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Market Insight

The next phase of growth begins for Enphase and SolarEdge

September 10, 2018

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Historically, both Enphase and SolarEdge have enjoyed success partly due to being “first movers” with their respective technologies of microinverters and power optimizers. Their successful sales execution and marketing, coupled with a boom in residential solar installations in the United States and key global markets catapulted each company to occupy dominant positions in the module-level power electronics (MLPE) industry. However, in recent years, the intense price competition and challenging competitive landscape has pushed both companies to accelerate their pace of innovation and entry into new markets in order to maintain their leading positions and grow their business in revenue terms.

According to the recently published update to IHS Markit’s “Microinverters and Power Optimizers Report”, global revenue of module level power electronics, including microinverters and power optimizers, are forecast to grow from $616 million in 2017 to $931 million in 2022, driven by continued adoption across new markets and rooftop rapid shutdown requirements in the United States. While both Enphase and SolarEdge will have to continue to sell their core technologies of microinverters and power optimizers, it is incumbent on both suppliers to create new growth pathways to insulate themselves from regular solar shocks and help generate new growth opportunities.

Challenges continue to thwart Enphase and SolarEdge revenue and market share growth but none are insurmountable 

Enphase and SolarEdge continue to face obstacles that challenge both their profitability and their leading positions in their respective product types, microinverters and power optimizers. IHS Markit outlines some of the main challenges below:

  • New tariffs of up to 25% on Chinese-manufactured goods, including PV inverters, were recently proposed in the United States.
  • Huawei, a leading supplier of string inverters signaled its intent to disrupt the market by producing its own brand of power optimizers and PV inverter for the global residential market.
  • Other Chinese manufacturers such as APSystems, Hoymiles, LeadSolar and Omnik continue to internationalize, some with unique microinverter products which can operate with 2 to 4 modules.
  • Tigo, a pure-play power optimizer manufacturer continues to certify a growing list of inverter products compatible with its power optimizers. This type of partnership provides a viable substitute for SolarEdge’s brand of power optimizers and string inverters and Enphase microinverters. This is especially important for installers who are shopping all available options to comply with rooftop rapid shutdown requirements in the United States.

Module partnerships, grid-agnostic features and energy storage to drive future growth for Enphase 

While Enphase is developing its core microinverter technology, it also has ambitions to grow rapidly in the following new areas:

  • The deal between Enphase and SunPower, in which Enphase acquires both the rights to be SunPower’s exclusive microinverter supplier and all of SunPower’s existing microinverter intellectual property, is one of the most important advancements for Enphase to capture and protect market share, particularly in the United States. The deal also helps Enphase enhance its sales volume, potentially providing it with increased manufacturing efficiencies. Finally, Enphase may begin finding ways to sell into the existing SunPower customer base by adding its own brand of energy storage and data monitoring software.
  • Beyond SunPower, Enphase is still aggressively pursuing other AC module partnerships with Panasonic, LG, Solaria and Waaree Energies. Strategic partnerships with module suppliers may allow Enphase to increase the adoption of its microinverter technologies in international markets such as Japan and India. Building its list of module partnerships can be an important way for Enphase to increase the number of sales channels it can market its microinverters.
  • While Enphase’s IQ7 microinverter opened more international markets, the next generation microinverter IQ8 is expected to further increase Enphase’s total addressable market by being capable of operating after a loss of electricity supply from the grid, or even in the absence of a grid. The IQ8 signals Enphase’s focus on the off-grid market, which IHS Markit forecasts to grow at a compounded annual growth rate (CAGR 2017—2022) of 10% to reach 853 MW in 2022.
  • Energy storage may become Enphase’s highest growth opportunity. IHS Markit forecasts that grid-connected residential energy storage installations will reach 1.2 GW in 2022. As manufacturers rush to develop storage products to capture this growing market, Enphase can position itself as a leading residential energy management platform, capable of not only managing energy generation, but storage as well.

UPS, EV charging, and VPP represent new growth pillars for SolarEdge

SolarEdge began as a pure-play inverter and power optimizer manufacturer but has rapidly spread its activities into new industries such as energy storage, uninterruptible power supplies, and electric vehicle charging.

  • While SolarEdge enjoys its status as the leading module level power electronics supplier for residential systems, it is also intent on shipping to larger systems sizes, including commercial and even utility-scale with the introduction of its higher power-rated inverters up to 120 kW. IHS Markit forecasts that global  commercial installations (10.1 kW—5 MW) will reach 45 GWac in 2022, nearly triple residential installations and as a result, SolarEdge will substantially increase its addressable market. This will strengthen the SolarEdge brand across a diverse group of installers and developers while also making it possible to achieve even greater economies of scale.
  • In conjunction with its hardware portfolio, SolarEdge has also developed its own software capabilities targeted at providing grid services and enabling the creation of virtual power plants (VPP). Providing utilities and grid operators with software allows SolarEdge to increase its footprint across the entire grid, from residential, commercial to utility scale. Working with utilities to provide them grid services and VPP software may also bring SolarEdge more opportunities to sell inverter hardware to utilities. VPP solutions may also open interesting new possibilities in the future in which home owners and market participants can engage in energy trading across the platform.
  • In the context of relentless competition within the solar market and considering the significant volatility still prevalent in the market due to policy changes and shifting tax environments, SolarEdge has made it a priority to mitigate their risk by diversifying into tangential markets. Some notable recent activities include the following:
  • Eventually, SolarEdge may also discover synergies between its solar, UPS and EV business units, allowing it to maintain high profitability and competitiveness in all the markets in which it operates.

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Power & Energy Technology
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