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Best Practices in the BOS Procurement Industry

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Best Practices in the BOS Procurement Industry

Bimal Jindal
Vice President- Supply Chain Mgmt
SB Energy (Softbank Group)

Solar market in India is becoming extremely competitive with tariff falling to Rs 3.15/KWH. This makes it important for Solar Power Developers to manage BOS procurement in best possible manner, as BOS is a pretty substantial part of overall cost of the project.
SB Energy Holdings Limited (“SB Energy”), has announced the commencement of commercial operation of its 350 MW solar power plant located in Andhra Pradesh. It is the first operational solar power plant delivered under the Solar Parks scheme of the Jawaharlal Nehru National Solar Mission which commenced its operations on March 29, 2017 and completed 51 days ahead of the scheduled date agreed in the PPA.

In today’s scenario, it is always challenging to deliver and commission solar power plants on time or ahead of time meeting with budgets due to procurement challenges. SB Energy was able to do the same due to the following best practices of procurement:

· Functionalized procurement processes

· Qualification of suppliers/products to ensure avoidance on CoPQ (Cost of Poor Quality)

· Focus on Product reliability & safety

· Develop long term partnership with suppliers

· Innovate with Suppliers

· Compliance with scope and specification

· Close monitoring of delivery schedule to ensure timely execution

· Cycle time reduction on critical equipment’s

· In line inspections on sampling basis

· Logistics management including correct documentation

· Defining clear responsibilities of buyer/seller

· Centralised storage of data and reporting

· Use statistical tools to analyse the data

· Minimise inventory through proper planning

· Negotiate keeping both parties interest in mind

· On time payments

· Mutual respect for each other

There will always be challenges while implementing above practices which need to be managed with right skill set. The companies that follow systematic approach to procurement will be able to deliver the projects on time and improve bottom line and hence increase the profits. ”

A.S.Kumar
Head Purchase
Fortum India Private Limited


Solar tariffs and their investments are now synonymous with cut throat competition and the ever increasing optimizations in the balance of system (BOS) in the plants to match up to the stiff competition. But is it so, that this competition is killing the basic and minimum technical necessities required of an asset to operate at least its productive life cycle of 25 years? Are there compromises that are being made to stand up to the competition? Some evidences are already visible.Some of the practices let alone the best practices are nowhere to be found.

As a general rule in procurement, it is important to have a thorough supplier audit and a qualification process followed by regular quality checks. In the melee of a severe competition, these basics are jeopardized with a rush to qualify new and cheaper products and suppliers with no previous back ground of supplies. These new suppliers may serve in the short term with a plant coming up within the budgeted costs but a long term sustainability of such a solution would always remain a question. An asset sale would bring out and in a much magnified manner the lacunae in the products and the plant, thereby valuing the asset much lower than the returns expected by the seller.

Some of the best practices that have worked well including in the thermal power plants (some of them operational for more than 40 years) include a diligent qualification procedure, financial check and most importantly life cycle costs of the materials/ supplies. A commercial advantage multiples with strategic sourcing, supplier relationship management and timing the supplies in a JIT (Just in time) mode to save the precious interest costs during construction. Alternate materials from qualified suppliers have always added to the savings of the procurement team. These best practices coupled with an emphasis on “green supply chain” which is a procurement professional’s way of contributing directly to the environment greatly helps an organization.Companies like Fortum seriously believe in sustainable procurement solutions and activities as above, and have built world class solar plants.

On the supplier’s end it is imperative to have flexi manufacturing capabilities having the wherewithal to quickly cater to the demand spikes and to switch between different products. An innovative manufacturing process flow design with capabilities for future automation. A base design, the ones that have been followed successfully by many automobile companies, could help them to overcome product maturity cycles by quickly bringing on-line new and commercially viable products.Companies like Fortum seriously believe in sustainable procurement solutions and activities as above, and have been successful in building world class solar plants.

It is time that we built and operated solar plants which are true alternatives to fossil fuel based plants instead of churning out inefficient and obsolete plants.

Mr. Dharminder Singh,
AVP Procurement,
Sembcorp

In the context of numerous global challenges – including climate change, volatile fuel price, energy infrastructure insecurity and rising energy costs – solar Photovoltaic technologies have made great strides in past 10 years. More specific, Indian Solar Industry has matured over last 10 yrs. We have come a long way from 14% PV Module efficiency to 17% PV module efficiency, Levelized tariff of INR 17.90 to INR 3.50. Until CY 2016, solar industry thrust was on improving efficiency & optimization of PV Module.
Although heart of photovoltaic power plant remain the PV module but Balance of system plays a vital role to achieve the desired LCOE. Here “Balance of system system” refers to all equipment’s associated with s PV power plant except PV module Viz mounting and racking components, SMB’s, DC cable, Inverter, Inverter Transformer, AC cable, HT Sub-station and Transmission line etc.
While PV Module comes with standard warrantees for the 25yrs life in some cases 30 yrs too for performance, but it is BOS which has never provided with such long term warrantees. This makes procurement of BOS system to be a very challenging task and thus requires a systematic and analytic approach. The diagram below shows the cost breakup for a PV power plant and also breakdown breakup in an operating plant.

With aforesaid chart it is very much clear that for while BOS components constitute only 40% of the Overall Project cost but 80% cases of breakdown in plants pertains to BOS system only.
Now if we wanted to list the BOS components based on the % breakdown it would as in following sequence

  1. Inverter
  2. DC Side
  3. AC Side
  4. Structure
  5. Other Infrastructure

So it is very much clear that Inverter and DC side constitutes more that 50% of breakdown for any PV plant. Which means that inverter and DC side system reliability and uptime plays important role in achieving the LCOE.
This further boil down to inverter, which is key components in this whole system & selection of the same has been the most challenging part for any PV plant system designer or procurer.
The following two key consideration can help in achieving optimum system reliability for the project life cycle

  1. After sales Service network: This is critical in order to achieve highest system availability.
  2. Standardization of key Components: This is critical with respect to technological improvements happening in electronic components.

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