The global PV inverter and module-level power electronics (MLPE) market breached $9 billion for the first time in 2019. In the same year, inverter shipments also hit a record high, falling short of 130 GW, according to our new report.
In addition to growing global solar installations, two factors propelled the inverter market in 2019: The step-down of the US investment tax credit (ITC) from 30% to 26% and the growth of the inverter replacement market in Europe.
While solar PV modules were developers’ first choice to qualify for the ITC, they also chose to safe harbor PV inverters, albeit at a lesser rate. In 2019, between 25% - 30% of US PV inverter shipments were for safe harboring purposes.
Developers chose to safe harbor inverters for a few reasons. Firstly, modules made significant efficiency gains over the last several years, with more improvements on the horizon. Inverters are not likely to make such gains in the near term and so are perceived to have a lower technology risk than modules. Secondly, inverters represent a smaller proportion of the total cost stack, meaning that inverter price declines will be less impactful on a US dollar per watt basis compared to module technology.
Europe’s solar market took off in the late 2000s and early 2010s. Now, ten years down the line, inverters are starting to reach their end of life and need replacing. In the near term, Germany, Spain and Italy will lead the way for Europe’s inverter replacement market, while Asia Pacific will begin to pick up in the next few years with Japan, Australia and China.
The impact of Covid-19 on the inverter market will be minimal
The Covid-19 pandemic will not have as serious implications for the inverter industry as it has had for the broader solar industry.
Varied supply chains helped to dampen the impact. Some facilities adopted their manufacturing practices to meet safety guidelines and other facilities that already use automation were less impacted than those that rely more heavily on labor.
Pricing implications of the pandemic seem to be minimal. Logistical issues with shipping may increase costs slightly in addition to personal protective equipment (PPE) and safety protocols that have been instituted in facilities.
Overall, the coronavirus is expected to reduce inverter shipments in 2020 by 14% compared to pre-coronavirus expectations.
Chinese inverter vendors continue to grow their global footprint
Chinese inverter manufacturers expanded their overseas presence, growing from about 30% of global shipments outside of China in 2018 to around 40% in 2019. China’s market downturn and growing international demand have prompted great success for these companies.
Chinese inverter companies are typically more price competitive than European companies and have increased price pressure globally. As a result, the market has seen consolidation.
Since the acquisition of ABB’s inverter line by FIMER was announced in summer of 2019, there has been little news of mergers and acquisitions (M&A) or exits in the inverter space. But that’s not to say more is yet to come. Price pressure coupled with the market downturn caused by the coronavirus, could lead more exits and acquisitions within the next year.
Software and services
As was the case in 2018, inverter vendors continued to expand their software and service offerings, becoming more than just pure-play manufacturers. Vendors have launched internet-of-things platforms, delved into artificial intelligence and machine learning, and ventured into other smart energy verticals. These moves can open up additional revenue streams and help companies differentiate themselves from the pack.
Reliability and customer attention are top-of-mind in selecting inverter technology, and vendors have reacted to meet these considerations. Recently, Enphase launched an online store to connect more directly with clients. CPS America announced it was offering inverter O&M services to those sites using its inverters as well as sites that use inverters from manufacturers that have exited the space. And SMA launched its repowering business in early 2019.
What’s next for the inverter industry?
While the coronavirus will dampen the inverter market in the near-term, the overall trend for the inverter market is positive. Demand for inverters will be on the rise as installations continue to grow globally, and as systems age and more replacement inverters are needed.
As the industry focuses on digitalization and customer-needs, inverter players be pushed to innovate and branch out into non-traditional pure-play manufacturing.
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The Global solar PV inverter and MLPE landscape 2020 report provides detailed, country-specific pricing and forecasts for microinverters, single-phase string inverters, three-phase string inverters, central inverters and DC optimizers. The report covers top trends as they relate to market dynamics, technology, codes and regulations, as well as competitive market share. It also profiles the top inverter suppliers globally, providing background information and analysis on such vendors.
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