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Price Pressures Squeeze Solar Inverter Shipment Outlook

Larger inverter suppliers, especially those targeting utility-scale business, are increasingly feeling the burden of the supply chain's pricing pressures to lower costs, which will negate growth on the demand side.

In a new report, IHS says worldwide solar inverter unit shipments will rise 7 percent this year, but PV inverter revenues are heading the opposite way, a 9 percent decline this year to $6.4 billion, worse than the firm's earlier prediction of a 5 percent drop. (2014 will see a 9 percent rebound in revenues back to around $7.0 billion, while shipments will surge 19 percent to more than 41 GW.) That's because overall inverter prices are sinking fast, sliding to $0.18/W this year vs. $0.22/W in 2012. It's especially painful for big utility-scale projects; IHS says these will make up a third of global demand this year, up from 29 percent last year, but global prices for large central inverters will decrease 16 percent to $0.12/W.

One reason for the divergence is that solar PV technologies further up the supply chain — silicon, cells, and modules — have been bearing the brunt of the market's relentless cost-cutting demands, but now those pressures are moving further down the chain into the balance-of-system technologies, explained Cormac Gilligan, senior PV market analyst at IHS. Meanwhile, some of the larger established solar markets, especially in Europe, are slowing down dramatically, so an increasingly crowded market of inverter suppliers is fighting for less business. Favorite markets such as Germany and Italy also are reducing or eliminating subsidies, he pointed out, so project developers are submitting tenders at rock-bottom prices to win the business, which means they'll have to squeeze out even more costs.

Ironically, some of the emerging global solar markets are also ones where utility-scale solar is taking off, such as China, India, South America, and South Africa — and it's in these markets where pricing pressure can be most severe, with inverter prices as low as $0.06/W in China, India, and Thailand, IHS noted.

Gilligan said that makers of central inverters are trying to answer the market pressures by offering features that translate to some savings on the operations and maintenance side, such as higher input voltages (>1,000 V) and liquid cooling. Some inverter companies also are broadening their portfolios to include smaller three-phase inverters targeting more commercial-scale opportunities. China's still a relatively unique case where several domestic utility-scale inverter companies have held their turf, and western inverter suppliers are trying to get into the market, creating massive price pressure.

However, price pressures also are being felt for smaller three-phase inverters (20-35 kW) in utility and commercial applications, Gilligan pointed out. Some European markets will see prices for those lower-power inverters sinking 20 percent to $0.14/W. This is a growing sector in the U.S. for these types of inverters, he noted, predicting more than 200 MW of shipments this year, and pricing is still relatively higher than in Europe. But there's increasing competition too (he pointed to SMA and Power-One) so look for prices to start declining as they have in Europe.

Lead image: Stack of gold dollar coins being squeezed in a silver adjustable spanner, via Shutterstock

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