China’s transition, India’s growth, inverters’ insight

It is often said in solar that the inverter is the ‘brains’ of the PV system. And as these systems themselves become more intelligent and sophisticated, the role of the inverter is evolving beyond simply inverting direct current (DC) into alternating current (AC), to incorporate a broadening range of functionalities.

‘Twas ever thus, of course. Even the very early solar inverters boasted rudimentary intelligence features to ensure safety and consistency of energy supply. In 2018, the inverter remains at the vanguard of innovation in the solar industry: ‘dumb boxes’ no longer cut it, yet, by the same token, there exists a wide spectrum of inverter capabilities, from containerized central inverter units to module level power electronics (MLPE).

The result is that inverters can represent the sentries on duty atop PV’s towers: alert to trends appearing on the distant horizon, attuned to the shifting winds of change, and with a bird’s eye view of movements and developments within the industry itself.

In 2017, for example, three-phase string inverter sales outstripped central inverter sales for the first time ever. There are numerous reasons for this shift, not least the continued growth of the Chinese market – and especially its distributed PV sector – allied to Huawei’s domestic dominance. Huawei only deals in string inverters, of course.

Growth in string-controlled solutions could also hint at the exhaustion of available large-scale sites in mature markets (Japan), surging residential sectors (Australia and the U.S.), and maturing and reemerging utility markets eager for greater data monitoring capabilities (Europe and MENA, for example). Such trends can be extrapolated by pulling at just one thread in the inverter cloak – with many more awaiting to be examined.

2017 – a look back

According to IHS Markit’s Senior Solar Analyst Cormac Gilligan, global inverter shipments in 2017 were around 30% higher year-on-year (YOY) against 2016, reaching above 100 GW for the first time ever.

“First and foremost, it is the Chinese market that has been performing extremely strongly in 2017,” says Gilligan. “In that market I would suggest that inverter shipments are higher than actual installations. This is attributed to an expectation that 2018 will perform strongly.”

The intense competition to survive and thrive in China is not solely confined to the module players. In the inverter space exist not only market leaders Huawei and Sungrow, but also TBEA, Sineng and Kstar, each performing strongly in the utility-scale space.

However, while China’s utility-scale solar market remains bullish, growth dynamism has shifted notably eastwards away from the vast plains of the western regions and towards the more urbanized parts of the country in the east.
“This shift means that the sales channels for many domestic suppliers have evolved as more rooftop opportunities emerge,” Gilligan suggests. Companies such as Growatt, GoodWe and Ginlong have all benefited from this new trend. “From an international perspective this means that we may begin to see the likes of Growatt, GoodWe, and Ginlong build their presence in markets in Europe and elsewhere, with domestic stability giving them a launchpad to expand globally,” Gilligan says.

Analysis of inverter trends in India yields similar insight into how the solar market there is shaping up. The record year witnessed in 2017 was a major factor in the ~30% global growth in inverter shipments, with a number of installers active in India feverishly stockpiling inventory of inverters in an attempt to beat the Goods and Services Tax (GST) that applies an additional 5% import tax on the already-painful 18% rate for inverters.

“Many firms pre-ordered their inverters in bulk in 2017 in case they were going to be taxed, so we will see the majority of these inventories used up and installed over the course of 2018,” elucidates Gilligan.
The GST may compel more international firms to build local production facilities in India, particularly if the wider Indian solar market can stay the current growth course. China’s Sungrow recently finalized the details of a 3 GW inverter plant in Bangalore, and ABB has large capacities in the country. “Other companies growing their presence in India include General Electric, Fimer, Gamesa, Siemens, and Ingeteam, joining the more established players such as TMEIC, SMA, Schneider Electric, ABB, and Hitachi,” says Gilligan.

Central reservations?

The threat of string inverters to the central inverter market space has been kicking up dust on the horizon for many years, and last year the tangible shift arrived. But does this mean the gap will continue to widen as string inverter solutions eat deeper into markets traditionally ringfenced for central inverters?

Yes and no, says Gilligan. Some of the most rapidly growing markets are to be found in Latin America and MENA, and in these regions there remains a firm preference for central solutions. “Mexico is growing strongly, and that market has a lot of Spanish and Italian players active, including the likes of Fimer, Nidec, and Ingeteam – all of which have centralized solutions.” However, Mexico’s potential will see a number of Chinese firms attempt to build on the toehold they already have in the country, and this could mean a growing acceptance of using string inverters to build utility-scale solar plants.

“It is not as simple as saying one technology will triumph over the other,” Gilligan opines. Inverter-driven market insight allows us to know, for example, that India’s cost-conscious approach to large-scale solar development sees central inverters – which are still significantly cheaper on a dollar-per-watt basis than string inverters – remain the dominant choice.

“Logistically too, companies like ABB, Schneider Electric, and General Electric have been present in India in other capacities for some time, so they can simply upscale their technical engineers to be able to service a central inverter and away they go – in India they have that advantage,” says Gilligan.

The MENA region is becoming a hotbed for vast, gigawatt-scale solar plants and that is where central inverters will still have a role to play. “The continuation of development of very large solar farms in India, MENA, and Latin America – and to some extent in the re-emergence of Spain and Portugal – will deliver a steady stream of revenue for suppliers of central solutions,” predicts Gilligan.

Higher power, higher cost

Despite the growth in three-phase string inverter solutions, central inverters remain more attractive on a dollarper-watt basis. This begs the question: Are solar developers now more versed in looking at longer-term opex costs as opposed to fixating on the initial capex?

By digging a little more deeply into the types of string inverters gaining traction, the answer to that question becomes a little clearer. Most leading inverter providers are now offering – or will soon offer – string inverters with far higher power ratings than previously. This trend, driven by incremental technological developments that allow for more power in less space, means that a typical string inverter could be 60 kW to 80 kW, or even above 100 kW (Sungrow and SMA are just two inverter firms offering this string solution).

“The impact of this trend shows that the solar industry is almost coming full circle,” reveals Gilligan. “Inverters sized at 100 kW were quite common around seven to eight years ago, but they were designed as central inverters and very heavy. They died off, but now that the technology has caught up, many firms are in a position to miniaturize the string inverter.”

High-powered string inverters are proving good solutions for groundmounted plants in the 20-50 MW range, and thus have begun to be embraced in markets such as Japan and the U.S. where solar plants of this size are increasingly in vogue. “Lots of string suppliers have gone down this route because it is an effective way to compete with central inverters on cost, although suppliers of central inverters have also been showcasing their higher power solutions recently and so stayed ahead of the game.”

Gilligan is confident that most leading inverter firms in the string space are now working on products that have a power rating above 100 kW – a trend that has been driven by the coming-of-age of very nascent solar markets in Sub-Saharan Africa and Southeast Asia. To compete here, Gilligan says, most suppliers will have to be able to offer string inverters of between 100 and 125 kW in order to compete on price. “Given the low tenders that went into some of these markets, that is the only way to be competitive from the off.”

The growth of string inverters should also be examined, of course. In markets such as Turkey and Brazil, both of which are expected to be gigawatt-scale markets, companies such as Sungrow, SMA, and Huawei are having joy with their string solutions, with the former two firms happy to let their customers decide which type of product to select from an increasingly broad portfolio.

“We should not overlook the role that strong C&I markets globally are playing in boosting string inverter adoption,” adds Gilligan. “In this segment there have been some nice wins in India for Huawei, for example, and also in Japan where domestic brands are strong.”

In the module-level power electronics (MLPE) space, 2017 represented another exceptional year of growth and development for the sector’s leading players, not least Israeli firm SolarEdge, which rose to third place in the U.S. in terms of inverter shipments – a rise underpinned by its premium rooftop offering of DC power optimizer+inverter+energy management system.

Microinverter specialist Enphase also returned to growth in the U.S. last year, and both firms – alongside optimizer specialist Tigo – can expect success in the markets of Australia, Europe, and the U.S. this year, Gilligan believes. He goes on; “2018 will be another exciting year for MLPE because we will really see Huawei push into this space. We are yet to have confirmation that Sungrow will do likewise, but we do anticipate some type of MLPE solution to emerge from them sometime soon.”

China, on the other hand, is not ready for the type of premium offering that most MLPE solutions provide. Instead, companies such as SMA and Huawei may find some joy with their selective deployment solutions, where some but not all modules in an array are fitted with an MLPE component.

2018 and beyond

Inverters may be solar’s canary in the coal mine with their fingers on the pulse (and all manner of other lazy clichés and idioms), but they are not crystal balls. By analyzing this industry, one can certainly get a hint of the forces shaping other links in the solar chain, but nothing is set in stone. “The overarching theme we see from looking at inverter data is the undoubted growth of grid requirements as PV becomes a larger proportion of the energy system,” says Gilligan. “Grids will need more controls in place, and this will most likely be done with the power electronics that exist, which means MLPE in residential and the C&I context becomes vital, and more string inverters at scale play their part in data analytics and cloud-based control.”

Beyond that, inverter installation perspectives can give a flavor of what to expect from the world of solar in 2018. “Installations in India will continue to be strong and we expect further manufacturing announcements from particularly Chinese companies over the next five years there,” Gilligan predicts. “In China there is certainly good supply at the moment, but we do expect Q1 data to show a post-rush relaxation.”

Utility-scale growth can tend to be lumpy as developers and EPC companies take breathers after finishing massive projects, but inverter demand will be a little smoother and is likely to enjoy global year-on-year growth in the single digit range for 2018, the IHS Markit analyst forecasts.

“If inverter suppliers feel that markets are cooling, they are quick to enter other markets and other segments,” concludes Gilligan. “SolarEdge, for example, has developed a 100 kW solution for the C&I space, while Huawei has gone in the opposite direction with its residential offerings.”
Most firms in the inverter space are also looking to expand into other technology areas including energy storage, O&M, or using the data that they harvest, as seen with SMA’s new subsidiary, Coneva.
“This is the great trend we will continue to see. Whether it’s inverter firms developing electric vehicle charging stations, or battery inverters, or cloud-based O&M and monitoring control, the industry will witness a continuation of inverter suppliers not solely trying to compete on costs, but targeting greater integration and broader portfolios.”