April 11, 2018 by James Pagonis:
I think I speak for every renewable energy industry service provider (and a good percentage of potential investors and acquirers as well) when I say “Why can’t we all just standardize!” .
We need to agree on what we’re measuring, how we’re doing it, and what we’re calling it. Give us data consistency, or give us death!
I’m not even being that figurative. If we deal with data this way, we’re going to have challenges driving down costs, and continuing to be competitive.
We’ve been talking about data a lot recently. Last month I moderated a series of panels on data and information relating to large portfolios and this month we’re off to the Orange Button Developer’s Conference. We keep talking about data because this stuff is important.
We have a data management problem in this industry, so says the Orange Button mover and shaker, Jon Previtali. I wholeheartedly agree. Your business information is probably coming from an enormous number of sources, passing through many different pieces of software, and stored in too many different places. I’m not even touching on the errors associated with raw instrument data.
Think about what happens when you move to sell or refinance an asset. Where is your information stored? Are you using a wide variety of different software to transmit this information? Be honest, is there just one person on your team that knows and manages the Excel spreadsheet that’s your project bible?
You make money based on the reliability, availability and transparency of your data, so why, as an industry, are we making things more difficult to value? If it’s hard for you to decipher the data from your own projects, which you deal with regularly, imagine how your clients and financiers feel.
Bad data management, in the best circumstances, means lost efficiency, and lost revenue, and it makes it difficult for people standing on the outside of your business looking in to understand what you’re really talking about. This, in large part, is why large financial institutions and insurance providers are such a driving force behind the Orange Button initiative. Consistent portfolio valuations and comparisons are pretty tough if the same language is being used to describe two different things (and don’t even get me started on insolation vs. irradiance).
I think I know what’s on your mind – you’re wondering why you should care. Do you want money to build new projects? On a macro scale, a consistent taxonomy across the board makes it easier for banks and funds to value renewable energy projects for more efficient and cost-effective financing.
Regardless of trade tariffs, hard costs falling can’t be counted on to continue drive margins; they’re no longer the material lever. Soft costs have to come down, but, according to Jon, they’re not. Turns out, transparency has an impact on profitability, and on valuation and funding. Without even thinking about the human impact – so much wasted time explaining, coordinating, and centralizing data that should be front and centre of your organization.
The same principles that paved the way for peer-to-peer funding, and the crowdfunding revolution are rearing their head in the form of the Orange Button Initiative. That is, that transparency, standardization and ease of sharing are the fundamental components of funding automation. Turns out, braggawatts don’t really work as a standardized measure for valuation.
I hope by now I’ve made my case, but here’s my Hail Mary pass: you should care because better transparency benefits YOU, not just the industry as a whole. Because renewable energy is not a special and unique snowflake, we do cool and exciting stuff, and automation and standardization is the path to true market parity. Because we should all be clear on exactly what you’re talking about, and because right now we a simply standing in front of the dam of data plugging the cracks with our fingers. And the data keep pilling up.