Labor is Most Variable Cost for Solar, Wind Projects
A new report researched by Bloomberg New Energy Finance (BNEF) and commissioned by CohnReznick ranks the major engineering, procurement, and construction (EPC) companies for solar and wind projects as follows:
- Solar Companies: SunPower, First Solar, Mortenson, and E Light Wind and Solar.
- Wind Companies: Mortenson, IEA, RES Americas, and Blattner.
The report Evolving Landscape for EPCs in US Renewables looks at the economics of providing EPC services. Estimated EPC prices (including component costs but excluding development costs) for photovoltaic solar projects range from $1.38/W for very large desert-based projects using thin-film modules, to $1.97/W for projects around 5 MW in size in New Jersey. Labor is the most important variable cost. For wind, EPC costs (including balance of plant costs but excluding costs of turbines) range from $0.41/W in Oklahoma to $0.62/W in New England.
Some key findings from the report, include:
- Some EPC firms that have historically focused on wind are broadening their attention to solar, which offers a more stable policy environment. Firms that can focus on smaller utility-scale solar projects (1-10 MW) in states with robust incentives may find higher margins than might be gained from large-scale wind.
- Key EPCs with significant experience as general contractors have now also developed deep expertise in US renewable energy, providing their clients with knowledge of financing obstacles, development trends, and technology advancements. They are also becoming involved in areas such as permitting and securing the point of interconnection. Some EPC firms are providing their clients with financing or alternative payment methods to help get projects completed.
- EPC firms are beginning to look to other ‘adjacent’ technologies such as advanced storage.
- EPC costs have been falling as the increased scale and maturity of the US solar and wind industries are, for the most part, driving total project costs down. In some regions, competition with the oil & gas sector for resources is reversing this trend.
The market for EPC services for utility-scale solar and wind is forecasted to peak at $7.2 billion in 2015 before falling 28 percent to $5.2 billion in 2016 and another 52 percent to $2.5 billion in 2017, as a number of federal tax incentives effectively expire or decrease in those years.
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