A year after the company outlined an attack plan to hold on to its lead in the microinverter business, Enphase Energy still reigns but is gearing up for a year when competitors plan to ship new models.

The California company shipped 292,000 microinverters, or 62MW, during first quarter of this year, said Sanjeev Kumar, Enphase’s chief financial officer, during a conference call with financial analysts last week. The company began shipping products to Europe late last year and has since pulled off an initial public offering, which it needed to raise money to stay ahead of competiton.

The California company launched its third-generation product last June and now has staff in China to work on deals with manufacturers to attach Enphase’s microinverters to their solar panels before shipping them to customers. Some panel makers already announced plans to do so, including Upsolar and Hanwha SolarOne, and the market should see these integrated solar panels this year.

“There is a rapid and industry-wide shift away from central inverters,” said Paul Nahi, CEO of Enphase Energy, during a conference call to discuss the company’s earnings last week.

Microinverters are an alternative choice to central inverters for converting direct current from solar panels into alternating current to feed the electric grid. Instead of pairing a central inverter with, say, a dozen solar panels, installers attach a microinverter at the back of each solar panel.

A microinverter not only does power conversion but also monitors the power output of each solar panel, and it can make tweaks to optimize each panel’s energy production. Enphase and other microinverter makers offer monitoring services to customers by crunching a heavy load of field data – 100 gigabytes everyday, Nahi said.  The technology is more commonly found in rooftop residential systems. Enphase said that the ability of its microinverters to improve the performance of solar panels more than makes up for their higher price tags.

A central inverter can do that, too, but because it is in charge of a bunch of solar panels, its calculations are influenced by the lowest-performing panels. If an array is partly in the shade, for example, then the optimal energy output of that entire array will be more on par with the output of the lower performing panels. Centralized inverters tend to cost less, and they have accrued more long-term field data to prove their reliability. 

Microinverters still occupy a tiny piece of the inverter market, and how well Enphase can expand its reach provides a good indicator of the technology’s adoption. The company, founded in 2006, began shipping microinverters in the summer of 2008 and has enjoyed a first-mover advantage.

Being first to the market, of course, wouldn’t mean much if a company isn’t able to market and sell its new technology effectively. Enphase doubled its first-quarter sales to $42.6 million, up 136 percent from $18.1 million from a year ago. It narrowed its losses to $10.2 million, or $5.97 per share, compared with $9.3 million, or $10.95 per share, from the first quarter of 2011. Shipment grew to 292,000 microinverters from 123,000 a year ago.

The U.S. remains a key market for the company. California represents nearly 30 percent of Enphase’s sales in the residential market and 19 percent in the light commercial market, Nahi said. Overall, the state makes up roughly a quarter of the company’s sales, he added.

Although the residential market is the segment where microinverters are thriving, its growing reliance on leases or power purchase agreements also has worked against microinverter developers.  Nahi acknowledged that providers of solar leases or power purchase agreements tend to shy away from microinverters because they add to the upfront installation costs.

While Nahi said his company is working on reducing costs, he also said Enphase doesn’t necessary have to be the lowest-cost provider to stay ahead of competition. He also noted that the big drop in solar panel pricing, while terrible for solar panel makers, is great news for installers. And that could help microinverter sales, he said. It'd be interesting to see whether installers and their project financing firms will be more willing to tag on the cost of microinverters now that solar panels are taking up a smaller share of the cost of an installation. 

Competition will heat up, though, as more companies enter the microinverter market. SMA Solar Technology showed off a microinverter last fall and said it would start shipping it this year. Power-One introduced its own version last year. SunPower announced plans to package microinverters from Texa-based SolarBridge Technologies to its solar panels. Aside from SolarBridge, companies that make only microinverters include Enecsys from the United Kingdom.