United States and Japan to account for almost half of global solar PV inverter revenue in 2015 and 2016

IHS predicts that global PV inverter revenue for 2015 and 2016 combined will reach $13.2 billion, and that Japan and USA will account for 25 percent and 21 percent, respectively, of this.

Key Points

* Japan and the United States will be the main drivers for PV inverter suppliers in 2015 and 2016, despite the relatively uncertain policy conditions in the former. These two countries will account for 46 percent of global PV inverter revenue in 2015-2016 and will be the only two markets exceeding $1bn annually.

* Ongoing price reductions across the PV inverter industry caused by a highly competitive market environment will mean that 2016 global revenues will grow by just 5 percent over 2014 levels. IHS predicts inverter prices will decline by 9% in 2016.

* Limited global growth will result in suppliers focusing on cementing their position in key markets, where the supplier bases are currently evolving rapidly.

* The Japanese market remains largely closed to non-domestic suppliers, with 3 of the top 10 global suppliers in 2014 based in Japan.

IHS Analysis

The United States and Japan will remain the only two PV inverter markets with annual revenues exceeding $1 billion in 2015 and 2016. IHS predicts that global PV inverter revenue for 2015 and 2016 combined will reach $13.2 billion, and that Japan and USA will account for 25 percent and 21 percent, respectively, of this. The global PV inverter supplier base has been placed under pressure in recent years by intense price pressure caused by slowing demand, over-capacity and a plethora of new entrants. As a result, global suppliers are highly focused on building a strong position in these two key markets to capitalise on revenue opportunities. Despite China being the largest market in terms of shipment volume, low prices and extremely challenging business conditions have made it a lower focus for global suppliers, with this market accounting for just 14 percent of 2015 and 2016 global revenues in comparison.

Japan became the largest PV inverter market by revenue in 2013, and is predicted to remain so until at least 2018. The market grew by over 140 percent in 2013 as an attractive feed-in tariff resulted in a huge acceleration of the residential market and the dawning of a GW-scale market for commercial and utility-scale systems. Although the enormous demand that Japan has seen and high prices that it commands have made it extremely attractive for international suppliers to enter, it has remained dominated by domestic suppliers due to a strong preference for local products and complex certification requirements. The combined shipments of the three largest suppliers, Omron, Tabuchi and TMEIC increased by 60 percent during the first 3 quarters of 2014, versus the same period of 2013, and accounted for over half of total shipments to Japan. However, some Western suppliers such as Schneider Electric and ABB are starting to reap the rewards of their investment in the market and their position as major global companies, as their shipments to Japan have grown significantly throughout 2014. To date they have mainly been focused on shipping large central inverters for the booming utility-scale market.

The United States, which was the only market to exceed $1 billion in annual revenue each year for the last three years, has also attached the focus of most suppliers and proved far more accessible than Japan. A robust utility-scale pipeline, and strong incentives and financing models in the residential and commercial sector have resulted in USA delivering robust year-on-year growth whilst many other markets proved to be extremely volatile. The large number of European and Asian suppliers that have made establishing themselves in the United States a priority has led to the supplier base continuously evolving. Notably, two Japanese suppliers appeared amongst the ten largest suppliers to the United States, based on revenues for the first 9 months of 2014, TMEIC and Yaskawa (via its acquisition of Solectria). Israel based Solaredge has also made a significant improvement in its position and was the fifth largest supplier in that period, largely helped by its supply agreement with SolarCity.

Whilst these two markets present the largest opportunity for PV inverter suppliers over the next two years, IHS also highlights that both markets are predicted to decline in size in the future. Japan is predicted to decline in 2016 as feed-in tariff reductions and grid-connection delays for utility-scale systems cool the market. A decline is also predicted for the United States in 2017, due to the scheduled expiration of the federal Investment Tax Credit (ITC). Whilst there is currently speculation that the ITC could be extended, most large projects are aiming to complete before end of 2016, which will cause a slowdown in 2017.

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