January 24, 2011 -- The global photovoltaic (PV) inverter market is forecast to reach $8.5 billion by 2014, growing at compound annual growth rate (CAGR) of nearly 25%, according to a new report from IMS Research. The report also revealed that more than 7 million inverters will be sold in 2014, up from less than one million in 2009.
|PV inverter market's forecast development|
The new report from IMS Research also found that, despite a factory-gate price decline of around 11% in 2010, revenues generated from PV inverters more than doubled, and exceeded $5 billion for the first time. In the longer term, positive growth is predicted to continue, despite on-going price reductions and architecture changes, and the market will double in size again in the next 5 years.
Supply vs. demand
Whilst the development of the PV inverter market is closely linked to PV installations, inverter demand became decoupled from underlying installation growth in 2010 due to shortages, component bottlenecks and double-ordering. The resulting effects were large shifts in suppliers' market share and a major supply/demand imbalance. A bottleneck in component supply in early 2010, coupled with a booming German market, led to a severe shortage of inverters, which was further compounded by customers double-ordering amidst the panic. This shortage affected some inverter suppliers much more than others; suppliers such as SMA lost market share, while Power-One, among others, captured major share.
|PV inverter delivery times|
IMS Research's latest report has confirmed that this shortage has now abated and the balance has shifted towards a major oversupply of inverters, with high levels of inventory recorded in Q4'10, leaking into Q1'11. "Despite the shortage of inverters at the beginning of 2010, IMS Research estimates that more than 2GW of inverters were produced that were not needed. This has led to high inventory levels, both at suppliers' warehouses, and throughout the supply chain. This came as a direct result of double-orders being fulfilled and has also led to cancellations and push-backs of orders," PV research director Ash Sharma commented.
12-15GW additional capacity in 2011
As a result of the shortage, many inverter suppliers announced major capacity expansions and total industry capacity was more than 30GW in 2010: double the year before. In spite of this massive capacity expansion, factory utilization actually increased significantly in 2010 to around 70%, hitting close to 90% in Q3'10. Aggressive capacity expansions are expected to continue this year, reveals IMS Research: Ash Sharma commented "Inverter suppliers continue to add capacity, most notably in Asia and North America. A further 12-15 GW of additional capacity is planned to be added in 2011, which is somewhat surprising given the uncertain market outlook in 2012 and many suppliers are certainly not being cautious in their expansion plans."
|Demand increase in 2010 by inverter power level|
Despite the very high demand and tight supply in 2010, factory-gate inverter prices actually dropped steeply by around 11%, although many end-customers saw prices increasing significantly due to distributors capitalizing on the short supply situation. Declining prices were not due to the increasing capacity, but in fact more linked to a mix change, with higher volumes being sold to Germany, which typically commands lower prices. In 2011, some like-for-like price declines of 10-15% are predicted, however a shift away from Germany will help adjust the mix once more and support a more modest average price decline.
Three-phase inverters gain major share
Although announcements from microinverter and power optimizer vendors grabbed the headlines in 2010, the biggest architecture changes came from traditional inverter suppliers with a dramatic shift towards small three-phase products, typically rated below 20kW. These products were the fastest selling in 2010 and gained major share due to installers' preferences for these products in commercial installations up to 100-200kW. Very large inverters above 500kW also experienced high growth in 2010, with shipments increasing by more than 250% due to robust demand from MW-scale PV plants around the world. In the longer-term, IMS Research predicts this will be one of the most promising segments of the market for a number of reasons. Sharma commented, "Large central inverters above 500kW or even 1MW will become an increasingly attractive business area for many suppliers as high demand is anticipated from utility-scale projects in several countries, including the US and India. In addition, these products are typically highly engineered with advanced functionality and design, which attract healthy margins and also prevent low-cost competitors from stealing market share."
Sharma will be speaking on the solar inverter market's development during a panel session at the Solarpraxis 1st Inverter and PV System Technology Forum (http://www.solarpraxis.de/en/conferences/inverter-and-pv-system-technology/general-information) being held in Berlin on January 24-25th.
Ongoing, detailed quarterly analysis of the PV inverter market's supply and demand is available from IMS Research's PV Inverter Report. Or contact Ash Sharma, research director, [email protected]; www.imsresearch.com.IMS Research is an independent provider of market research and consultancy to the global electronics industry.