LONDON — According to IMS Research’s latest annual market report, The World Market for PV Inverters, the global PV inverter market is predicted to grow by 23% in 2012 to reach almost 32 GW. But despite this good news, the report offered a much more sobering outlook for industry revenues, which are forecast to grow by just 3% in 2012 (while also reaching a record US$7 billion for the first time).
The recently released report found that the PV inverter market shrank marginally in terms of revenues in 2011, but is predicted to return to growth in 2012. Shipments are forecast to grow by almost 25% in the mid-case scenario, but pricing declines will see revenue growth muted to around 3% this year. ‘In 2012, suppliers will continue to see high shipment growth but may struggle to see top- and bottom-line growth,’ said Ash Sharma, director of IMS’s PV practice. ‘Inverter prices will see another double-digit drop in 2012, partly driven by product mix change, and shifts in demand to lower cost countries, but also standard price erosion as major markets stagnate.’
Sharma has been tracking this price erosion for more than four years. While it varies by country, he explains that prices tend to fall in line with feed-in tariff (FiT) reductions. So, for example, if Germany reduces its FiT by 8%, the market should expect an 8% drop in inverter prices. Standard price erosion is also caused by rising volumes.
Because rest-of-world markets such as China and India are growing so rapidly, said Sharma, installations in those countries tend to be focused on ground-mount products using large central inverters, for which prices are lower than string inverters on a per watt basis – and this tends to drag down the overall pricing mix. In addition, Sharma reminded us that the PV inverter markets in China and India are already very competitive, and prices there are low.
The Indian market is the fastest-growing in the world and is expected to exceed 1 GW this year, according to Sharma, who continued that India is possibly the most price-competitive market, with even lower prices than China. Indian PV developers are using very large inverters and looking for the lowest possible up-front cost; as a whole, he said, this market is not as concerned with lifetime costs. Sharma predicts that the Indian market will be a very tough one for Western suppliers; because pricing levels there are so low, gross margins will erode.
‘In certain markets the early adopters are using low-cost products in a focus on short-term gains. As a result, we could see a lot of failures, recalls, and problems with PV plants not operating as they should,’ said Sharma.
The 2012 report found that global inverter shipments grew by more than 12% in 2011, despite the excess inventory overhang from the previous year. Shipments reached 27 GW, but the European market shrank considerably. Europe’s dominance in the PV inverter market is predicted to continue to wane as its two biggest markets, Germany and Italy, face significant reductions in their annual installations. ‘Europe’s share of PV inverter shipments and revenues was over 80% in 2010; however, we forecast this to fall to less than 40% in 2016 and revenues not to return to 2011 levels in the next five years. This in itself presents a huge challenge to suppliers, which are mainly European, with the majority of their facilities and customers located in that region,’ said Sharma.
However, the report’s results showed that while the European outlook is not so bright, the global picture for PV inverter suppliers looks somewhat better, highlighting the fragmenting nature of the industry that now needs to look to emerging markets for future growth. Global shipments are predicted to continue growing at a double-digit rate over the next five years, with revenues exceeding $9 billion by 2016.
In fact, in March IMS reported that the PV inverter market in China grew by over 400% in 2011, shipping more than 2.5 GW after a period of high consolidation. Of the year’s top 10 suppliers, providing 80% of total shipments to the Chinese domestic market, nine were Chinese companies. IMS made it clear that the nation’s feed-in tariff (FiT) programme, initiated in July 2011, created an inverter market of more than $300 million, within which inverter prices are considerably lower than the average global price. And inverters shipped from outside China to the Chinese market accounted for 10% of global shipments in 2011.
In 2010, China held only a 3% share of global PV inverter shipments, compared to the 42% share held by Germany and the 22% held by Italy, while 7% was held by the Czech Republic, 6% by the US and Japan, and 4% by France. By 2015, however, China is expected to account for 13% of the global market – a substantial increase.
Sharma points to the many new markets emerging, for example in Eastern Europe, Latin America and South Africa; and Thailand and Malaysia in Asia. ‘That’s what’s changing the industry,’ said Sharma. ‘There are no longer one or two important markets.’ He advised that if suppliers want to be successful they need to start diversifying now and choosing their markets correctly, rather than waiting for the European market to recover – which won’t happen anytime soon, certainly not in the next two to three years, IMS believes.
The report’s analysis of the more than 150 active global suppliers found that the top five remained unchanged, albeit with some slight shifts in rankings between them. Germany’s SMA Solar Technology retained its number one position in 2011 despite losing further market share, followed by California’s Power-One and Germany’s Kaco, Fronius and RefuSOL. The report found, however, that the biggest market share gainers in 2011 were in fact those outside the top 10, showing that the industry may not be consolidating just yet. ‘Startups Enphase Energy and SolarEdge were two of the biggest market share gainers in 2011, whilst we also saw considerable gains from Advanced Energy and Emerson,’ noted Sharma.
IMS’s 2011 version of this report showed that trends toward reactive power, smart grid interaction and energy storage are transforming inverters from simple power conversion units into essential components of grid infrastructure, a trend that is continuing in 2012. According to IMS this shift will radically change the global inverter market to 2015. IMS PV research analyst Tom Haddon forecast in 2011 that standard, ‘non-smart’ inverters will fall to just 42% of global shipments by 2015 as PV’s integration into the grid – led by Germany’s Low and Medium Voltage Directives – continues.
One of the hottest topics is the trend toward increasing use of micro-inverters, still a fairly niche part of the industry in percentage terms, but one that is having an effect, and will continue to do so over the next few years. The micro-inverter sector will gradually take up a greater share of the smaller installations (residential and small commercial), said Sharma.
Another recently released report on the global PV inverter market comes from Global Industry Analysts Inc (GIA), which predicts that the market will boom to reach 52.3 GW by 2018, and the balance of demand will shift toward the North American and Asia-Pacific regions. This report looks to China and India as significant emerging markets, and projects that the Asian market will display a CAGR of more than 25% through 2018.
Sharma roughly agrees with these predictions. IMS’s longer-term prediction forecasts a 56 GW inverter market by 2016, although Sharma cautions that, due to the nature of predictive analysis, ‘it could be plus or minus 10% or 15%’.
IMS’s 2011 market report predicted a growth in shipments but a fall in revenue.These moves happened ‘slightly faster than we expected,’ says Sharma, but essentially as predicted. And he said last year’s predictions regarding micro-inverters and power optimisers were ‘spot on’ in terms of how much share they captured over the year, but they did face more resistance in Europe than was expected.
Tildy Bayar is Associate Editor of Renewable Energy World magazine.