The lobby of a police station isnt usually designed to encourage lingering. But at the Sonoma City police station, located in the wine-producing region north of San Francisco, a video screen occupies the lobbys corner. Its aim is to encourage people to check out the performance of the solar panels situated on the stations rooftop. The panels show up on the screen as domino-like tiles and change colors from blue to black to indicate the amount of power production at any given moment during the day. Black means the panel isnt generating any. The per-panel monitoring and analysis of power production hiccups are some of the features Enphase Energy executives highlight when promoting their microinverters; a miniature version of the central inverters that carry out DC-to-AC power conversion at the panel level.
It has been roughly three years since California-based Enphase launched its first product, and it has staked a claim, however small, in the market with this new type of inverter. The venture capital-backed company can claim to be king of the microinverter market, which has seen few entrants thus far. It says it has shipped more than 500,000 microinverters since its initial product launch in 2008 and, after focusing on the North American market, it is launching in Europe this year to spread the gospel of distributed power conversion.
Microinverters, it seems, are here to stay. Although sales of the power electronics are tiny in the overall inverter market, they are growing. Market research firm IHS iSuppli has forecast a doubling in shipments over the next four years, starting with 354 megawatts in 2011 and moving to 890 megawatts in 2012, 1,776 megawatts in 2013 and 3,146 megawatts in 2014, says Greg Sheppard, Chief Research Officer at IHS iSuppli. In 2010, microinverter companies shipped 87 megawatts, most of which were installed in North America.
To propel microinverters into the mainstream, however, will take a lot more work. A lack of ample field data, which demonstrates their reliability, remains a big hurdle for the companies trying to persuade project developers and financiers to give up the good old central inverters, including string inverters. Price microinverters remain more expensive is another. Some of the solar panel manufacturers looking to pre-assemble microinverters into their solar panels, in order to create the so-called AC solar panels, are also still working out some technical and warranty issues.
Enphase has, so far, enjoyed a first-mover advantage, and its ability to convince installers to give this new technology a try has helped to pave the way for other microinverter developers to market their own products. Indeed, competition is already heating up. Enecsys in the United Kingdom announced in May that it had raised 41 million U.S. dollars in equity, a second round of funding that it will use to expand technology development and market expansion, particularly in North America. Meanwhile, Texas-based SolarBridge Technologies began ramping up production in the second quarter of this year to serve customers in North America. It plans to head to Europe later this year, says CEO Ron Van Dell.
Until now, most large inverter companies have refrained from talking about any plans to add microinverters to their product lineup. As the market grows, however, they arent likely to stand for upstarts grabbing sales away from them. Just in May, Power-One announced the launch of a microinverter.
You will see traditional inverter companies introducing products. They dont want to cannibalize their own products too soon, but Ill bet the smarter ones have products waiting in the wing, Sheppard says.
A short history
The idea of microinverters has been around for several decades now, but attempts to popularize them have failed in the past. Werner Kleinkauf, a co-founder of SMA Solar Technology, conducted research into microinverters while he was at Germanys Institut für Solare Energieversorgungstechnik (ISET), which has since been folded into the Fraunhofer Institute for Wind Energy and Energy System Technology (IWES). Companies such as Mastervolt, IKE-Services and Ascension Technology also launched microinverters in the 1990s, and in some cases sell them as part of solar panels. Product development then sputtered to a halt over the past decade as a result of poor performance, high pricing, corporate acquisitions and new strategies to meet the rising demand for central inverters.
However, the microinverter concept didnt die. Two telecom equipment industry veterans founded Enphase in 2006, in order to take a crack at microinverters.
The company moved rather quickly in terms of raising money and introducing its first product: its first microinverter was available on the market by mid-2008, by which time the company had raised 6.5 million U.S. dollars. A few months later, it raised 15 million dollars from new investor RockPort Capital Partners, and existing investors Third Point Ventures and Applied Ventures (the venture capital arm of Applied Materials). In 2009, it received a further 22.5 million dollars and then in 2010, it bagged 63 million dollars. In between times, the company expanded production through its contract manufacturer Flextronics, which is devoting factories with a capacity of at least 300 megawatts in China and Canada to serve Enphases customers this year, says Enphase CEO, Paul Nahi. It also launched new microinverters and lined up more customers, including Suntech Power as a distributor. It then announced last October that it had signed a 4.5-megawatt deal with Main Street Power, an agreement which will see its microinverters installed in around three dozen locations. Morgan Stanley will reportedly finance the project, which is expected to encompass arrays ranging from 30 kilowatts to more than 300 kilowatts in size. Overall, Enphase generated 61 million dollars in sales in 2010, Nahi says.
Moving forward, the startup announced this January that it had crossed the 500,000 shipment milestone. The following month, it signed an agreement with Siemens to distribute its microinverters through Siemens dealer network. Siemens is stamping its own name on the microinverters. Earlier this year, Enphase additionally headed to Europe by hiring a representative in France and another one in Italy. It is planned that its products will be launched there some time this year.
The company has also been gearing up for the launch of a third-generation product in June and, consequently, went on a road show around the country this spring to demonstrate to customers both its new microinverter and cabling system, which it has designed to simplify the installation process. The cable, to be sold by Enphase, comes with built-in connectors and clips to fasten the wire to the racks underneath the solar panels. A single bolt will then secure each microinverter, which is plugged into one connector on one side and the solar panel on the other.
Until now, the company has mainly focused on selling within the United States and Canada, even though Europe represents the largest solar market.
Staking a claim in an emerging market that some analysts believe can one day overtake current market leaders such as Germany is a sound strategy. Enphase has also likely found it easier to convince the small but growing contingent of installers in North American than the larger and more mature distributors and project developers in Germany, Sheppard says. Furthermore, the company happens to be headquartered in a state with a strong pro-solar policy and incentive program. Commenting on Enphases microinverter, Phillip Roberts, Vice President and PV designer of Indiana-based One Planet Solar says, Its very easy. Plug and play. It eliminates the DC side of components and connections. It allows us to design a system with a different orientation without a huge loss.
Gaining a foothold
Enphase certainly hasnt been alone in the microinverter space. Enecsys, a spin-off from Cambridge University in the United Kingdom in 2003, is shaping up to be a serious competitor. In May, the company announced it had lined up a second-round fund of 41 million dollars for product development and market expansion. Enecsys only launched its first product in Europe last year, and is eager to gain a North American foothold. The company has set up an office in California to launch new products this year, says Peter Mathews, Vice President of North American Sales at Enecsys. Overall, he explains that the company has shipped tens of thousands of units.
The big debate
By design, microinverters serve the same purpose as central inverters. Aside from the power conversion function, both have maximum power point tracking (MPPT) algorithms to calculate the optimal power output and make necessary adjustments to ensure the highest power production. Microinverters perform this task for each panel, a crucial difference that avoids the Christmas lights effect of an array with a central inverter.
Solar panels are typically strung together in series, so the poor performance of one solar panel can lower the overall output of the system. A central inverter only figures out the MPPT at the system level. As a result, shading and heavy dust can seriously compromise the power production of a system that uses a central inverter. Microinverters, on the other hand, will ensure that each panel performs its best without being influenced by the least-productive panel.
The software to monitor microinverters, therefore, provides performance data for each panel. Enphase and its peers say this monitoring data, piped over the web, allows system owners whether they are installers, or home or business owners to spot any power production glitches more quickly. While they all pitch this feature as an attractive and useful option, they have different philosophies when it comes to charging the users for the software and service.
Charging for monitoring has been controversial, Mathews says. Some people say fine and no big deal; some are mortally opposed to it. Enphase offers a 90-day free period for using its monitoring service, after which it levies a subscription fee of 1.80 to 2.00 U.S. dollars per panel, per year. Enecsys has opted not to pursue this source of revenue, mainly because a growing number of residential and commercial solar energy systems are owned by companies such as SolarCity and SunEdison, which only sell the produced electricity to their customers. Some of these installers and service providers have created their own monitoring software or have otherwise developed a preference for another software developers product, so they arent so keen on paying microinverter manufacturers more for monitoring, Mathews notes.
What microinverter evangelists do agree on is that installing microinverters saves on labor costs and enables a system to produce more power, and that all helps to offset their higher prices. Enphase claims its microinverters can save balance-of-system equipment and labor costs of up to 15 percent. The company has had to devote resources to educating its customers about the proper and efficient ways to achieve those savings. Enphase contends that its microinverters typically cost 15 percent more than string inverters.
Microinverter developers say their power conversion electronics also minimize the headaches of replacing solar panels years down the road. An older central inverter, on the other hand, may not have the right specs to support the latest and presumably higher performing solar panels.
Enphase claims its microinverters can prevent power losses in a PV system by five to 25 percent. Other microinverter developers, such as SolarBridge, Enecsys and GreenRay Solar also make similar power harvesting claims.
We are generating more power than you would with central inverters. Thats just physics, says Paul Nahi, CEO of Enphase.
Still, skeptics have doubted whether the microinverters can really prevent power loss by a quarter in real-world conditions, since those claims are made by manufacturers who havent launched products long enough to collect a solid amount of performance data in the field.
The critics are not only questioning the power harvesting figures. While they acknowledge the per-panel tracking is indeed an appealing feature, they wonder how many systems are seriously impaired by shading. The scenarios in which the microinverters power harvesting ability will make a serious difference may be quite small, thus making microinverters more of a niche product, they contend.
While SMA doesnt see microinverters as a good fit beyond the residential market, the company does plan to launch its own version within two years, says Dave Wojciechowski, Senior Director of Sales for SMA America.
The company bought the microinverter technology from OKE-Services in the Netherlands in 2009, an acquisition that seemed to validate the important role microinverters would play in the market. But publicly, SMA executives have expressed a lot of skepticism about the broad appeal of microinverters. We do see microinverters working well in smaller types of system, one to two kilowatts on houses that have a mix or odd orientation, roof and shading. We believe its a niche, continues Wojciechowski.
Critics also argue that the cost savings of installing microinverters are overstated. KACO New Energy says it has carried out its own cost comparison of two five-kilowatt systems, one with a string inverter and one with microinverters, and found that the latter costs twice as much. The cost difference widens as the size of the systems goes up, KACO says, and the cost increase can reach three-fold. The company does note that it includes shipping costs in its analysis and remarks that the weight of microinverters for the five-kilowatt installation is more than twice that of the string inverter.
The efficiencies of central and micro- inverters for residential and light commercial systems mostly run from low 90 to 98 percent, according to the California Energy Commission (CEC), which lists the inverters that have been approved for use to claim the states incentives. The commission uses its own metrics to determine the efficiencies, and given Californias place as the countrys largest solar market, the CEC-weighted efficiency measurement is often quoted by manufacturers as a de facto standard.
Enphases microinverters offer CEC efficiencies from 94.5 percent to 96 percent, which will come from a new 215-watt product it is launching around the middle of this year. SolarBridges get around 94 percent, says CEO Van Dell. Enecsys products were not on the CEC list as of early May; the companys own product spec sheets say its microinverters can achieve 94 to 95 percent peak efficiencies.
The highest efficiency products on the inverter list belong to central inverters from Israel-based SolarEdge Technologies, which bundles the inverter with DC-DC optimizers that perform power point tracking for each solar panel and a monitoring service. The company, which raised 25 million U.S. dollars last year, is one of a cadre of power optimizer developers which see themselves as offering the most attractive feature of microinverters the power tracking and harvesting while keeping the traditional central inverter in the system designs.
While the efficiencies are comparable, the actual performance of microinverters in the field may render them less efficient than central inverters. As power conversion devices, inverters of any kind generate heat. Central inverters stand apart from the panels while microinverters sit right at the back of each panel and, being on a rooftop, are more exposed to the weathers elements.
Rated efficiencies alone arent enough in persuading installers and project investors to give microinverters a chance. Central inverter makers often raise the issue of product reliability and note the lack of ample long-term field data to prove microinverters longevity. That makes the prospect of having to replace a bunch of them throughout the life of an array a serious risk for installers.
The number one thing is to get more data to show more performance and reliability, and convincing people that harvesting works, says Sheppard, referring to the challenges microinverter developers face in bringing their products into the mainstream.
This perceived shortcoming seems to have prompted microinverter companies to offer longer warranties than their central inverter counterparts. Enphase started out by offering a 15-year warranty, which is longer than the ten-year warranties offered by many central inverter manufacturers. SolarBridge then announced it would offer a 25-year warranty. Meanwhile, Enecsys is providing 20-year coverage and GreenRay, based in Massachusetts, says its microinverters match the warranties of solar panels that typically run for 20 to 25 years.
There is another important reason why microinverter companies are striving to offer long-term warranties. Many of them believe their products can provide even more value if they are integrated into solar panels by panel manufacturers in their factories, and sold as AC panels. Selling the whole package, perhaps along with cables and racks, could cut a significant amount of assembly and installation time, and cost for installers. In fact, SolarBridges own calculations show that system owners can achieve a 20 to 30 percent reduction in levelized cost of electricity, Van Dell says.
With an AC system, you have a much more flexible solution. You dont depend as much on all the matching between individual solar panels. You can put up five panels on your roof one year and two years later put up five more panels, he adds.
Unlike Enphase, SolarBridge doesnt aim to sell its microinverters to distributors or installers. Instead, the company is working with solar panel makers to create AC panels. Van Dell declines to say which panel maker will launch the first SolarBridge-enabled panels, but notes that the company has shown prototype AC panels with SunPower and Kyocera at a trade show last year. The first SolarBridge-based AC panels could hit the market this summer, says Van Dell. Companies such as Akeena Solar and Suntech Power have also worked on this concept for some time, but AC panels have yet to find market acceptance.
Developing and marketing AC panels is not as easy as it sounds. To better market the panels, the warranties of the microinverters need to match the solar panels own, Van Dell says.
Even then, panel manufacturers will still need to decide if, and how, they should assume the liability of faulty microinverters, since they are the ones to integrate the power electronics with solar panels and sell them as one product. The heat generated from microinverters, for example, could present a problem down the road if they are attached to the back of the panels.
Ultimately, module guys will have to move to AC modules or at least put in an optimizer, because they are heading towards a hard-to-differentiate commodity situation, Sheppard concludes.