The global energy ESO market size was valued at USD 194.10 billion in 2019 and is expected to expand at a compound annual growth rate (CAGR) of 18.8% from 2020 to 2027. Growing digitization in the energy sector is expected to positively impact market growth over the forecast period. Over time, several Engineering Service Providers (ESPs) have introduced new technologies for smart grid management, plant digitization, embedded product engineering, and virtual prototyping. These technologies are expected to drive the digital transformation in the energy sector, thereby increasing the potential of the energy ESPs on a global scale. Furthermore, OEMs may drastically reduce labor costs, along with the other investment costs, by outsourcing services to engineering service providers. Engineering service providers have the competency to execute appropriate strategies and complete projects promptly as they have access to a ready team of skilled and trained engineers, and this is also expected to gain the attention of end-use industries during the forecast period.
Furthermore, the outsourcing firms leverage advanced engineering tools and technologies to serve their clients, which is expected to further fuel the market growth. Partnering with service providers to accelerate Research & Development (R&D) activities has become common in the energy sector. However, Intellectual Property (IP) and security threats are two critical factors restraining market growth. The OEMs and service providers regularly exchange confidential data on project specifications, technologies, and equipment performances to enhance collaboration on development, design, and support. Thus, IP management and data security issues have become increasingly crucial for businesses utilizing outsourcing services.
Furthermore, the energy engineering service providers need to compete on the grounds of pricing and their domain expertise to prove beneficial for the energy-producing companies. ESPs are emphasizing the provision of services to address the difficulties experienced while operating in the energy sector. For instance, power fluctuation is one of the major issues connecting wind farms to the power network. Hence, ESI Group, a French provider of virtual prototyping solutions, offers virtual testing technology for windmill operations. Similarly, Altair Engineering, Inc., a U.S.-based provider of product engineering, industrial design, and analytics solutions, offers IoT-based digital transformation services for the energy outsourcing industry.
Over the past few months, the COVID-19 pandemic has caused an unprecedented global slowdown. It has also affected the energy sector, thereby delaying the construction of new energy infrastructure and facilities due to equipment delivery problems. For instance, China, being the first country affected by the COVID-19 pandemic, is one of the primary producers of several clean energy equipments, including wind turbines and solar panels. Delivery and installation of energy-related equipment for renewable energy companies have been negatively affected due to the pandemic, which has resulted in the reduced demand for engineering service providers.
The structuring and layout segment dominated the market with a revenue share of 34.7% in 2019. This growth is attributed to the rising concerns about the operating efficiency of energy plants. Structuring and layout include construction and equipment procurement. Engineering service providers offer structuring and layout services for large infrastructure projects, including oil and gas, hydro-electric, mining, solar, and wind plants, and this is expected to drive the segment growth over the forecast period.
The R&D and designing segment is expected to register a CAGR of 19.8% over the forecast period. This growth can be attributed to the increasing need for real-time analytics services to handle energy industry requirements, such as analyzing vast amounts of data generated in energy production and real-time feedback from the smart grids. According to the International Energy Agency, governments across the globe spent over USD 26.00 billion on energy R&D in 2018 with a 5.0% year-on-year growth.
The implementation and maintenance segment accounted for a revenue share of 19.0% in 2019. Implementation and maintenance services include post-construction services such as equipment diagnostics and maintenance, operational support, and upgrade services. Engineering service providers offer implementation and maintenance services to OEMs for any issues revolving around operations or changes in project requirements. Moreover, the availability of implementation and maintenance services is becoming a critical differentiator between engineering service providers. Hence, ESPs are emphasizing the provision of continuous support services to OEMs.
The non-renewable segment dominated the market with a revenue share of over 54.0% in 2019. Most non-renewable energy sources are fossil fuels, including natural gas, coal, and petroleum. The production of natural gas is expected to be the fastest, compared to the other fossil fuels, over the forecast period. This can be attributed to the abundant natural gas resources, which include supplies of shale gas, tight gas, and coalbed methane.
The renewable energy segment is expected to register the highest CAGR of 20.6% over the forecast period, which can be attributed to the growing awareness and concerns of environmental protection. Growth in the world's economy, coupled with rapid industrialization, result in a substantial increase in the demand for energy over the coming years. Apart from the challenges of fulfilling the growing energy demand and reducing greenhouse gas emissions, cleaner energy sources are crucial to protect the environment. Hence, there has been a rise in the demand for renewable energy sources.
Chemical processing, which includes nuclear power generation, is expected to be the second-fastest-growing energy source globally. Nuclear power plants use nuclear fission of a radioactive element, uranium, to generate electricity. According to the U.K.-based World Nuclear Association, nuclear power is the second-largest source of low-carbon electricity worldwide, after hydropower, and it reduces carbon dioxide emissions by 2.5 billion tons per year. Nuclear power has a crucial role to play in reducing greenhouse gases, which is expected to drive the demand for nuclear energy sources over the forecast period.
The onshore segment held the largest revenue share of over 55% in 2019 and is expected to register the highest CAGR of 19.8% over the forecast period. OEMs prefer onshore outsourcing services owing to concerns regarding information security and privacy. Onshore services include the offerings provided to an OEM by an ESO vendor operating in its home country. The demographic factors such as language, communication, and working in the same time zone are expected to significantly contribute to the dominance of the onshore segment over the forecast period.
The offshore segment accounted for a revenue share of 40.0% in 2019. Offshore engineering services refer to the offerings of ESPs based in international locations. One of the main driving forces of offshore outsourcing is cost-effectiveness. Besides, companies beyond the traditional legacy of noncore outsourcing are willing to shift toward offshoring core processes, which are also expected to drive the segment growth over the forecast period.
Engineering service providers need to act as per outsourcing regulations and laws imposed by different geographic regions while fulfilling their contracts. The outsourcing process includes the transmission of data, documents, files, project roadmap, software documentation, database structure designs, and records regarding the services to be outsourced. Hence, OEMs have to employ a high degree of vigilance to reduce IP and security threats while operating in an outsourcing business environment.
In 2019, Asia Pacific accounted for the largest revenue share of 36.1%. Favorable government regulations in countries, such as India, China, and Japan; skilled talent pool; and cost-effective labor make the countries in this region favorable for outsourcing activities. Moreover, increasing investments in clean energy sources are also expected to drive the growth of the energy engineering outsourcing market in the region.
North America is expected to register the highest CAGR of 20.6% over the forecast period. The primary factor driving the growth of the region is increasing investment in renewable energy sources. For instance, according to the U.S. Energy Information Administration (EIA), electricity production from renewable sources in 2020 increased to 20.0% from 17.0% in 2019. Moreover, the early adoption of advanced technologies in the energy sector is also expected to drive regional market growth over the forecast period.
The Middle East and Africa (MEA) region is expected to witness significant growth over the forecast period. The increasing deployment of solar energy is one of the major factors driving the growth of this region. Moreover, increasing investments in the energy sector are also propelling the regional market growth. For instance, according to the Middle East Solar Industry Association (MESIA), energy investment in the Middle East and North Africa (MENA) region is expected to reach USD 1 trillion by 2023.
In recent years, ESPs have evolved from providing energy ESO services from their headquarters to opening key operations and excellence centers in developing countries. Most leading ESPs provide services for embedded product engineering, mechanical designs, plant layout designs, and digital manufacturing solutions. These firms are principally engineering, procurement, and construction management companies with a global presence. As the industry has evolved from a domestic to a global domain, it has impelled companies to form global delivery systems. The market is witnessing robust growth with numerous domestic and international companies operating across the regions. Moreover, the key market participants are entering into mergers and acquisitions to expand their business presence and sustain the competitive business environment. For instance, in 2017, Altran Engineering, through its subsidiary Altran U.S., acquired Aricent, a U.S.-based design, and engineering service provider. With this acquisition, Altran Engineering aimed to leverage new opportunities and emerging demands from this region. Some prominent players in the energy engineering service outsourcing (ESO) market include:
Altair Engineering, Inc.
ALTEN Group
ALTRAN
Assystem
Cyient
ESI Group
LUXOFT
Mott Macdonald
QuEST Global Services Pte. Ltd.
Rilco Engineering Services
Segula Technologies
Semcon
STAS Engineering
Total OutSource, Inc.
Report Attribute |
Details |
Market size value in 2020 |
USD 230.11 billion |
Revenue forecast in 2027 |
USD 766.43 billion |
Growth Rate |
CAGR of 18.8% from 2020 to 2027 |
Base year for estimation |
2019 |
Historical data |
2016 - 2018 |
Forecast period |
2020 - 2027 |
Quantitative units |
Revenue in USD billion and CAGR from 2020 to 2027 |
Report coverage |
Revenue forecast, company ranking, competitive landscape, growth factors, and trends |
Segments covered |
Service, location, energy source, region |
Regional scope |
North America, Europe, Asia Pacific, South America, MEA |
Country scope |
U.S.; Canada; Mexico; U.K.; Germany; France; China; India; Japan; Brazil; Saudi Arabia; UAE; Kuwait |
Key companies profiled |
Altair Engineering, Inc.; ESI Group; QuEST Global Services Pte. Ltd. |
Customization scope |
Free report customization (equivalent up to 8 analyst’s working days) with purchase. Addition or alteration to country, regional & segment scope. |
Pricing and purchase options |
Avail customized purchase options to meet your exact research needs. Explore purchase options |
This report forecasts revenue growth at the global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2016 to 2027. For this study, Grand View Research has segmented the global energy ESO market report based on service, location, energy source, and region:
Service Outlook (Revenue, USD Billion, 2016 - 2027)
R&D and Designing
Structuring & Layout
Digitization
Implementation & Maintenance
Location Outlook (Revenue, USD Billion, 2016 - 2027)
Onshore
Offshore
Energy Source Outlook (Revenue, USD Billion, 2016 - 2027)
Renewable
Non-renewable
Chemical Processing
Regional Outlook (Revenue, USD Billion, 2016 - 2027)
North America
U.S.
Canada
Mexico
Europe
U.K.
Germany
France
Asia Pacific
China
India
Japan
South America
Brazil
Middle East & Africa
UAE
Saudi Arabia
Kuwait
b. The global energy ESO market size was estimated at USD 194.10 billion in 2019 and is expected to reach USD 230.11 billion in 2020.
b. The global energy ESO market is expected to grow at a compound annual growth rate of 18.8% from 2020 to 2027 to reach USD 766.43 billion by 2027.
b. Asia Pacific dominated the global energy ESO market with a share of 36.13% in 2019. This is attributable to the growing investment in renewable energy infrastructure in this region.
b. Some key players operating in the global energy ESO market include QuEST Global Services Pte. Ltd.; Altran Energy; Alten Engineering; Kimley-Horn and Associates, Inc.; Rilco Engineering Services; Cyient; and Semcon.
b. Key factors that are driving the global energy ESO market growth include increasing investment in renewable energy resources and growing digitization in the energy sector.
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