“Ensuring the process and due diligence in terms of engineering, selection of vendors and equipment, ensuring the risk mitigation of the project and having a detailed contract obligation with client / end user is crucial to have an edge on the projects,” asserts K Shridhar, Head Supply Chain Management, L&T Construction, Solar International BU, Sharjah, UAE.
What are the basics of solar supply chain?
Solar projects are expanding very quickly around the world, paving way for many opportunities for investors, developers and Solar EPC contractors. Capacity has multiplied 150 times with a trend of increase in size of the PV plants totaling to hundreds of megawatts, which require components and suppliers from different parts of the world for different projects. This has become the norm in large scale projects with implementation of solar panels from Chinese PV module manufacturers, inverters & other components suppliers from European / Indian / Chinese / Japanese brands, EPC contractors from around the globe illustrating the big challenges of geographical distribution logistics and expected quality standards for solar projects. The plants across the globe need a standard design life of 30 years and the required warranty and Guarantee for the plants.
Supply chain is not as complex as we feel, it’s the perception that matters at the end of the day. Proper planning, coordination of data in terms of both technical and commercial clarity, having efficient contract management both with vendors and end clients, timely sourcing, having strategic plans and strategy in place will help build the best supply chain. A well knitted network and strong integrity and collaboration will lead to ease the complexity.
Project owners, lenders, investors and other parties involved in large scale PV projects need to be sure that the ordered products are in line with the given specifications, full life cycle requirements and perform as expected. This has to be managed by effective supply chain by selection of reliable suppliers and products that meet the project-specific needs, having frequent factory audits, process and quality management by way of on-line and pre-shipment inspections and last but not the least to have all round Risk Management throughout the supply chain.
This must begin right from the planning stage that includes selection of suppliers that are truly suitable for the solar power plant as well as conducting tests and inspections before and after shipments and extending right up to monitoring and installation.
Everyone involved in the value chain of such a big solar power project facility is exposed to different kinds of risks. This includes from site access – ground levelling – vegetations management – climatic conditions – logistics aspects – financial / political stability – and of course the design and installation itself.
Large scale solar projects involve a huge amount of material and many construction workers. In order to minimize costs, avoid installation penalties all difference components must arrive on schedule. Installation is a very critical portion in solar projects as it consumes huge labor and other costs for successful commissioning of the plant. To have low overheads and mitigate the cost runs, we need to ensure all the supply materials arrive on time as per the planned schedule of execution agreed to avoid the delays and the project penalty (as per the agreed contractual terms).
Another important aspect is the Insurance of the supply equipment in terms of Generation Warranty / Guarantee from the vendors or approved third party reliable bankable parties on back to back terms for critical equipment. Not only this, the insurance for workmen, entire solar plant and taking care of the contractual obligations is a big challenge to deal with.
Transmission and distribution infrastructure: Scaling up of renewable projects need electric grid expansion and upgrades to support the additional power capacity of the utility scale systems.
Financing: Utility scale solar projects need huge financial resources, long construction and payback periods, especially in undeveloped financial market, which becomes a daunting task. Of late, it’s important for the shareholders to have a good relationship with international banks that are often responsible for financing of major percentage of utility scale solar projects.
Today with the experience in Mega Solar projects with Solar parks being developed, India is in the matured stage in terms of ranking in solar projects installation with ambition to reach 125 GW by 2022. Having said that, challenges are multi-fold in terms of the not only complexity of the projects in executing the project in a shorter duration, but also managing external factors such as changing dynamics of the market prices and the product technology itself leading to a huge competition in this solar world.
Solar being an immense potential, the R&D and product development plays a vital role in the selection of the technology and equipment. Every year there are new products being launched in the market by various equipment manufacturers and the first-come-first will have the fruit and benefit of the same in terms of advantage of the costs and utilization factors be it land, resource, labor, etc.
A well-balanced micro-planning from the project conception stage, making detailed site layouts, detailed topographical & geological studies of the project sites, detailed design engineering studies and selection of the supply equipment will play a vital role in securing solar projects.
While earlier I have discussed about challenges of operating in the Indian subcontinent, the challenges are multifold in the international geographies as well with scale and size of the projects involved, which call for huge force of manpower, execution challenges, climatic conditions of the regions and in specific the soil conditions and data management of the field. Also, another differentiator is the capacity, capability of the supplier partners to supply such huge volumes by keeping the commitment of cost, quality, delivery and reliability, and last but not the least, the Warranty & Guarantee of the supply equipment, and ensuring proper operations and maintenance for the equipment and projects.
But there are positives as well. These include the ease of handling, high level technology in handling and placement of goods, faster cycle time of clearance, operations and mobilization of manpower and equipment at shorter time span with reliable cost and quality considerations.
Selection of vendors plays a vital role. Before finalizing any long-term partner, we also need to see how the vendor can work as an extended support partner and being an integral team of the supply chain into the business will help achieve the milestone. The parts management also has to be stringent in processes, raw materials and finished goods inspection to meet with the standards. Additionally, vendors’ commitment on the warranty and guarantee of the parts supported by insurance and fallback plan is also crucial in such large-scale projects.
Today solar being the focus on many platforms and also expanding into domestic and international acumen, the supply chain is secured with keeping abreast of the technology, the product life and design life cycle of the equipment, maximum utilization of the land and using automation and robotics as needed both in the product and the labor force needed. Further, a detailed Risk analysis and capacity & capability analysis will help secure the solar projects.
Demand opportunity is aplenty in the next 10 years to come. The thrust is now more on the solar and globally also this being a green sustainable energy coming in par with coal and gas, etc., is the way forward on the roadmap.
With large scale projects being constructed more focus on IOT, automation, Big Data analytics will play a vital role. The mushrooming of the projects in terms of solar parks and focus on the roof top and other segments will play a vital role.