers to account for the future investment needed to rectify the O&M strategy.

Q5. Does the market offer an opportunity for large, O&M focused firms today in solar, as we see in Wind? What could be the implications of a higher share of hybrid and BESS linked projects in the future on O&M capabilities?

We do believe that there is a great opportunity for large, specialized O&M firms in the solar market. As our report also highlights that RE industry’s exponential growth is outpacing the growth of a skilled workforce, creating a critical talent shortage – the gap is particularly severe in O&M, where companies are facing difficulties in hiring qualified personnel. Combined with the nascent partner ecosystem, lacking the scale or deep expertise for advanced digital O&M, this presents an excellent opportunity for third-party specialists who can offer sophisticated, data-driven services across diverse portfolios.

The increasing share of hybrid and BESS projects will amplify this need. These complex assets require a more holistic O&M approach that goes beyond individual component upkeep. It involves sophisticated software to optimize the interplay between solar, wind, and storage to maximize revenue against grid demands and market prices. This raises the technical bar, favoring specialized O&M firms that can invest in and master these advanced control and forecasting capabilities, a task challenging for many developers to manage in-house.

Q6. In your experience, post a certain size, (say, 5 GW or more), does it make sense to have in-house O&M or outsource it?

While there is no universal number, our experience suggests that for players with multi-GW portfolios, developing a strong in-house O&M capability on critical areas of O&M becomes a compelling strategic choice. O&M execution can remain outsourced but having an analytics led supervision, deep understanding of critical O&M processes and its impact becomes an absolute necessity. At this scale, the benefits of full control over data, asset strategy, and performance analytics often outweigh the costs. The mature stage of the O&M journey, as defined in our report, is characterized by in-house capabilities that drive superior performance. An in-house “center of excellence” can develop customized digital tools and foster a culture of continuous improvement that is difficult to achieve through complete outsourcing. A case study in our report validates this, showing an IPP achieving up to 5% CUF increase after moving O&M capabilities in-house. A hybrid model, where core strategic and analytical functions are in-house while routine fieldwork is outsourced, we believe is a highly effective strategy for large players. 

Q7. Do EPCs risk undermining O&M prices to win large projects by adding low-cost O&M as a sweetener?

Yes, this is a prevalent risk and a short-sighted strategy for both parties. When an EPC offers a low-cost O&M contract as a “sweetener” to win a project, it often leads to long-term value destruction. As our report emphasizes, robust O&M is not a commodity but a crucial driver of an asset’s profitability. An underfunded O&M plan inevitably results in corner-cutting, a reactive-maintenance-only approach, and a lack of investment in essential digital tools and skilled personnel. For the developer, this translates directly into asset underperformance, lower revenue, and a failure to meet the projected IRR and target P50/ P75 values. For the EPC players, it can lead to reputational damage, financial penalties for not meeting performance guarantees, and an unprofitable O&M business unit. Forward-looking developers are increasingly looking beyond the headline price to assess the true quality and viability of the O&M offering.

Authors

Bhaskar Rakshit Partner, Gurugram bhaskar.rakshit@kearney.com

Kunal Kaushal Principal, Gurugram kunal.kaushal@kearney.com