Middle East Cleantech Energy EPC Market: Ken Research


Market Size and Introduction

The market for EPC contracts in cleantech energy is very promising. EPC contractors in hydropower are large engineering contractors who specialize in civil construction, mechanical fabrication and erection. Wind energy contractors in EPC segment mainly include the turbine suppliers, local players responsible for developing the civil infrastructure and electrical contractors. EPC contracts in solar energy segment vary from small players installing rooftop solar panels to large players developing utility scale solar power plants in both PV and CSP solar power segment.

In 2016, the EPC market in Middle East region was estimated at USD ~ billion with majority of the contribution coming from wind energy (~%). Share of hydro energy contribution to EPC segment declined from ~% in 2012 to ~% in 2016. Contribution of wind energy segment was estimated at USD ~ billion (2016) of which majority of the revenue came from Turkey.

Future Outlook

EPC market for cleantech energy sector will have an erratic trend as many projects which are announced for future development may be subjected to various regulations. Wind energy segment which initially had been concentrated in Turkey is expected to increase its presence in Egypt and Jordan. Many large scale projects are due to be completed in Egypt and Jordan which will add revenue for EPC market in these countries. US lifted the many economic sanctions on Iran which is expected to give positive boost to the cleantech energy sector and foreign investment in development of cleantech energy sector. Local contractors will continue to benefit from the investments made in the renewable energy segment. It is expected that solar EPC market for solar energy will register maximum growth rate due to entry of many countries where other cleantech energy sources may take longer time before that can be tapped commercially.

How Middle East Cleantech Energy Market is Positioned?

Middle East region is ideally located for generation of solar and wind power. Their geographical location permits the better efficiency and high exposure to the energy source. In last few years there has been significant growth in government expenditure to diversify the energy mix and huge investments were announced in the cleantech energy segment.

Middle East cleantech energy sector is dominated by Turkey whose contribution to the cleantech sector increased from ~% in 2011 to ~% of the cleantech energy installed capacity in 2016. The Middle East cleantech energy market witnessed a five year CAGR of 9.3% during 2011-2016. In 2012, an estimated ~ MW of cleantech energy power plants were installed. Majority of the development took place in hydro energy segment which contributed ~ MW.

Wind energy segment added ~ MW in 2012. In 2015, Jordan added ~ MW of wind energy, Egypt contributed ~ MW but Turkey again emerged as the leader contributing 1,064.0 MW. Solar energy which has very high potential in the region added a meager 350.1 MW.

Many countries have announced very ambitious plans to develop their solar energy potential after Paris agreement on climate change was introduced in 2016. Regulations regarding net metering facility were promulgated/updated in many countries including Jordan Egypt, Israel and others to promote rooftop electricity generation. Lowest PPA was signed in solar energy segment for developing a solar energy plant in UAE. Many countries have made it mandatory to use solar water heater for commercial application.

Middle East Cleantech Energy Market Segmentation

Hydro Power: Only two major countries (Iran and Turkey) are still developing their hydro power sector. Share of hydropower is on decline in overall cleantech energy market as solar and wind energy installation gain momentum. It has declined from ~% in 2011 to ~% in 2016. Total installed capacity at the end of 2016 was ~ MW.

Wind Energy: Most of the Middle East countries have sea borders making them ideal for wind energy generation. Global leaders such as Vestas and Siemens have shown deep interest in developing the wind energy in the region. Turkey was the largest player in the wind energy segment in the region constituting ~% of the total cumulative installed capacity in the wind energy segment.

Solar power: Solar power projects are the latest additions to the cleantech energy segment in the region. Many global players in US and China have stepped up their investment in Middle East region to tap the growing market for solar power generation considering their geographical location and the commitment of the government to increase the share of solar power in their energy mix. In 2016, solar power contributed ~% of the cleantech energy installed capacity which amounted to ~ MW.

Others which include geothermal and waste to energy contributed ~% with total installed capacity of ~ MW. Countries like Turkey has specialized in development of all types of cleantech energy resources and lead the Middle East region in terms of total installed capacity.

Finance Model for Middle East Cleantech Energy Sector

Build-own-operate-transfer model is the new concept in Middle East renewable energy industry. It is one of the new models to implement for solar renewable power systems and is mainly used to reduce the government obligation to make large initial investment. The renewable power company will manufacture and builds the renewable energy systems at customer’s site (government or power companies).

Build own operate model is more popular among independent power producers. Many countries in Middle East have deregulated their energy sector and this model is prevalent there. Most of the countries are yet to develop their renewable energy potential.  In this model the company doesn’t transfer the renewable energy systems to the customers.

Engineering, procurement and construction model is a common form of contracting arrangement within the

renewable energy industry. Under this model, the company designs, installation, procures the necessary components and materials and builds the solar PV systems, wind energy systems and others on the defined customer location.

Net metering system and Feed in tariff system are the other methods used for power purchase or financing the installation of energy generation.

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Ken Research
Ankur Gupta, Head Marketing & Communications


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