The Chinese solar market is slowing, and it's creating some interesting dynamics for the country's domestic inverter companies.
China is projected to drop slightly from 41 percent of new global solar PV installations in 2016 to 39 percent in 2017, and continue down to about 20 percent by 2022, according to the latest Global PV Inverter and MLPE Landscape report and Global Solar Demand Monitor from GTM Research.
While China will remain the world’s largest solar market over the next five years, market uncertainty has pushed Chinese inverters companies of varying sizes to expand their global reach, according to Scott Moskowitz, senior analyst in GTM Research’s PV Systems and Technologies group. For pure-play inverter company Sungrow, this represents a unique opportunity.
Sungrow is not the first pure-play company to look beyond its home region in search of global growth. Back in the early part of the decade, SMA’s shipments looked similar to Sungrow’s in terms of concentration in its home market. Sales for SMA were highly concentrated in continental Europe. However, as European markets declined and price pressures increased from China, German-headquartered SMA was forced to accelerate its international expansion strategy and restructure its business.
Meanwhile, Sungrow expects to double its exports this year from 2016.
“Sungrow continues to focus aggressively on international expansion and exported over 1 gigawatt of inverters in 2016 for the second year in a row,” said Moskowitz, lead author of the latest GTM Research inverter report. “However, global brand recognition continues to be a challenge” for inverter companies working outside of their home country.
The question of what traits are needed to scale globally as a pure-play inverter company are timely, but Sungrow is hardly a global laggard. The company has been the second largest inverter supplier in the world when ranked by megawatts shipped every year since 2013, according to GTM Research. Huawei took over the top spot from SMA in 2015.
Much of the business for both companies, however, is in China. Despite the size of the Chinese market, diversification is increasingly key for Chinese inverter companies. Top-tier Chinese inverter companies have been relatively successful expanding into the low-price feed-in-tariff markets of Europe and Australia, but share gains in South and North America have been harder to come by.
Sungrow has started to make inroads in the U.S., with both its central and three-phase string inverters. The company doubled its three-phase string inverter shipments in 2016 as string inverter prices have declined. It has recently released a 125-kilowatt, 1,500-volt string inverter, the highest power density for a string inverter to date, which is currently being shipped for projects in North America.
GTM forecasts both string and central inverters will continue to see steady price declines through 2022. Sungrow has won a few significant projects in the region, notably with Swinerton Renewable Energy and a 205-megawatt utility-scale project in California.
“Global growth requires significant investment in sales and servicing as well as R&D and marketing,” said Moskowitz. “It will not be easy for Sungrow to achieve, but shifting demand will necessitate trying.”
Sungrow has made strategic decisions to invest in its service team, including bringing over Roberto Cardoso, who previously headed up ABB/Power-One's service operations. U.S. developers “have to know if there is going to be a service organization around for the life of the product,” Allan Gregg, CTO at Sungrow, told Greentech Media in 2016.
It has also invested in novel architecture with its virtual central inverter concept. The virtual central inverter brings together the benefits of the command and control of central inverters with the lower O&M of string inverters, but in the U.S. where central inverters still reign supreme, Sungrow is investing in market education about the benefits of how developers and EPCs can use this technology in practice.
As Sungrow tries to get traction around its virtual central inverter concept, there is one area where Sungrow has a benefit over the technology giant and inverter market leader Huawei, notes Moskowitz.
While the U.S. market is still warming to string inverters for utility-scale projects, Sungrow also sells central inverters and Huawei does not. “Sungrow only has to convince U.S. EPCs to use its inverters rather than to change how they think about utility system design,” Moskowitz said of Sungrow trying to build its market share.
Sungrow has also forged a partnership with Samsung SDI, although “It remains to be seen to what extent these partnerships will occur, and at what size in terms of both dollars and megawatt-hours deployed,” GTM Research energy storage analyst Brett Simon cautioned when the partnership was announced.
For any inverter company, a laser focus on staying ahead of regional trends will be increasingly important as prices come down further in the next five years. “Inverter prices continue to fall aggressively and the market is consolidating,” said Moskowitz.
“Tomorrow’s inverters must be smarter and more versatile due to high penetrations of solar and the rise of energy storage,” he said. “Pure-play vendors like Sungrow are often most able to respond to such challenges.”