The market for global photovoltaic (PV) solar microinverters and power optimizers is forecast to more than triple in the coming years, rising to more than $1 billion in 2018, as both established and new regions increase their adoption of the emerging technology, according to IHS Technology (NYSE: IHS).
Worldwide market revenue for PV solar microinverters and power optimizers, collectively called module-level power electronics (MLPE), will rise at a compound annual growth rate of 27 percent to total $1.1 billion in 2018, up from $329 million in 2013, as presented in the attached figure.
Microinverters are devices that convert direct current (DC) electricity from a single solar module into alternating current (AC) used by all electrical devices. Although they are more costly, microinverters can in some cases harvest up to 25 percent more electricity than conventional string or central inverter devices, which convert power from multiple solar panels.
Power optimizers take a similar approach by performing the maximum power point tracking (MPPT) at a module level. However, a centralized inverter is still used for the DC-AC stage.
“Demand for MLPE has been driven by key markets such as the United States, the United Kingdom and Australia,” said Cormac Gilligan, senior analyst for solar inverters at IHS. “The market has grown to more than $300 million in size, despite continued price pressure due to new entrants into the business and decreasing PV system prices. Future demand for microinverters and power optimizers is expected to be spurred by continued acceptance in mature European PV markets, such as Germany and France. However, some of the major Asian markets, like Japan and China, will generate huge opportunity in the next few years as MLPE technology begins to penetrate these markets in larger volumes.”
These findings can be found in the report, “PV Microinverters and Power Optimizer– 2014,” from the Solar service of IHS Technology.
US to maintain microinverter leadership
The United States is the largest region for microinverter shipments, with residential systems representing the largest market for microinverters in the region. U.S.-based microinverter supplier Enphase has built market leadership serving this segment, although the penetration rate of microinverters in this segment is starting to saturate.
However, during the next few years an increasing number of microinverters are forecast to be installed in commercial installations in the United States. This will allow the U.S. to remain the largest market for microinverters through 2018.
The United States is one of the fastest-growing markets for power optimizers with shipments forecast to increase by 160 percent in 2014, as all of the leading suppliers—such as SolarEdge, Tigo and Ampt—are forecast to increase shipments.
Japan to boost MLPE demand as prices decline
Lower microinverter and power optimizer prices will mean that MLPE will become more competitively priced compared to traditional inverters. This will make MLPE devices more appealing to new customers. As a result, total shipments will increase to 6.6 Gigawatts in 2018 as MLPE technology gains acceptance in new regions.
For example, power optimizers have been shipped in Japan in relatively low numbers to date. However, IHS expects that the penetration rate will increase dramatically to 7 percent of total installations in 2018, as increased energy yields that result from using MLPE will allow a higher return on investment (ROI). Moreover, microinverter suppliers are expected to gain Japan Electrical Safety & Environment Technology Laboratories (JET) certification in Japan in the near future, which will allow them to ship microinverters into this huge residential market.
“There still will be some challenges for microinverter suppliers, even if they gain JET certification in the Japanese market,” Gilligan noted. “There is a huge preference for local brands in this market, and inverters or microinverters would normally be sold in kits to residential owners via the module manufacturer. As a result, developing strong partnerships with module suppliers will be paramount in Japan.”
New suppliers continue to enter the market
Although Enphase and SolarEdge continue to be the leaders in the microinverter and power optimizer market, this has not stopped new suppliers from entering the space. For example, leading inverter suppliers, such as Kaco and Delta, have released new microinverter models recently as they continue to expand and diversify their inverter portfolio.
“Traditional inverter suppliers have been cautious to date in entering the microinverter market. But as the market has matured, an increasing number have moved in by acquiring a pure-play microinverter supplier or by designing in-house,” Gilligan said.
In the power optimizer market, new suppliers like Maxim Integrated have recently developed partnerships with module suppliers, adding to the number of active suppliers in the trade. This will intensify the competition and may lead to lower power optimizer prices in the future.
The entry of new suppliers will put further pressure on the existing players to innovate by developing next-generation models and new sales channels. While some prominent suppliers, such as SolarBridge and Tigo, have decided that integrating their products directly onto the module to create an “AC module” or “Smart module” is the way forward, other suppliers, including Enphase and SolarEdge, have had success with solar lease companies such as Sunrun and SolarCity in the United States as an alternative sales channel.
As a result of new microinverter and power optimizer suppliers entering the market and existing suppliers entering new markets, revenues of MLPE are forecast to increase 28 percent per year to reach more than $1.1 billion in 2018. This represents a huge opportunity for new and existing suppliers alike to grow their business, with the market likely to attract new players in the next few years.