by Steven Han, Analyst
The China PV market is forecasted to continue to develop rapidly with 118% Y/Y growth, according to our latest Asia Pacific Major PV Markets Quarterly. Varieties of industry players are participating in the EPC (engineering, procurement, and construction) business, with domestic PV projects developments in full swing. The EPC model has moved to become the booster rocket for the rapidly-changing Chinese PV market, from the exclusive tool of state-owned developers.
The major EPC players in China PV market used to be subsidiaries of state-owned PV groups, but with declining systems cost and fierce market share competition, enterprises throughout the value chain – including module, rack and inverter manufacturers and installers – began to enter the EPC business. However, the state-owned firms will fight to maintain their lead in the EPC market, and their background will give them an advantage in communicating with local governments and the State Grid Corporation.
TBEA Xinjiang New Energy was the leading domestic EPC player in 2011 with more than 200MW of installed capacity. The company’s growth rate has slowed in 2012, due to the huge contract funding and follow-up quality problems in project maintenance. Guodian Solar, a subsidiary of one of the dominant national developers, China Guodian Group, completed many utility-scale PV projects, including more than 100 MW from its parent company in Qinghai Golmud and Delingha.
With PV system costs 39.2% lower in Q1’12 than a year ago, module manufacturers tried to accelerate sales and enhance profit through the EPC business. Rising star Jinko Solar received a 50 MW module and EPC contract in April and participated in project development business in Qinghai and Xinjiang. In June LDK Solar announced it received three EPC contracts in Gansu province with individual capacity 200MW. Using their advantage of product quality and competitive LCOE cost, other module manufacturers like Suntech Power and Chint Solar have realized the importance of domestic EPC business and are looking to gain more market share.
There are many more industry players than module manufacturers. Not constraining themselves to BOS sales or rack installation business, installers and rack manufacturers adopted the EPC model to win contracts, subcontracting the engineering design and procurement business to others. Zhenfa New Energy is a leading example; with the partnership of many state-owned PV developers, they have reached a cumulative installed EPC project capacity of over 400 MW over the past three years. Zhenfa New Energy intends to grow their EPC business in 2012 and increase the sales revenue, with the potential for a listing on the public markets.
Clearly, the best approach to win EPC contracts is to invest with the developers. Providing funding has been the most direct way for EPC companies to win an alliance with PV developers, especially since the government began to limit the transfer of project permission activity in 2012. In the case of a 20MW PV project in Dongtai Jiangsu, a CNY 79 million capital fund was offered by China Energy Conservation (90%) and Zhenfa New Energy (10%).
Although many problems still exist, such as access to the grid, financing, product quality, and severe installation environments, the rapid development of the Chinese PV market continues to attract the focus of the global industry. The EPC model is viewed as a way to help share the developers’ burden of cash flow and engineering requirements, and will undoubtedly accelerate the Chinese PV market.
