Shortage of installers 'biggest risk' in Europe's solar supply chain

European nations are working to simplify renewables permitting and unblock congested grid connection queues, but the incoming wave of new solar capacity in Europe may end up being stifled by a shortage of companies able to install panels.

A lack of engineering, procurement and construction (EPC) companies operating in solar is a further sign of the growing pressure on the clean energy supply chain, according to observers, and adds to a series of other barriers standing in the way of the solar industry's rapid projected growth.

"In the supply chain, the biggest risk in Europe is really the availability of EPCs to build," said Axel Thiemann, CEO of Sonnedix Power Holdings Ltd., a global renewable power producer majority-owned by investors advised by JP Morgan Asset Management.

Sonnedix has significant solar development pipelines in European markets including Spain, Italy, France and the UK, countries where grid operators are facing a backlog of projects waiting for connection.

In Spain, 43 GW of renewables capacity — split 80% solar and 20% wind — is awaiting construction authorization. Citing supply chain tightness, the Spanish government recently granted the entire pipeline a six-month extension to avoid the projects missing their July 25 deadline and having to start from the beginning of what is, on average, a five-year permitting process.

But even with the extra six months, the projects still need to enter operation by July 2025 or risk losing their grid access. "That is not possible with the current supply chain, with the current availability of EPCs," Thiemann said in an interview.

The emergence of new solar markets such as Poland and Ireland is adding to the strain, according to Benjamin Clarke, business analyst at lobby group SolarPower Europe.

"Now that there are significant pipelines of projects being developed all around Europe, including outside the traditional solar markets, EPCs are in significant demand," Clarke said in an email. "The challenge for EPCs at the moment is onboarding significant numbers of new hires that may not have a lot of experience in the solar industry and allocating their experienced personnel as intelligently as possible to help keep up with the volume of projects."

Building solar 'not rocket science'

Concerns around a shortage of solar EPC companies comes amid significant expected demand for the technology underpinned by new capacity targets within REPowerEU, the European Union's strategy to end its dependence on Russian energy imports.

The bloc is aiming to add 420 GW of new solar by 2030, taking its total fleet to 585 GW, with companies adding 41 GW of new capacity in 2022, almost a 50% jump year over year.

"Where there is market opportunity, there will always be people willing to step in to respond to demand," Clarke said, adding that SolarPower Europe has had "significant personnel growth" among its membership base.

Among European-headquartered solar EPC companies, the likes of Eiffage SA, Equans SAS, Enerparc AG, Juwi GmbH and BayWa AG have each built more than 2.5 GW of capacity, according to Wiki-Solar, which has a database that tracks utility-scale solar projects.

Increasingly, construction companies are moving into solar from other infrastructure sectors. Spain's Ferrovial SE, for instance, recently created an energy solutions business to start building solar and wind projects. Overseas EPCs are also entering the European market, according to Clarke.

"Building solar projects is not rocket science ... and that's a good thing," Thiemann said.

Still, the worry is that the massive demand for EPCs in solar, added to the relative straightforwardness of the job of installing panels, attracts the wrong kind of companies — as happened during the last solar boom in Europe.

"With the first solar peak in 2010, we saw the rise of 'solar cowboys' which were barely qualified," Clarke said. "A number of projects were installed poorly, and it's fair to say that this undermined public faith in solar."

To avoid a repeat of that experience, SolarPower Europe developed a series of best practice guidelines for the industry, recommending that asset owners select EPCs that have a track record of financial stability and delivery of a portfolio of projects.

The guidelines "provide a blueprint for establishing quality at the stage of a project where [capital expenditure] and risk is the highest," Clarke said.

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