For the second year in a row, PowerChina took the lead position, by installing 6% of the world’s non-residential solar PV capacity, predominantly in its home market. In 2021, we can expect further reshuffling of positions in the engineering, procurement, and construction (EPC) ranking, as soaring system costs lead to delays and contract renegotiations for some PV projects. Even EPCs in the United States may struggle to complete individual projects this year as a result of the latest blockage on some PV module imports.
Mainland China and the United States key to major companies’ success
For EPC providers, the location of the business determined its success in 2020. The Covid-19 lockdowns brought back a concentrated PV market, in which more than half of the world’s non-residential PV additions were located in mainland China or the United States. Adding on Vietnam, where the commercial segment soared in 2020, the top three markets contributed to 61% of added non-residential PV last year. In contrast, non-residential PV installations declined by 17% in the rest of the world, compared to 2019. The result was that among the 10 largest EPC providers, four conducted all or the majority of business in mainland China and another four were solely focused on the United States.
In sharp contrast to mainland China and the United States, India experienced a drastic 52% year-on-year decline in installations. The market contraction resulted in a slow-down for most locally active players and a subsequent loss of global market share. No Indian companies were among the 10 largest in 2020 and only two – Sterling and Wilson and Tata Power – remained among the 30 largest in the ranking.
|Top global PV EPC and integrators in 2020|
|1||PowerChina (Mainland China)|
|2||CEEC (Mainland China)|
|3||Blattner Energy (United States)|
|4||Swinerton Renewable Energy (United States)|
|6||TBEA Xinjiang Sun Oasis (Mainland China)|
|8||Sungrow Renewables (Mainland China)|
|9||Moss Construction (United States)|
|10||Mortenson Construction (United States)|
Source: IHS Markit
PowerChina leaped ahead as the 2020 challenges reshuffled the EPC landscape
Out of the 30 largest PV integrators in 2019, 21 installed less capacity in 2020, and 13 even fell out of the top-30 ranking. While many were struggling globally, six companies actually grew to surpass one GW of installations for the first time. Mainly thanks to strong market growth in China and the United States, they joined the seven integrators that were already in the gigawatt league. In all, the 30 largest EPC providers installed 36 GW of nonresidential PV systems, representing 28% of the global PV market. This is a continued increase from 27% in 2019 and 21% in 2018. Of those 30 EPC providers, 16 executed projects in several markets. The rest concentrated on projects in singular markets, most often in their home markets.
PowerChina kept its position as the leading integrator of PV systems in the world, installing more than twice the PV capacity of the runner-up, China Energy Engineering Group. By exceeding 6 GW of installations in mainland China and another gigawatt in overseas markets, PowerChina grew its global market share to 6% in 2020, up from 3% in 2019. Blattner Energy and Swinerton Renewable Energy rose to third and fourth position as they shared a fifth of the EPC market for PV plants in the United States. Spain’s Prodiel took the fifth position by being the largest EPC provider both in Spain and Latin America.
US preference for third-party EPC services boosted performance of pure-play EPC providers
For several years now, the business of providing EPC services for PV plants has been challenging for many companies. As the industry has grown around expectations of sharp system price reductions, the margins across the value chain have diminished, often squeezing the EPC provider. Clients have increasingly absorbed module procurement, leaving less revenue for the EPC. At the same time, the EPC providers have needed financial strength to navigate the construction process. In several cases over the past years, poorly timed cashflows have sunk entire companies. To counteract the risks and raise profitability, many major EPC providers have branched out to develop projects over the years, leading to a trend of more integrated developer-EPCs gaining positions in our ranking. In 2020, however, pure-play EPC providers performed more strongly than the vertically integrated companies.
The strong performance of pure-play EPCs can be attributed to the strong U.S. market where developers show a preference for third-party turn-key contracting. Banks that finance PV projects in the United States often want a single counterparty to take on the construction risk. Overall higher system pricing also helps to preserve margins across the U.S. value chain. We will see if pure-play EPCs will continue to dominate the U.S. solar PV market in the coming boom years, or if a possible lack of qualified providers will instead push developers to build up in-house EPC departments.
In the rest of the world, we project a continued trend of more EPCs expanding their development capabilities to gain control of the pipeline and boost margins. Developers and financiers that aim to minimize the total project costs often see less value in the EPC role but are not that interested in taking on construction and performance risks. To improve business, EPC providers will need to convince clients of their contribution to project performance and the value of proper risk allocation. Companies that will position well in our future rankings will either follow the vertical integration trend and build in-house developed projects or gain contracts with investors that have acquired project rights and are ready to pay for turn-key construction. We may also see a few EPC providers absorbed by utilities and large IPPs that insource project construction.
Increasing system prices and project delays to impact the 2021 EPC ranking
In most major PV markets across the world, last year’s sharp increase in PV system prices has directly hit the EPC contractors as they carry the procurement risk and need to meet contract deadlines. The exact impact on projects and companies hinges greatly on procurement and project delivery conditions. Many developers, EPCs, and suppliers have been renegotiating contracts to ensure the timely completion of projects planned for 2021. As for the future pipeline, the uncertainty regarding system prices paralyzed new procurement of components and services for several projects at the start of this year. Next year’s EPC ranking will reveal which companies successfully – through a combination of skills and luck – completed projects in 2021.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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