Inverters Compete over Cost

For those making inverters that convert the direct current flowing out of PV panels into alternating current that can enter national power grids, the resulting ramp up has been necessary, says Yole Développement market analyst Brice Le Gouic. 'Before you had companies from the industrial or rail traction business,' he told Renewable Energy World. 'In between, sometimes they manufactured inverters for PV, but the processes were not clearly defined.' Now that the PV inverter market has become a clear driver of growth, manufacturers want specific strategies to ensure they can take full advantage of it. From this beginning, three distinct classes of company have evolved to inhabit the inverter industry, seeking the best chance of success given their particular strengths.

The 1 MW-range inverters used in industry were obvious candidates for transferring to the highest-output segment of the PV industry. Today, however, there are two other important segments to consider. The residential segment with installations below 10 kW, and the commercial/industrial segment of between 10 kW and 500 kW, with solar farms typically above this range. Residential inverters can be compared to consumer electronics products with their high volume/low margin, while large inverters are low volume/high margin products.

Inverters deployed in these different segments can be separated into two types used above and below 100 kW, Le Gouic explained. 'In the industrial segment below 100 kW people will use inverters that are somewhat like the small ones used in residential applications,' he said. These will only allow one or two 'strings' of PV modules connected in series, meaning that several inverters must be used. A key advantage of this approach is that as inverter technology progresses the power rating of this class of inverters increases, meaning that fewer are needed. 'Now the industry is working towards 15 kW inverters from around 8 kW a few years ago so, for the same installation size, you can have less inverters that are still single strings,' said Le Gouic. Installations above 100 kW use larger, more custom-made, inverters, he added.

Low cost and clean: SMA Solar Technology's fully automated inverter production provides it with an economical manufacturing infrastructure, while also being carbon neutral (Source: SMA Solar Technology AG)

While two of the three inverter producer classes address all these market segments, the third can be defined as those companies which narrow their focus. One example is Spain-headquartered inverter manufacturer SEPSA, which is concentrated on providing solar farm-scale inverters. While this could increase how well these companies serve their chosen segment, it will also make it harder for them to reduce their costs. Also included in this class are those which have limited their market geographically. For example, some Japanese companies have decided to focus on their local market rather than tackle the challenge of decreasing their costs to enter more competitive markets.

The remaining two classes are aggressively seeking to reduce their manufacturing costs, and can be distinguished by exactly how they seek to do this. The first approach, extensive automation, is typified by industry-leading German inverter specialist SMA Solar Technology. 'SMA decided to automate, especially for the residential and small commercial product portfolio,' said Le Gouic. 'There are actually very few people in the facility. It's advantageous for them, because PV inverters, especially when they are very big, need lots of people for assembly, testing and cleaning. By reducing the manpower needed at each process step, such companies can successfully reduce costs.'

The final inverter manufacturer class is made up of companies establishing facilities in countries where labour costs are low, particularly eastern Europe and China. With the European market still driving today's PV industry, such companies also frequently seek suitable contract manufacturing partners in eastern Europe. Even Chinese players need to be physically present where the demand for solar power-generating technology is strong, so they have also been seeking local sales channels and local distribution in Europe.

Payback Time

These strategies have been developed largely as manufacturers recognise PV inverters must be considered from the overall perspective of electricity generation economics. 'People don't think "I want the most efficient inverter", "the cheapest inverter" or "the most reliable inverter" any more,' said Le Gouic. 'People think "I want the quickest return on investment time; whatever I invest, I get my payback as soon as possible and then generate some cash".' This kind of thinking considers a PV installation overall, balancing initial cost against overall revenue and therefore total electrical output. Consequently, while fundamentals like reliability, efficiency and price remain important, PV inverters have increasingly had to accommodate the specific challenges of generating electricity from solar energy.

'At the inverter level this means that manufacturers integrate functionalities, like monitoring and efficient maximum power point tracking (MPPT),' he said. The first embodiments of MPPT developed were motorised tracking systems that follow the sun, typically used at the utility scale.

While inverter manufacturers' efficiency expertise can minimise the energy this movement consumes, MPPT increasingly exploits software technology that can be deployed in all market segments. In these cases, algorithms adapt circuit configurations to ensure maximum harvest is maintained in the presence of complications like passing clouds, rain, dust, wind and leaves falling on the panels.

To truly keep a system at its maximum power point, an MPPT system should respond to these events immediately, although this is difficult to achieve. 'The faster and more accurate your MPPT is, the better,' he said.

Anti-theft and anti-fire solutions, which rapidly communicate changes in power output arising from such incidents, are two other kinds of monitoring that inverters are increasingly incorporating. At the residential level, microinverters are attracting a great deal of attention in the US as a way homeowners can monitor their panels. These allow users to access data on how much energy they have generated through a web portal. 'It looks great, but the technology is much more expensive. They are twice or 2.5 times the price of a standard inverter,' he added. California-based Enphase is the leading exponent of microinverters. It is now hoping to push its products in Europe, although Le Gouic expects it will need to accommodate the strength of the cost driver in that market to succeed.

While these additional technologies were initially adopted by inverter manufacturers to differentiate themselves from each other they are now becoming so widespread that they are almost standard. Yole Développement estimates that more than 95% of inverter producers now integrate such capabilities. 'It's very important as functionality, but it's also a marketing and commercial tool,' said Le Gouic.

Individuality Remains

Yet even as some common themes have developed in the PV industry, many product features are still non-standard. 'Engineering, procurement and construction (EPC) contractors, integrators and installers say that they are not asking for regular types of products for installation,' he said. One reason for this heterogeneity is that the standards for connecting to electricity grids differ from country to country, obliging companies to offer inverters to fit each specification. The fact that each company's inverters are distinct from each other has also made them less interchangeable. This means that major solar projects will only use one company's inverters, whereas just a few years ago there was more scope for using multiple suppliers.

The number of inverter suppliers that have subsequently emerged became especially useful during 2010, when some were hit by shortages. Then, manufacturers of semiconductor devices and some other component manufacturers were unable to meet the demand from inverter makers. A simultaneous surge in orders rapidly created a six-month lead time for inverter deliveries from many suppliers. Their customers understandably turned to whichever manufacturer could supply them first, although in Europe keeping price to a minimum also remained equally important.

One Chinese manufacturer in particular — Sungrow — was able to satisfy both these needs and consequently penetrate the European market when they might not otherwise have been able to. 'They have a large power range product portfolio, so they can cover any type of installation, plus they are very cost competitive,' said Le Gouic. 'They benefited from this shortage situation, starting dialogues with EPC contractors or integrators. Now they have their network. A large amount of the money they have they inject into R&D in China, it's really very impressive.' Power-One, based in Camarillo, California, was another beneficiary of the shortages, Yole Développement believes.

Inverter manufacturers are facing cost challenges (Source: Sputnik Engineering)

While minimising costs is necessary for PV to be competitive with other power generation technologies, this desire can also lead to some inconvenient compromises. This can be seen with input capacitors, components that have a key role to play in an inverter's reliability, as they are typically the first to fail. For Chinese companies, input capacitors typically have a five-year lifetime, said Le Gouic. 'To reduce cost, those companies don't want to change that,' he said. Instead, they provide five- or 10-year warranties that allow one replacement, in order to continue with the low cost capacitors. Inverters made elsewhere in the world are more reliable, with input capacitors used by Japanese companies lasting for up to 20 years, but customers must pay more for that reliability.

Rather than only addressing the upfront costs of their components like this, in other areas the inverter industry is pursuing component innovations that demand a more holistic payback perspective. 'People are considering moving to compound semiconductor components — especially diodes, and now transistors,' said Le Gouic. Gallium nitride (GaN) and silicon carbide (SiC) compound semiconductor devices offer higher efficiency than their silicon rivals, at a price. In large inverters the overall cost difference is slight, meaning that this is where the improved efficiency is most likely to have a positive impact.

Such devices are still in their infancy, however, and widely considered too expensive. Among the best established are SiC diodes produced by German electronic giant Infineon, with transistors still in the early stages of commercialisation. Le Gouic indicates that PV inverter producers are already working with SiC and GaN transistors, although it's still too early to say which products will be adopted, if any. 'We know that leading companies are asking for both in looking for higher efficiency,' he said. Ultimately, any choice between the two could be driven by the automotive industry, which uses inverters with the same power range. If it adopts one semiconductor material as standard, PV inverters will likely follow their lead.

Storm Forecast

It is therefore clear that PV inverter manufacturers want to lower their costs, whether it be by adopting strategies emerging across the industry, or through more individual efforts. The ultimate goal must be to take a greater share of what Yole Développement estimated was a €3.3 billion PV inverter market in 2010. Underlying this competition is the need to reduce PV system costs generally. Even though reduced silicon prices are set to provide the majority of this, with inverters typically worth less than 10% of a system's installation cost, there is still a desire for cheaper inverters.

As a result, European customers are reluctant to accept inverter prices above €0.24/W, which is a problem for Japanese vendors offering products at €0.25/W, by Yole Développement's estimates. However, Japanese producers have recently been focusing on penetrating the European market with their high-quality, reliable solutions with greater vigour than ever. While cost is not their strength, these companies are concentrating on closely tailoring their offerings to individual national markets, and Yole expects that they will have some success. Meanwhile, despite poor reliability, Chinese PV inverter makers lead the industry for cost at €0.19/W-€0.20/W, Yole believes. US and EU manufacturers provide systems that offer both reliability and price in between these extremes, at €0.22/W and €0.20/W-€0.21/W respectively.

With inverter suppliers having just recovered from one set of shortages, hopes of price reductions were dealt an unwelcome blow by the Japanese earthquake and tsunami in March 2011. The country's electronics manufacturers make a wide range of small inverter components, such as microcontroller units and transistor drivers. 'They supply Chinese, Japanese, Korean or even German manufacturers — and I believe some of their fabs have been affected,' Le Gouic said. 'I think this will have some consequences.' Against this background, Yole predicts little progress on costs, with prices from Chinese producers unlikely to be matched in Europe for three to four years.

But such predictions are difficult, said Le Gouic, with perhaps an even greater upheaval on its way than the past 18 months have seen. 'China is really problematic,' he said, 'because the Chinese government is helping manufacturers.' The existing prices Yole Développement quotes do not take this into account, the analyst added. 'The Chinese government has a list of companies it wants to help and support so they can enter the European market with low-cost products. The target is €0.06-€0.08. That's dramatically low and people will get upset with this. It's very dangerous.' The PV inverter industry could see trade disputes, said Le Gouic. 'I think this may lead to quotas for Chinese products in Europe or even the US,' he warned.