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The Real Cost of An In-house Drone Team

The Real Cost of An In-house Drone Team

Drone data service providers like Precision XYZ cost well under half of what you can expect to pay to build out and maintain your own drone operation. Here’s why.

Decisions, Decisions

I saw my first commercial drone solution back in 2010 at a solar conference in Germany. I say “commercial” in the sense that it was being sold at a major show as a commercial solution. But in terms of it’s practical feasibility, it left a lot to be desired.

For starters, it was $150k. Anyone who’s been in the solar sector for longer than two weeks knows that if you’re going to ask for that kind of money, you had better be making something magical happen for a project developer, an EPC, O&M or asset management firm.

There were other issues with the system as well, but having worked in and with technology for almost 30 years, one thing was clear to me immediately—drones were going to get substantially cheaper, more reliable, and more robust. And they were going to solve a lot of problems for the solar sector like accelerating project development, improving build quality and increasing project yields.

Magical indeed, but it was going to take a bit of time.

“One of the Highest ROIs you’ve ever seen”

Fast-forward 8 years and virtually every enterprise in the solar sector I talk to either has a nascent drone team, is actively building one out, or is considering building out a drone operation.

When I asked one of our clients why they had their own drone ops, the reason he gave was that drones have a ridiculously high ROI for his firm, under 1 year. That’s consistent with studies in the sector.

Service provider Skyward recently surveyed 1,736 businesses generating $50M or more in revenue. Of those using drones, 88% responded that they were seeing ROI on their drone operations of less than 1 year.

And while current adoption is still relatively low—with about 12% of businesses having a full blown drone operation—the rate of adoption is growing rapidly.

If you’re working in the solar space, the question for any investment is always two-fold—how much will this cost me, and how much will I save? But the real question is:

Do I really need to do this at all, or can someone do it for me?

A Hypothetical Solar Firm

Bear with me now as I dive into the weeds on the math of a theoretical client who is intent on building their very own drone operations.

Let’s assume you’re a vertically integrated solar firm here in North America – specifically the US and Canada. You’ve got an active pipeline of 100 projects and 1,000 MW that you’re building out in the next year, and you’ve got 2,000 MW of assets under management across 500 locations.

With a density and penetration like this, it would seem that a drone program would make sense. The easiest part is asset management, so let’s start there.

Chasing Your Assets

So you’ve got 500 locations – but you have 100 additional sites coming on line. In a perfect world you’d do a minimum of 2 thermal scans per site per year for new sites and one for established assets—so in this case, 700 scans. Like many asset owners, you may find you need to do spot scans for troubled assets, so add another 200 scans for a total of 900 scans. To be reasonable let’s assume these are spread across 6 states, with most of the sites, say 400, in two of those 6 states.

For the sake of argument, let’s further assume you can do 2 scans per day on average. So that means you’ve got about 450 days of scanning work to do.

That can’t be done by one person, and given your geographic diversity, you can’t even do it with two people. You’re most likely going to need at least 6 operators, one for each state. Two of those operators are going to be close to fully loaded while the remaining 4 will be underutilized.

As with virtually every service operation, the key is density; you just can’t cover the turf you need to, but if you hire too many people you end up with underutilized staff. So what to do?

Well, for asset management and the O&M function, you can train existing staff and have them run double duty. This isn’t perfect; ideally, O&M staff have the thermal scans in their hands before they show up at the job site. This improves staff efficiency because they can prepare before heading to the job site—the alternative is they end up finding issues for which they are not prepared which can increase truck rolls and therefore your Annual Panel Costs (APC).

Despite all that, we generally know that thermal scans can improve your Annual Panel Revenue (APR), so this may be a bet you’re willing to take.

How much does a trained operator cost? One who knows how to responsibly operate a commercial drone and get the data you need in one shoot? You should plan on a minimum FTE cost of $70k and the high end being about $100k. You’ll need to add 20-30% for burden. So in this model, you’d be looking at about $600k – $700k in costs, with some of those cost split with other functional areas.

Of course, when you split the costs it does mean that some other work won’t get done. This is the calculated bet you make; the gains you realize in APR will exceed your incremental costs in APC.

But what about the data processing and the management? From a staff standpoint you’ll need at least 2, probably 3 people—two GIS professionals and one overall drone operations manager. These three staff members, fully burdened, will run you about $400k.

Capital costs for this operation would be around $500k – $700k; you will need two types of drones per operator (fixed wing or VTOL and multirotor) with at least one backup drone per operator. You’ll also need high-end workstations for local processing and data storage, as well as subscriptions to various processing toolsets.

From a planning standpoint assume this kit will need to be upgraded about every 3 years. The industry standard for pricing of thermal scans is $/MW scanned (DC). So what would this theoretical operation look like?

Your price point will likely come in around $500-600/MW for this team. This assumes that you don’t always hit your scan targets; delays or equipment failures drive your price per MW up and you need to account for that.

The good news is that you’ve made an investment in a structure. So how might you use this staff with your development and EPC teams?

Sorry, I’m Busy…

The reason that Asset Management is easier is because it already exists; you know where you’re going and what you need to do. The opposite is true with Development teams. By definition they are hunting the next location, and while it won’t necessarily be anywhere, it will be somewhere.

So if you want to leverage that drone operations team, you really only get to leverage the processing part of that team. The flight operators are simply going to be too busy—the full time operators will have a relatively tight schedule to deliver their thermal and asset inspection schedules. The part time operators are part time because they have a day job—usually as electricians or field technicians.

Bottom line? You’ll need at least one new operator and that operator will have a slightly different set of skills.

At a minimum, that operator will need to have sufficient knowledge about photogrammetry and basic surveying techniques to consistently capture good imagery for the processing team. The processing team will also be dealing with slightly different data inputs and very GIS specific knowledge, so you will need more training for that team.

Your flight manager will also have a very different scheduling challenge. If you’re working in areas with high levels of ground cover—either forests or tall corn, for example—you’ll need to be using LiDAR. This is a completely different set of skills and equipment—a basic LiDAR rig will cost you upwards of $150k—not to mention you will definitely want a well-qualified operator behind the sticks.

Assuming you’ve got 100 sites to shoot, you will want at least one backup operator. Your operator costs? You’re looking at adding anywhere from $180 – $250k in fully burdened operator costs. For sake of argument, let’s call it $200k.

The data acquisition here also will require you to expand your processing team a bit to accommodate the new workflows and skills, particularly if you are working with LiDAR. Assume this increases your burden there by about $100K, so call your new processing base costs $500k and the Development team will consume about 25% of those costs, or about $125k annually.

All in, your entire annual burden for the Development team would rest at about $400k. On a per-acre basis, in this model you’re looking at about $80/acre before you apply CAD and the Professional Land Surveyors (PLS) stamp.

After CAD work and the PLS, you are probably close to $100/acre for your internal team.

If You Build It, Will They Come?

Your all-in annual costs now on the drone team is at least $1.5M. You’ve got 8 drone operators and at least 3 FTEs on the processing team, and very likely 4. So what’s a guy to do at this point? Can you use this for your EPC team as well?

The short answer is yes. Most of the effort you invested in enabling your development team with drone capabilities is directly applicable to your EPC team. The key word here is most. Unfortunately, you run into almost the same problem with EPC team as you did with Development.

While the Development team is the least predictive of the three organizations and Asset Management and O&M the most predictive, EPC falls in between. That means you’ll need to add several more operators to your drone ops team, as there will simply be too many jobs to shoot.

The good news is that these operators will likely also be pulling dual duty, as the components are all on the “easy” side of drone operations. Yes, they will still need drones; so you’ll need to add that to your costs. But they are on the simpler side, because the fabric these operators will be leveraging will have largely be put in place by the development team. Most of the work these operators will do will be job construction tracking.

So what does it look like from a cost standpoint?

With 100 sites being built, each about 50 acres in size, you are looking at an average cost per shoot of around $300, more if you’re using a subset of trained operators who need to travel to each site. With 7 shoots per build site, your total costs should come in around $210k.

By the time you’re done fully drone-enabling this theoretical operation, they will be spending almost $2 million annually, will have close to 17 FTEs and will be looking at about $300k/year in depreciation costs. Here are the key metrics:

  • Asset Management/O&M $/MW = $500-600/MW
  • Development/Topographic Mapping $/Acre = $80-$100/Acre
  • EPC/Job Site Tracking $/Shoot = $300
  • No enterprise does this without solid justification that it will strengthen their overall business and drive the ROIs they demand. The question you have to ask is:

    Can it be done cheaper with a higher ROI, by an outside party?

    Not to spoil the end, but yes. Let’s take a look.

    Drone Data Services

    Somebody once said that “other people’s jobs are always easy”. This could never be more true than with Drone Data Services. Let’s take a look at pilot operations first and you’ll see what I mean.

    Unlike other Drone Data Services firms, Precision XYZ has a structured program for pilot certification to insure that the old adage of “garbage in, garbage out” does not apply. This means we rank order our pilot operators from L-1 to L-5 based on their experience with different types of equipment and flight operations.

    An L-1 pilot, for example, knows how to fly a multirotor and has a minimum of 20 hours of flight time. This pilot knows the basics of how the airspace works and can conduct simple data collection, shooting static images of homes, structures or fields. Conversely, an L-5 pilot is an instrument rated professional, has worked with a wide variety of airframes, has experience with FAA approved BVLOS flight operations, and has hundreds of hours of flight time.

    Because we rank order and verify our pilot skills, we also know what we can charge for different skill sets. This also established far better data outputs than what you find with the “shotgun” approach used by virtually every other drone data service provider. And because we get much higher utilization rates out of our pilots, we end up at a much better cost for the client. So how does this translate into the theoretical vertically integrated solar provider?

    On a pure price point basis using our previous theoretical vertically integrated large solar client, Precision XYZ would come in at least ½ the costs for all of these services and in some cases more.

    Because all of our data is delivered through an integrated online portal, with monetized prioritization for distressed assets, coupled with rank ordered pilot operators to assure great data capture, our data output is consistent, reliable and enables your teams to easily prioritize work orders. Essentially, you get better quality and better prices. Sound impossible? It’s not. We just know solar, have been doing drone operations for years, and understand that ROI is what drives the bus.

    None of this is to say it’s never viable for a firm to run their own drone ops; you just have to be operating at a large scale with good site density. And there will be other times when internal operations make more sense; the emergent international markets, for example, have much lower prices for pilot operators. In those instances, we partner with our enterprise clients and focus on data processing and analytics, further improving your ROI for those markets. But in general, unless drone operations are core to your business, why elect to reduce your ROI? Leave it to us – it’s literally all we do.

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