Solar EPC Landscape Consolidates in 2013 as Tight Margins Pressure Medium-Sized Integrators

"We see integrators in the U.S. and China rapidly executing very large pipelines, which accounts for some of the notable growth last year"

El Segundo, Calif. (Feb. 25, 2014)—The 30 largest Engineering, Procurement and Construction (EPC) companies in the global photovoltaic (PV) industry installed 30 percent of the world's non-residential PV capacity in 2013, up a solid 5 percentage points from 2012, according to IHS Technology (NYSE: IHS).


"We see integrators in the U.S. and China rapidly executing very large pipelines, which accounts for some of the notable growth last year," said Josefin Berg, senior analyst for solar demand at IHS.

In a global market where non-residential PV additions climbed 20 percent during the past year, a company like China's TBEA Sun Oasis quadrupled its installations to approximately 1 gigawatt (GW)—enough for the integrator to come in at second place. TBEA was surpassed only by No. 1 Arizona-based First Solar, which had doubled its installation capacity in non-residential markets to more than 1.1 GW.

Overall, the share of the 30 largest integrators in the non-residential solar market was up from 25 percent in 2012.

The attached tables present the IHS ranking of the world's top 10 EPC companies in 2013, as well as installed capacity in gigawatts of the top 30 integrators compared to the rest in the global PV non-residential space.

Nine of the world's top 10 entities are Chinese- and U.S.-based integrators that actively pursue large utility-scale projects, mainly conducted in their home markets. Growing local opportunities will propel these leading companies to gain further market share.

The only European-based integrator among the top 10 in 2013 was Abengoa of Spain, which is pursuing opportunities in the U.S. to build up installations worth 260 megawatts (MW).

IHS predicts that this trend will continue in 2014 as China and North America maintain their momentum as the markets to watch for large utility-scale PV. The findings are contained in the report, "IHS PV EPC and Project Market Tracker," from the Power & Energy service of IHS.

Planned PV projects in US and China swell to 50 percent of global PV pipeline

Currently under construction in the United States are at least 2.5 GW worth of projects larger than 20 MW, and plans for another 2.1 GW are afoot in China. Globally, 123 projects larger than 20 MW are also being built elsewhere besides the two countries, amounting to some 7.6 GW in total. The progress of these projects will significantly impact the EPC ranking in 2014, but First Solar's current construction of 770 MW is likely to allow the integrator to keep its position within the top three.

The global PV pipeline tracked by IHS adds up to 114 GW in nearly 10,000 projects in various stages from under construction to early- phase planning. Half of this capacity is located in the U.S. and China. Of the global pipeline, 10 GW is under construction, while another 10 GW has secured power purchase agreements (PPA) or other contracts.

"The road from first planning a project to final execution is paved with challenges," Berg noted. "Even after permits have been secured, PPAs signed and suppliers identified, troubles in obtaining finance or overhauled government policies can block or delay projects. This is particularly true in emerging markets, but financing can be a challenge also in more mature European markets."

Tougher market for regional PV integrators in Europe

In the U.K., the highly competitive PV environment has left two major PV integrators, S.A.G. Solarstrom AG and Wirsol AG, insolvent in the midst of high ambitions. As a result, Wirsol had to sell off its 100 MW pipeline to Conergy AG.

It may seem a paradox that in the midst of a booming market for utility-scale PV in the UK – a market forecast to install 1.2 GW of non-residential PV in 2014 – system integrators struggle to stay afloat. The main reason is the high financial risk that EPC suppliers take on, as the tight profit margins under the UK's trimmed ROC-scheme keep final investor risk adverse. The system integrator is expected to cover all costs during the construction process, until the projects have been accredited for the Renewable Obligation Credits (ROC), a process that can take more than six months after project completion.

"This long process put system integrators at risk of running out of cash before the project is sold and paid for," Berg observed. "Consequently, the most successful EPC companies building PV plants in the U.K. are either backed by venture capital, or form part of larger construction groups."

In the former category is an integrator like Solarcentury; in the latter are players like Isolux Corsan, Martifer, Oskomera and Goldbeck.

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