Market research firm IHS remains bullish on the global solar PV market in 2016, forecasting it top 69 GW this year. This is an estimated 17% growth from 2015, where global PV installations reached 59GW, with 28GW of total installed capacity coming from the United States.

 

The strongest growth will come from markets outside the EU such as India, China and the United States. In order to maintain growth and mitigate risk in their home markets, many of the top EU-based EPCs and developers are already diversifying into global PV markets.

 

If you are considering diversifying into the US solar market, the following are some lessons learned from observations of EU-based developers who have entered the US market, unsuccessfully.

 

1. They Enter with Too Lean a Team

Mindful of cost, many EU entrants send a single expat into the US to access and tackle the market. Unfortunately, they soon find themselves overwhelmed by the sheer size of the US and the diversity of the project landscape and are unable to quickly and efficiently access projects—a phase we call Origination Management. No man is an island and no single person can handle the due diligence required to find the best projects before competitors do.

Lesson learned: Critical mass matters, under spend and you will not realize your targets.

 

2. They Come in Too Large

In Europe, the most successful companies play many roles—from EPC to distributor to developer, they try this in the US and have a bloated organization burning through a lot of cash.

Lesson learned: Vertical integration is a failed business model. 

 

3. They Underestimate the Slowness of US Project Life Cycle

Due to the complexity of US market, projects take a long time to mature and ready for sale. European investors underestimate how long it takes to flip a constructed project and as a result run into severe operating cash challenges.

Lesson learned: Understand project timelines, cash flow and build strong finance relationships.

 

4. They Lack a Strong Origination Methodology and Domain Knowledge

This is where EU entrants can take a page from US developers who understand that origination, the ability to create a rich pipeline of projects, and origination management, the ability to quickly access which projects are the best, is key. US developers understand this because they understand the complexity of the market. The US doesn’t have a national utility; we have 3,000 municipalities and utilities that are local and/or publicly-owned and each with its own set of regulations and needs. For EU entrants, an origination strategy and strong domain knowledge can mean the difference between success or failure.

 

Lessons Learned:

-Know your market. The US is a patchwork of many micro-markets.

-Develop an effective origination engine and business process through partnerships that leverage local domain knowledge.

-Focus on speed.

 

Many of the most successful EPCs and developers that have come to the US from Europe sent a small, but experienced team with the objective of finding good US partners. They understood that insight and speed are the keys to successfully entering new markets.

Having an asset investment management process is essential to increase speed and gain better insight in your organization. A solution such as Mercatus helps modern energy professionals achieve this by putting an end to profitless growth, inefficient deal acquisition and lack of project visibility.

For more insights into the growth of the US Solar Market, download our whitepaper with IHS.