Engie North America announced Monday it will acquire SoCore Energy, a Chicago-headquartered solar company and subsidiary of Edison International.
The investment gives Engie a more concrete corner on the U.S. commercial market.
SoCore has 150 megawatts' worth of projects operating or under construction and another 170 megawatts in late-stage development. GTM Research estimates that about 70 percent of SoCore’s operating pipeline is commercial. According to GTM Research solar analyst Michelle Davis, assuming that SoCore’s 2017 installations are now within Engie’s portfolio, that would bump Engie from its eighth place ranking as a commercial solar asset owner in Q3 2017 to fifth in Q4 2017.
“This is definitely a strategic play in the commercial solar space,” said Davis. “In general, Engie is trying to get involved in earlier stages of the commercial solar development value chain. This helps reduce transaction costs and lengthy due diligence steps that are necessary for any given commercial project.”
The acquisition of SoCore comes after Engie purchased early-stage commercial solar developer OpTerra Energy Services in 2016. But bringing SoCore in, Davis said, gives Engie increased development, engineering, procurement and construction capabilities outside California. Previously, Engie had subcontracted out its engineering, procurement and construction (EPC) work outside the state.
In addition to the advantage SoCore offers Engie in the commercial space, GTM Research solar analyst Colin Smith said SoCore’s experience in municipal, co-op and community solar gives Engie a “leg up” in those markets.
“It’s getting more bang for your buck than a standard commercial developer,” he said.
In 2017, the co-op and municipal market accounted for 21 percent of cumulative capacity additions, and in 2018 those additions are on track to reach 18 percent. Investing in SoCore and OpTerra allows Engie to keep those growing segments of the market in sight. SoCore also has some solar-plus-storage projects in development.
“If they have two commercial developers who’ve dabbled in utility, if they’re building out some project development EPC capabilities in several markets, that’s not an incredibly hard pivot into utility-scale solar, and something internationally they’ve done before,” said Smith. “They appear to be looking to first get a strong foothold in the non-residential space and are possibly looking at venturing into utility development as well.”
The purchase aligns with Engie's growing mass of distributed generation and energy resources. The international energy company now lays claim to 201 megawatts of solar capacity in 15 countries.
Commercial solar, while a growing portion of the market, has traditionally lagged behind other solar sectors, in part because of financing and long development timelines. But Davis said that’s changing with more developers looking to enter the space, meaning Engie is part of a rising tide.
“A lot of asset owners and developers have been attracted to the commercial sector recently because it offers higher returns than the utility and residential segment, where margins have been depressed due to competition,” she said. “More customers are interested in third-party ownership than in prior years. That means it's an investment opportunity for long-term asset owners.”