Inverter market forecast reassessed
Global market revenue for solar photovoltaic (PV) inverters will drop by 9 percent in 2013, due to rapid price declines for commercial and utility-scale inverters and intense cost pressure in mature markets such as Germany and Italy, according to the latest data from IHS.
Although worldwide solar inverter unit shipments will rise by 7 percent in 2013, projections now show that market revenue this year will fall. Revenue is set to decline to $6.4 billion, down from $7.1 billion in 2012. The previous IHS forecast issued in July predicted a 5 percent decline in revenue in 2013, as presented in the attached figure.
Average inverter prices now are set to decrease to $0.18 per watt in 2013, down from $0.22 per watt in 2012, according to the latest PV Inverter Market Tracker report from IHS.
Inverters are devices that convert direct current (DC) electricity from solar panels into alternating current (AC).
As total PV system prices continue to decrease, all parts of the supply chain, including inverter suppliers, are under increasing pressure to reduce prices.
"During the past few years, solar module makers have endured much more price pressure than the inverter suppliers have," said Cormac Gilligan, senior PV market analyst at IHS. "However, module prices now have reached an inflection point and have begun to rise. This is having major ramifications for inverter suppliers, with price pressure having shifted to their segment of the business."
Inverter makers now must absorb some of the price pressure that module suppliers can no longer sustain. Further pressure is occurring because the inverter makers now are being forced to decrease prices in order to win business in a crowded market. Moreover, the solar market is entering a period when government subsidies have been reduced or eliminated in many countries, forcing inverter makers to cut costs to keep their products affordable.
One catalyst for the intense inverter price pressure is declining demand in some of the larger solar markets such as Germany and Italy, where subsidies have been rapidly reduced or removed completely.
Combined inverter shipments to these two markets will fall by more than half this year, dropping to 5.7 gigawatts (GW) in 2013, down from 11.5 GW in 2012.
Inverter suppliers that previously relied heavily on these two markets now are being forced into a fiercely competitive market environment, compelling them to decrease prices.
"Total PV inverter revenue throughout Europe in 2013 will be down by 50 percent compared to 2011," Gilligan noted. "However, the number of inverter suppliers in Europe is largely unchanged. This will result in fierce competition and will prompt inverter suppliers to aggressively enter new emerging markets, such as South Africa and Thailand, in order to find new growth opportunities."
The price of low-power three-phase inverters"”i.e., those up to 35 kilowatts (KW) in size"”decreased rapidly in the first half of 2013, due to a combination of intense competition from suppliers releasing new inverter products and commercial markets shrinking in size in some markets like Europe. A number of Chinese suppliers are also targeting this market, further adding to the competition that European suppliers are facing. In some key European markets such as Germany and Italy, the price of these inverters will decrease by 20 percent to $0.14 per watt in the commercial and utility-scale markets.
In the United States, the world's two largest suppliers, SMA and Power-One, have released inverters in this power range and have earned certifications from Underwriters Laboratories.
"IHS predicts that shipments of 20- to 35-kilowatt inverters in the United States will reach more than 200 megawatts (MW) in 2013, and new products from the two largest inverter suppliers will certainly help to drive this growth," Gilligan added. "Pricing in this segment in the United States is relatively high compared to Europe, and it is likely that the presence of SMA and Power-One will contribute to American prices decreasing to European levels."
Although utility-scale installations will rise to account for one-third of global demand in 2013 compared to 29 percent in 2012, global prices for large central inverters that serve this market are forecast to decrease by 16 percent to $0.12 per watt, as shown in the attached figure.
Some of the largest utility-scale markets in 2013 will be Asian countries such as China, India and Thailand, which command prices as low as $0.06 per watt. For inverter suppliers that do not have a local presence, these very competitive prices can mean that it won't be economical to enter those markets, even though these nations represent significant growth opportunities.
Another factor that is causing prices for large central inverters to decrease rapidly is that an increasing number of projects are being awarded through bids and tenders, rather than via fixed feed-in-tariffs, particularly in emerging markets.
"Tender and bid mechanisms place a stronger emphasis on upfront inverter prices, which are being lowered in order to win large PV projects, particularly in today's highly competitive market environment," Gilligan noted. "In tandem with the very low prices for central inverters in Asia and smaller emerging markets, prices have decreased faster than predicted in European utility-scale projects as subsidies have been reduced and competition has increased. Even markets that attract relatively higher prices, such as the United States, are forecast to experience intense price pressure as new suppliers, mainly from Europe, enter the market."
