Will SolarBridge Micro-inverters Challenge Enphase?
When building a photovoltaic system that can capture solar power, one key piece of equipment needed is an inverter to transform the DC power generated by the solar panels to AC power which can then be used by ordinary household appliances or fed back into the electrical grid. Previously we highlighted SolarEdge, a company that sells a single conventional inverter which can be used by multiple solar panels. An alternative approach to using a single conventional inverter is to instead attach a mini-inverter to each solar panel. Each method has its advantages and disadvantages as highlighted in this article published by Green Tech Media. One startup which is betting on the micro-inverter method is SolarBridge.
Austin based SolarBridge Technologies was founded in 2004 to commercialize power electronics technologies created at the University of Illinois. In 2009, the company changed their focus exclusively to micro-inverter and monitoring solutions for the solar industry. The company has taken in over $100 million in funding so far from the likes of Battery Ventures, Rho Capital Partners, the U.S. Department of Energy, Constellation Ventures, and Shea Ventures.
Solarbridge versus Enphase
Solarbridge plans to differentiate its micro-inverters from the competition by offering unmatched reliability. They claim to be the only micro-inverter company offering a 25-year warranty for a module-integrated micro-inverter. However, this reliability comes with a cost. A recent GTM Research report,The Microinverter and DC Optimizer Landscape 2014, notes that Solarbridge’s “cost structure is still the highest in the market, which is a bad place to be in the solar industry.” The report estimated 2013 shipments for SolarBridge at roughly 100,000 units, with the market leader Enphase (NASDAQ:ENPH) shipping 1.6 million micro-inverters in 2013. While “micro-inverters” don’t sound like the sexiest technology to invest in, the potential for significant revenue growth is very real. While market leader Enphase continues to operate at a loss, their revenue growth over the past 5 years has been impressive:
In an article last month by Greentech Media, Craig Lawrence, the VP of marketing at SolarBridge was quoted as saying the following regarding their most recent funding round of $42 million last month:
The new funding will be used to develop a large sales and marketing effort, as well as “bulking up in R&D.” Lawrence notes that the “competitive and regulatory landscape [for inverters] is going to get pretty treacherous.” He said that the firm is developing next-generation features to meet new utility “command and control” features imposed by CPUC Rule 21. Lawrence spoke of the need for the inverter to provide control over reactive power and ramp rate. He said that a number of other microinverter vendors are not prepared for these requirements.
It’s hard not to believe that Enphase isn’t prepared for these requirements. Enphase has spent over $115 million in R&D over the past 5 years spending $34.5 million in R&D during 2013 alone.
In its PV Inverter World Market Report – 2013, IHS Research reported that in 2012, Enphase (NASDAQ:ENPH) was the number one residential PV inverter supplier in the Americas with 53.5 percent market share, however, returns for Enphase shareholders have not been so spectacular. If you became an investor on the day of the Enphase April 2012 IPO, you’d be up just +4% to date having to endure a paper loss of over -70% in late 2012. While Enphase may be the market leader for now, companies such as SolarBridge need to be watched closely to see if their “reliability” value proposition truly stands to displace the Enphase micro-inverters.