The global market revenue for PV inverters will contract by 9% by the end of 2013, damaged by drastic price falls driven by an intensely cost-sensitive market, says analysts IHS Inc.
Latest IHS data reveals that although shipments for solar inverter units will actually increase worldwide by 7% for the year, overall market revenue will fall to $6.4 billion 9% down on 2012, when the global market was worth $7.1 billion.
In July, IHS previously predicted a decline of 5%, but with average inverter prices now set to fall to $0.18 per Watt this year (down from $0.22 per Watt in 2012), the analysts have revised their forecast.
"During the past few years, solar module makers have endured much more price pressure than the inverter suppliers have," said Cormac Gilligan, senior PV market analyst at IHS. "However, module prices now have reached an inflection point and have begun to rise. This is having major ramifications for inverter suppliers, with price pressure having shifted to their segment of the business."
As the price pressures move along the solar supply chain, inverter manufacturers are now being charged with absorbing the costs. And in a crowded market already depressed by the elimination or expiration of government solar subsidies, inverter manufacturers have had little choice but to lower their asking prices.
New markets for inverter manufacturers
Europes heavyweight solar markets, chiefly Germany and Italy, have either removed or vastly reduced government subsidies, heaping further price pressure on inverters. IHS predict that combined inverter shipments to these countries will retract by more than 50% this year, falling to just 5.7 GW ordered, compared to 11.5 GW in 2012.
"Total PV inverter revenue throughout Europe in 2013 will be down by 50% compared to 2011," added Gilligan. "However, the number of inverter suppliers in Europe is largely unchanged. This will result in fierce competition and will prompt inverter suppliers to aggressively enter new emerging markets, such as South Africa and Thailand, in order to find new growth opportunities."
One area where the market appears more robust is at utility scale. IHS predicts that utility-scale installations will account for one-third of global demand this year, which is a slight increase on its 29% share in 2012.
However, prices for large central inverters are also subject to intense price pressure and are expected to fall to $0.12 per Watt a 16% drop. In the Asian market, this figure may even fall as low as $0.06 per Watt, which represents an ultra-competitive market and one that may deter foreign suppliers who lack a local presence.
With an increasing number of projects being awarded through bids and tenders rather than via fixed FITs, these emerging markets are imposing even stricter price pressures on large central inverter manufacturers.
"Tender and bid mechanisms place a stronger emphasis on upfront inverter prices, which are being lowered in order to win large PV projects, particularly in todays highly competitive market environment," said Gilligan. "In tandem with the very low prices for central inverters in Asia and smaller emerging markets, prices have decreased faster than predicted in European utility-scale projects as subsidies have been reduced and competition has increased. Even markets that attract relatively higher prices, such as the United States, are forecast to experience intense price pressure as new suppliers, mainly from Europe, enter the market."
Low power, lower prices
Low-power three-phase inverters up to 35 kW in size became even cheaper than average this year, reports IHS, due to a combination of the aforementioned market shrinkage and increased competition from suppliers releasing new products to the market. Chinese suppliers, in particular, have targeted the European market, swelling competition and forcing the average price down to $0.14 per Watt, a decrease of 20%.
In the U.S., SMA and Power-One the worlds largest suppliers of inverters have entered the low-power range, a move that is likely to exert even more downward pressure on global costs.
"IHS predicts that shipments of 20- to 35-kilowatt inverters in the U.S. will reach more than 200 MW in 2013, and new products from the two largest inverter suppliers will certainly help to drive this growth," concluded Gilligan. "Pricing in this segment in the U.S. is relatively high compared to Europe, and it is likely that the presence of SMA and Power-One will contribute to American prices decreasing to European levels."