In early November, GTM Research’s inverter expert Scott Moskowitz unleashed a “tweet storm” on twitter that broke down the key findings of the company’s Global Solar PV Landscape H2 report. Most strikingly, Moskowitz wrote that current inverter technology trends “have not exhausted their cost-reduction potential,” with the growth of 1,500 volt architectures poised to exert further downward price pressure on the entire inverter sector in 2018 – following what has been a relatively stable year for inverters and module level power electronics (MLPE) prices in 2017.
“There are few technology developments in the pipeline that will result in step-function price declines in the medium term,” Moskowitz added. “We expect annual pricing declines to minimize post-2020 as a result.”
Between now and then, however, the expected price squeeze will coincide with the growth of the MLPE market, which IHS Markit forecasts will reach 9 GW globally by 2021. Introduced largely as a premium product designed to extract slightly higher yields from an array, the MLPE sector is becoming an increasingly vital part of the solar furniture, and it speaks volumes that the additional costs they bring are being willingly absorbed and embraced even at a time of pinched financials.
To understand how the sector may take shape, analysts can look to the wider inverter landscape – where consolidation is king – for guidance. By the midway point of 2017, Huawei and Sungrow accounted for almost 25% of all shipments between them. Such dominance is even stronger in the MLPE space, where SolarEdge and Enphase are clear market leaders with their power optimizer and microinverter solutions, respectively.
Other industry stalwarts include Tigo, APsystems, and Ampt, with each firm adopting a slightly different route to market. In 2016, Enphase Energy appeared to be on the verge of losing its dominant position after limping through a procession of tough quarters that saw the California-headquartered firm rack up large losses. Raghu Belur, Enphase’s cofounder and VP for strategic initiatives, tells pv magazine that market forces in 2016 brought prices down more quickly than the company had anticipated, blindsiding Enphase and almost threatening to derail its planned cost reduction road map.
Belur admits, “2016 was a tough year, bringing a combination of rapid cost reduction during the development process of the Enphase IQ6 Microinverter. We had to keep investing and spending on the IQ, meaning our opex was very high. We had to finish the IQ development and our AC module development as well as storage development, so it was almost a perfect storm for Enphase: We were behind on cost reduction and still had three major product developments to finalize.”
This year, however, all three products are complete and on the market, and despite losing former CEO Paul Nahi in Q2, Enphase appears to have steadied the ship. “An estimated 70% of our product shipments in Q3 this year were the IQ6, with the next iteration – the IQ7 – coming right behind it and boasting an even better cost model.”
Belur explains how the new IQ7 Microinverter chip has 3.8 million transistors as opposed to 2.8 million, and a 12% reduction in internal parts that mean the device is smaller, but more powerful. “This 33% increase in transistor count should not come as a surprise – this is what Silicon Valley does: better performance at lower cost as the chips become more sophisticated.”
Belur adds that companies should “never bet against silicon,” and stresses that behind-the-meter solar systems are only going to become more sophisticated, affordable, and desirable. “Enphase’s next innovation is our Ensemble product, which we feel is a major technological breakthrough. The big elephant in the room with solar is that all of it is grid-tied,” he explains. “That means that if the grid fails, every PV element is dead. In the U.S. we found that 60% of solar homeowners thought that if the grid fails but the sun is shining, they will still have power.”
The Ensemble was designed because Belur sees no overlap between grid-tied and off-grid. “About 99% of all solar installs are grid-tied. The rest is off-grid systems. But the Ensemble completely eliminates the very notion of on-grid and off-grid, and can keep a solar system seamlessly running with or without the grid, and independent of storage.” This new software will sit inside the Enphase microinverter and is expected to be available by the end of 2018, Belur reveals.
Cost reduction built-in
Enphase is not alone in its efforts to continuously balance innovation with profitability. Israel’s SolarEdge has been at the forefront of both approaches for the past few years, and has prepared for the coming price squeeze by introducing an automated production process for its optimizers. “The automated assembly line has allowed SolarEdge to keep pace with the growing demand for power optimizers while increasing quality,” Lior Handelsman, SolarEdge Founder and VP of Marketing and Product Strategy tells pv magazine.
Handelsman says the savings brought by automation have reduced labor costs, and resulted in fewer errors and less material wastage. “Automation in highly repeatable tasks enables precision for the exact amount of material to be used, such as potting material,” Handelsman explains. “There is also no scrapped material caused by human error. The bottom line is that this makes the entire production process more efficient, decreasing costs while increasing capacity.”
Completely automated production is nothing new for the large solar module manufacturers, but other sections of the solar value chain are still playing catch-up in this regard. For SolarEdge, the decision to transition to an automated optimizer line was not taken lightly: The ramp-up and implementation was a difficult process, Handelsman reveals. “It was not a plug-and-play solution. We even needed to redesign the optimizer itself to allow a bottom-up approach to assembly. However, once the automated assembly line went online, we saw the immediate benefit, and are planning on establishing more automated lines for other components and products in our portfolio.”
A vital benefit of automation is the ease at which SolarEdge’s optimizers can now be shipped to module partners the company works with for the creation of smart modules, which are solar panels that arrive with a DC optimizer integrated. “SolarEdge supplies the tools to facilitate the embedding of our optimizers during the module manufacturing and testing process,” Handelsman says. “We continue to manufacture at our facility and then ship them to our partners – much in the same way as a regular diode-only junction box is attached. By keeping the manufacturing at our facility, we are able to ensure that our high standards are maintained.”
As outlined by Belur, MLPE systems are likely to become even more ubiquitous in the PV industry – particularly if their functionality continues to evolve. Handelsman stressed that MLPE is expanding into communication, safety, home energy management, and grid interaction, and such trends mean the sector will continue to thrive as both a standalone and embedded solution. “Not all power electronics can be moved to the module level, and any power electronics will need to work seamlessly with the main energy manager,” Handelsman believes.
Enphase’s Belur, however, argues that the inverters themselves could soon be obsolete as standalone components. “The whole notion of a separate inverter will die out,” he said. “Maybe even in two years’ time: You take the AC module and switch it on – and that’s it. The inversion process does not disappear, it just becomes integrated and becomes one less thing for installers and system owners to worry about.”
Olivier Jacques, Executive VP USA & EMEA at APsystems, agrees with Handelsman that MLPE will continue to thrive in both the integrated and standalone market segments. “So far we see that higher power modules and integration with the grid are the main drivers of the market,” Jacques tells pv magazine. “So while full AC module integration is still too much of a niche market right now, we know that things can evolve rapidly in PV and will keep a close eye on developments in this space.” S