{"id":5507,"date":"2016-04-14T20:50:19","date_gmt":"2016-04-14T11:20:19","guid":{"rendered":"http:\/\/www.solarquotes.com.au\/blog\/?p=5507"},"modified":"2016-05-30T14:05:55","modified_gmt":"2016-05-30T04:35:55","slug":"cheaper-microinverters-plan","status":"publish","type":"post","link":"https:\/\/www.solarquotes.com.au\/blog\/cheaper-microinverters-plan\/","title":{"rendered":"Enphase’s Cunning Plan: Make Micro Inverters Cheaper than String Inverters."},"content":{"rendered":"

\"enphaseWhen it comes to Australian solar installations, conventional string inverters<\/a> tower over the competition like a current converting colossus. But microinverters<\/a>, which are tiny in both physical size and market share, are shaping up to beat string inverters on both price and reliability. Enphase<\/a>, the world’s largest producer of microinverters, plans<\/a>\u00a0to beat conventional inverters on price within two years. If they meet their goal of cutting micro inverter costs in half, it will change the way Australians install solar power.<\/p>\n

What The Hell Is A String Inverter?<\/h2>\n
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This is a string inverter. image: SMA<\/a><\/em><\/p><\/div>\n

You can find the details of differences between string inverters and microinverters here<\/a> or you can check out this infographic<\/a>. But in a nutshell, string inverters are far more common in Australia and\u00a099% of our solar installations use them. They are big here. And I don’t just mean popular, they are physically large. Typically a 5 kilowatt<\/a> one will take up as much space as 35 liters of ice-cream<\/a>, or the same quantity of less delicious material, and weigh about 24 kilograms.<\/p>\n

String inverters use solar panels connected in series on a line called a string that sends Direct Current (DC<\/a>) to a central inverter which\u00a0it\u00a0converts it\u00a0to the Alternating Current (AC<\/a>) we use in our homes. While this inverter will try to maximise the power output of the panels, the drawback is if one panel on a string performs poorly all the panels will perform poorly. Because of this it is very important all the panels on a string share the same orientation and receive the same amount of sunlight.<\/p>\n

The main advantage of string inverters at the moment is price, as so far they have been cheaper than the microinverter competition.<\/p>\n

For example:<\/strong> a 5kW string inverter will wholesale\u00a0from $1,000-$2,000 depending on the quality. Whereas 5kW of\u00a0micro inverters will be closer to $3,500.<\/p><\/blockquote>\n

What The Hell Is A Microinverter?<\/h2>\n
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A microinverter. \u00a0 image: Enphase<\/em><\/p><\/div>\n

In a nutshell, microinverters are little baby inverters that\u00a0attach beneath solar panels and directly convert a panel’s DC into the AC used in homes and does away with the need for a central, string inverter. While cables that carry DC are extremely safe when installed to Australian standards<\/a>, AC is even safer because if something does go wrong it is much less likely to start a fire.<\/p>\n

Microinverters optimise the output of each panel they attach to, so if one panel has a problem it won’t affect the performance of the others. This means they will generally produce 5-15% more electricity overall than string inverters. If the two types are matched on price per watt microinverters will be cheaper overall, as fewer panels are required to generate the same amount of electricity. And because the panels are independent from each other they can be arranged as desired to maximise a household’s self-consumption<\/a> of solar electricity.<\/p>\n

Microinverters are very small. They don’t yet fit in a nutshell, but I was brought up in Queensland where the large nuts<\/a> come from, so I can tell you they are getting close. Today’s microinverters can easily fit in my outstretched hand. And for people who are less mighty than I am… well, they probably would fit in your outstretched hand too.<\/p>\n

The main disadvantage of microinverters at the moment is price. As a result of the extra cost they are only used in about 1% or less of Australian solar installations. But there are companies looking to change this.<\/p>\n

What The Hell Is Enphase?<\/h2>\n

Enphase is by far the world’s largest producer of microinverters. But there are other companies also in the business, and there are plenty more waiting in the wings ready to enter the field and play catch up as soon as one of the others demonstrates the ability to compete with string inverters on price.<\/p>\n

What is likely to result is a titanic battle for market share. Enphase has the advantage of size, experience, and reputation; but small companies can be nimble and large ones have deep pockets and will be willing to burn money in the short term to catch up if they think large profits can be reaped in the future. Regardless of who is left standing, the resulting price cuts ensure conventional string inverters will be a major casualty.<\/p>\n

Personally, I hope no company wins. I want them to keep slugging away at each other to the benefit of consumers with improved reliability in one fist and lower prices in the other. That’s my version of utopia. A boot stamping on the face of microinverter prices and reliability issues forever.<\/p>\n

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A DC Optimiser.<\/p><\/div>\n

But that lies in the future. Right now Enphase’s biggest competition isn’t from other microinverters but DC\u00a0optimisers<\/a>. This technology is superficially similar to microinverters in they go under individual solar panels and maximise their output. But they are cheaper and don’t convert the solar panel’s DC to AC. Instead they still require\u00a0a conventional string inverter to do so. Obviously, if households can get the main benefit of microinverters for around the same or lower cost, that is a major problem for Enphase.<\/p>\n

The largest producer of optimisers is Solaredge<\/a> and they definitely have the potential to lower the cost of their product using the same sort of cost cutting measures Enphase plans to use for its microinverters. But because optimisers are reliant on string inverters they are much more limited in how low their costs can go. So they may have an edge now, but in the long run microinverters seem certain to win on overall system cost.<\/p>\n

Unfortunately, as far as investors are concerned, Enphase hasn’t been doing too well lately. Their share price has fallen 86% from its peak one and a half years ago:<\/p>\n

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Enphase Stock (ENPH<\/a>) has dropped 86% in 18 months.<\/p><\/div>\n

While Solaredge’s has only plummeted 41%.<\/p>\n

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Solar edge (SEDG<\/a>) stock has dropped 41% from its peak.<\/p><\/div>\n

But a choice between innovation or death can spur companies to perform great feats. When the stakes are high and the chips are delicious, taking a risk on investing in new technology \u00a0could be exactly what Enphase should do. They just have to hope Solaredge doesn’t gain an edge first, otherwise they would become Solaredge Squared. And that would be a frightening thing to have to compete against.<\/p>\n

Don’t pay too much attention to Enphase’s low share price. After all, if investors are so smart, how come the rest of us have any money left at all? But on the other hand, investors do put their money where their mouths are, so they could be onto something. There are legitimate concerns about warranty obligations<\/a>. After all, just how valuable is a 25 year warranty if it is not clear the company will be around for that long? That said, Enphase is currently a large company that produces high quality products and has the capacity to manufacture and ship a great many teeny tiny inverters.<\/p>\n

How Reliable Are Enphase Microinverters?<\/h2>\n

In 2008 Enphase released their first generation microinverter and not too long after that the second generation. Unfortunately, it appeared they were cursed unto the second generation and they both experienced higher than predicted rates of failure<\/a>. This hurt the company’s bottom line and damaged its reputation. Then in 2011 they introduced their third generation technology and its rate of failure was lower than expected.<\/p>\n

So the lesson is, if at first you don’t succeed, try, try again. Provided you are actually getting better at what you are doing. There are some companies out there that really should have stopped trying a long time ago. And another lesson to take from this is, doing stuff is hard and doing stuff that is new is really hard.<\/p>\n

The first and second generation microinverters came with 15 year warranties<\/a>. And that ended up biting them on the bottom. But their third and later generation models came with 25 year<\/a>\u00a0warranties in the United States<\/a>, which is the longest warranty I am aware of for any inverter of any type. And they have performed very reliably<\/a>\u00a0to date. Unfortunately, it is still too early to be certain they’ll last the full distance.<\/p>\n

But things get interesting when it comes to the warranty we get down under. In the UK, which has identical electrical current to Australia, they have a 20 year <\/a>warranty<\/a>. But in Australia Enphase currently only offers a 10 year warranty<\/a>. Now conditions do vary between here and America. For one thing it gets hotter<\/a>\u00a0on average in Australia, although I do hear it also gets hot in states such as Nevada, particularly around some place called Death Valley<\/a>.<\/p>\n

Apparently the warranty is shorter in Australia for, what are to me, inexplicable legal reasons. So while we miss out on the 25 year warranty, the fact their warranty is that long in the US is a good indicator of reliability.<\/p>\n

Enphase’s Price Target<\/h2>\n

Enphase aims to get their price down to about 13 cents a watt by the end of 2017. This is the same as premium (SMA\/Fronius) string inverters are expected to cost at that point and, because microinverters produce more energy per solar panel, this means they will effectively be cheaper.<\/p>\n

This hard-to-see graph from Enphase shows what they hope to achieve. Their target of 10 US cents a watt comes to 13.1 Australian cents at today’s exchange rate.<\/p>\n

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Enphase’s cost reduction plan. \u00a0 \u00a0 \u00a0image: Enphase<\/a><\/em><\/p><\/div>\n

How Enphase Will Cut Costs<\/h2>\n

To cut costs Enphase has a multi-pronged plan. And provided each one of these prongs is successfully achieved, it appears likely they will meet their goal of beating string inverters on price before the end of 2017.<\/p>\n

And I have to admit that, as I studied their prongs, I grew increasingly excited. So while other tech fanboys have recently been drooling over the Tesla 3 electric car, I have been drooling over the specifications of planned future Enphase microinverters. After all, why would I need an electric car when I have a perfectly serviceable and good looking horse?<\/p>\n