The costs to develop utility scale solar and wind have dropped by ~10% per year for over a decade. The decline in costs has resulted in the installation of tens of gigawatts of solar and wind and an even larger upcoming pipeline. To-date the majority of economics in the space have gone to developers and those associated with putting new assets in the ground.
Now that the scale of in-ground, operating renewable assets is so meaningful, I expect the emergence of sizable software and technology businesses built around the maintenance and optimization of these newer power units.
One of those scaling software businesses serving the space is Power Factors. Power Factors is a mature (primarily) software company serving the renewables market. The company’s core product, the Power Factors Drive Pro, is a cloud-based asset performance management (APM) solution that integrates all the key data owners, operators and asset managers need to monitor, manage and optimize the performance of renewable energy assets throughout the asset lifecycle.
As seen in the article below, Power Factors was acquired by Vista Equity Partners. Vista is a well-known technology growth equity/PE firm and this acquisition is a signal to the recent maturity of the renewables O&M market. Wind farms and solar farms have 10-20 year operations contracts with their offtakers. Developers and utilities will look for long-term software contracts to help monitor and optimize asset operations over a similar time period. Firms like Power Factors are well-positioned to lock in these long-term deals and capture the many upcoming GWs in the process of being integrated into the grid. I expect Vista will implement a bolt-on M&A strategy to bring more technology solutions to the Power Factors platform and am bullish on the company going forward.