The United States and Japan will remain the only two PV inverter markets with annual revenues exceeding $1 billion in 2015 and 2016.
In a new report, market research group IHS predicts that global PV inverter revenue for 2015 and 2016 combined will reach $13.2 billion, with Japan and the U.S. respectively accounting for 25% and 21% of that total.
IHS says the global PV inverter supplier base has been placed under pressure by intense price pressure caused by slowing demand, over-capacity and a plethora of new entrants. As a result, global suppliers are highly focused on building a strong position in these two key markets to capitalize on revenue opportunities, the research group adds.
"Despite China being the largest market in terms of shipment volume, low prices and extremely challenging business conditions have made it a lower focus for global suppliers, with this market accounting for just 14% of 2015 and 2016 global revenues in comparison," IHS says.
The research group found that Japan became the largest PV inverter market by revenue in 2013 and predicts the country will remain so until at least 2018. The market grew by more than 140% in 2013 as an attractive feed-in tariff resulted in a major acceleration of the residential sector and the dawning of a gigawatt-scale market for commercial and utility-scale systems. Although the enormous demand that Japan has seen and high prices that it commands have made it extremely attractive for international suppliers to enter, it has remained dominated by domestic suppliers due to a strong preference for local products and complex certification requirements, IHS reports. The combined shipments of the three largest suppliers, Omron, Tabuchi and TMEIC increased by 60% during the first three quarters of 2014 compared to the same period of 2013, and accounted for more than half of total shipments to Japan. However, some Western suppliers, such as Schneider Electric and ABB, are increasing activity in the market as their shipments to Japan grew significantly throughout 2014. To date, they have mainly focused on large central inverters for the booming utility-scale market.
The United States, which was the only market to exceed $1 billion in annual revenue each year for the last three years, has also attracted the focus of most suppliers and proved far more accessible than Japan. A robust utility-scale pipeline, strong incentives and financing models in the residential and commercial sector have resulted in U.S. players delivering robust year-on-year growth while many other markets proved extremely volatile. The large number of European and Asian suppliers that have established themselves in the U.S. has led to the supplier base continuously evolving, according to IHS. Notably, two Japanese suppliers appeared amongst the 10 largest suppliers to the United States based on revenues for the first nine months of 2014: TMEIC and Yaskawa (via its acquisition of Solectria). Israeli firm Solaredge has also made a significant improvement in its position and was the fifth largest supplier in that period, largely helped by its supply agreement with SolarCity.
Booming markets set to shrink
Although Japan and the U.S. present the largest opportunity for PV inverter suppliers over the next two years, IHS predicts the two markets will shrink in size in the future: Japan is set to decline in 2016 as feed-in tariff reductions and grid-connection delays for utility-scale systems cool the market while the U.S. will likely see inverter demand weaken in 2017 due to the scheduled expiration of the federal Investment Tax Credit (ITC). While the ITC may be extended, most large projects are expected to be completed before the end of 2016, leading to a slowdown in 2017.