Fierce price pressure in 2013
London (July 30, 2013)The global market for solar photovoltaic (PV) inverters is forecast to decrease by 5 percent to $6.7 billion in 2013, according to a new report entitled "The World Market for PV Inverters - 2013 Edition" from IMS Research, now part of IHS Inc. (NYSE: IHS).
Despite PV inverter shipments rising to 34.2 gigawatts (GW) in 2013, average global inverter prices will fall by 11 percent this year, resulting in a decline in revenue, posing significant challenges to inverter suppliers as they cope with shrinking profit margins and increased competition. Even so, several growth opportunities exist for suppliers in certain segments, which will help inverter revenues to recover in 2014 and resume double-digit growth.
Fierce price pressure in 2013
The fierce price pressure that inverter suppliers are now facing is being driven by a number of factors. Notwithstanding some of the recent major acquisitions in the inverter market, the inverter supplier base continued to fragment in 2012 as existing and new inverter suppliers expanded their presence in PV markets. The Top 10 inverter suppliers accounted for only 57 percent of global revenues in 2012, compared to 66 percent in 2010.
"The industry remains relatively split today, and a strong group of suppliers are competing for share in a declining market," said Cormac Gilligan, market analyst for PV inverters at IHS. "Sharp decreases in demand are forecast for a number of markets in 2012. The Europe, Middle East and Africa (EMEA) region, which accounted for 82 percent of global inverter shipments in 2010, will contract to 37 percent in 2013, leading to intense competition among the major suppliers, which are highly exposed to this weakening."
Price declines are expected across all power classes in EMEA in 2013, with three-phase string inverters projected to decrease by as much as 15 to 20 percent.
The global fall in average pricing is also being compounded by a regional shift in inverter demand from Europe to more competitively priced markets such as China. Average inverter prices are already at very low levels in China, which will be the largest market for inverter shipments in 2013. Prices are forecast to drop further to $0.09 per watt, as the market is dominated by low-price central inverters.
A strong increase in the demand for high-power inverters, which typically have a lower price per watt, will also drive down global pricing and will not be unique to China. A number of the largest markets will continue to be focused on utility-scale installations, and will see shipments of large inverters grow as a result.
"Three-phase high-power inverters are forecast to increase their share of global shipments from 41 to 46 percent of the total inverter market in 2013, as a number of regions such as China, the United States and India, move forward on large utility-scale pipelines," Gilligan said. "This shift in product mix will also cause average global prices to decrease further."
High-power inverters in Japan offer high growth potential
In spite of the global pricing pressure for inverters, numerous opportunities are available for inverter suppliers in particular market segments, as shown in the attached figure. IHS forecasts that the three-phase 250 kilowatt (kW) and higher-inverter market in Japan will grow from $50 million in 2012 to $290 million in 2013 as utility-scale projects are installed.
This segment of the Japanese market is dominated by domestic suppliers currently, but the surge in demand for central inverters will present opportunities for Western suppliers that establish quickly on their own. Still this will be a short-term trend as the market will decrease in 2014 and 2015 after completion of the initial project pipeline and when there is less suitable land available.
US low-power string market to double
Also, the three-phase string market in the United States will double to reach slightly more than $100 million in 2013, as inverter suppliers expand their portfolios and offer a decentralized solution to their customers looking for an alternative solution to a central inverter in commercial systems.
"Increasing requirements by clients that would like fast installation, long standard warranties of up to 10 years in some cases, and the ability to wall-mount the inverter in order to maximize site space, are some of the key reasons driving the adoption of three-phase string inverters," Gilligan noted.
Innovation remains key for inverter manufacturers
As inverter pricing pressure is forecast to continue in 2013, suppliers are being more innovative in how they can create savings and value for their customers. Numerous suppliers are releasing new inverters with advanced features or new designs. For their part, inverter manufacturers are releasing new outdoor-rated and turn-key products, which will assist customers in reducing labor and installation costs along with expenses related to operations and lifetime maintenance.
Inverters are continually being released that are rated at 1,000 voltage direct current (Vdc) or greater in order to allow longer strings and reduce DC cabling.
"Although the upfront capital cost of inverters that can handle 1000Vdc or greater is higher, there are many other benefits for customers, such as reduced upfront balance of systems costs and increased energy harvest, as cable losses are lessened," Gilligan added.
While 2013 is forecast to be another challenging year for inverter suppliers as prices fall further, opportunities will exist for inverter suppliers in key PV market segments, such as the United States, Japan and China. Also by 2014, inverter revenues are predicted to rebound strongly and increase by 11 percent to reach $7.3 billion, which should give some welcome relief to inverter suppliers.
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