When to Internalize O&M

There is a moment in every power project when someone around the table says: “We should internalize O&M”. With external O&M, the owner buys, at least on paper, experience and a balance sheet that absorbs surprises while still learning or busy elsewhere. At the same time, particularly in renewable applications, external companies can achieve economies of scale by servicing multiple assets.

At an early stage, with no operating history, no failure database, a spare parts strategy existing only on paper, and no real understanding of how your plant behaves when ambient conditions, fuel quality, grid stability, or human error start to interact, an O&M contract is a safe approach. A secondary question is: for how long should you keep them?

Internalization needs the support of trusted data. If you cannot challenge the O&M monthly report, it is difficult to see how you plan to outperform the contractor. Data aligns objectives, and there is no such thing as a truly “back‑to‑back” guarantee. Roles must be designed to fit your organization, and planning internalization around the idea of hiring the contractor’s best operator is fragile thinking.

The question to answer is: why do you want to internalize operations? Internalizing O&M is not a maturity badge, nor a cost‑saving strategy. It is a risk‑transfer decision, and it is often misjudged both in value and timing.

There are very few valid reasons that make internalization meaningful.

You may want to internalize O&M when operations are no longer a source of uncertainty, and instead become a source of competitive advantage, when availability improvements, fuel‑efficiency gains, or maintenance optimization materially change project economics.

Internalization can also make sense when the plant portfolio reaches critical mass. Scale changes the equation: centralized engineering support, standardized procedures, and shared spares start to outweigh the benefits of outsourcing.

Governance and control matter as well. External O&M contracts optimize around KPIs, exclusions, and contractual boundaries. When you repeatedly find that “the contractual KPIs are being met” while margins are eroding, internalization becomes a rational response.

Finally, internal O&M can be a matter of earned confidence. Some IPPs deliberately build institutional capability they intend to reuse across future projects, accepting full accountability for outcomes rather than outsourcing it contractually. In that case, internalization is not about identity or ambition, it is about standing behind operational decisions with one’s own balance sheet and reputation.

If none of these reasons clearly apply, internalization will probably be disappointing.

If you are considering internalization, the real question is not “can we do it?” It is “what exactly are we prepared to be accountable for when things go wrong?” If the answer is full of buzzwords or hesitation, you probably already have it.