Success in the burgeoning market for power inverters will hinge upon suppliers’ capability to provide the lowest long-term costs and their short-term wherewithal to source sufficient quantities of key components, according to Photovoltaic (PV) research from iSuppli Corp.
Solar inverters, also known as PV inverters, are electronic systems that convert the DC power generated by solar panels into AC power that is needed for local use or to the power that can be fed into the electricity grid. An inverter is half power management system and half embedded computer.
Global inverter shipments are set to exceed 23.3 million units by 2014, up by a factor nine from 2.6 million in 2010. Revenue will rise to $8.9 billion in 2014, up from $5.3 billion in 2010.
“Solar inverters are on track to become one of the world’s highest-volume ruggedized electronic systems,” said Greg Sheppard, chief research officer for iSuppli.
Despite such soaring demand, the average price per watt for inverters worldwide will decline 13.5 percent this year. In particular, Asian suppliers are trying to drive prices down with lower costs, Sheppard noted, even though they have been challenged to deliver bankability—i.e., the capability to provide a lower Total Cost of Ownership (TCO).
“Besides the upfront acquisition cost, other competitive factors will separate the winners from losers during the next few years,” Sheppard observed.
Total Cost of Ownership
Apart from the rising competitive pressures, price is being felled by the increasing market share of larger inverters, which boast a lower price per watt. Furthermore, suppliers are having difficulties in countering customer expectations for continual price reductions. The purchase price of an inverter represents only a portion of its actual cost as part of a solar system.
“iSuppli believes that inverter suppliers increasingly will be valued based on their impact upon the Levelized Cost Of Energy (LCOE), a metric that takes into account not only the acquisition cost of an inverter but also total energy production and the 20-plus-year lifecycle costs of an inverter within an installation,” Sheppard said.
Not all inverters are the same, however, when it comes to LCOE, and inverters are the most failure-prone component of a PV system.
“Initial acquisition costs are important, but the lifetime costs of inverters loom larger in Return of Investment (ROI) equations for PV system owners,” Sheppard pointed out. “Thus, quality and reliability are key competitive advantages in the inverter business.”
A key issue last year and part way into this year revolved on adequate production capacity to make inverters. However, a lingering shortage of electronic components has emerged now as an ongoing challenge for inverter companies.
Among the most troublesome components to source are Insulated Gate Bipolar Transistor (IGBT) modules, which are in short supply and difficult to obtain for many inverter companies. According to Germany’s SMA Solar Technology AG, the world’s leading solar inverter supplier, component shortages have limited the company’s shipments in recent quarters.
Once a mature product with predictable supply and demand dynamics, IGBTs now are experiencing rising sales in a number of hot applications, including automotive electronics as well as PV and wind inverters. Combined with conservative investments in new IGBT capacity, the strong demand has spurred a supply crunch.
Other inverter components in short supply include Digital Signal Processor (DSP)-based controllers and certain types of capacitors.
Inverter suppliers also will have to keep up with technological advancements that are improving the total energy harvest of solar power. Most prominent among these is Module Level Power Management (MLPM) technology, consisting of microinverters and optimizers.
Used with each panel, the products aim to ensure that every panel produce at full potential. Microinverters include the DC-to-AC inversion function, while optimizers need to be coupled with a string inverter.
Far from simply being a theoretical concept, MPLM has moved into high-volume market adoption. The U.S. residential market, for instance, is adopting microinverters rapidly, while optimizers have found favor with European residences. Each market is commanded by a different company at the top: The leader in microinverter shipments is Enphase Energy, while SolarEdge in No. 1 in the optimizer arena.
The success of MPLM is forcing traditional inverter companies to pay attention and take action. A key advantage of MLPM solutions is their capability to raise energy harvests. Depending upon their particular installation, location and panel choices, solutions that deploy MPLM technology can boost energy-harvest levels by 2 percent to as much as 15 percent.