How micro inverters are changing solar business models

24 Apr, 2014

Someone asked me a great question recently: “Nige, I know your’e a fan of micro-inverters. How big do you really think their share of the market will be?”

Its a great question because those who have been around for a while have seen plenty of excellent products never really take off because they don’t have the engineering, sales and market mix right.  The most fabulously engineered product will  fail to sell if it’s marketed poorly. The cheapest product will fail to gain sales momentum if it isn’t supported or fails the test of time.  A great all round product offer will fail if the timing or feature set isn’t what the market wants.

Micro inverters aren’t miracle devices, but I have sense that the sales success they are achieving around some parts of the world is  because some manufacturers  have landed on the right mix and that’s where it starts to get exciting. I would argue that Australia has a unique set of circumstances and that the recent growth in micro inverter sales is proof that the mix is particularly right for our market.

“They’re too expensive”,  I hear you say. “Australia is a price driven market”.

Really? I wrote a story about market prices recently, diving into this issue and I think that “big fat worm” of low price has turned. Sure, there will always be a market for the cheapest gear and you have to be competitive but there are several major reasons why I believe lowest cost models will continue to lose market share. Firstly because consumers are learning that to a large degree you get  what you pay for. The data shows that Tier 1 inverters and Tier 1 modules are gaining share rapidly, despite the price premium. Secondly, consumers are also increasingly aware that if you don’t buy from a reputable company who is making a profit you are unlikely to get support when it matters. I’ve personally spoken to crying customers who ring me for help when things go wrong. They are busy telling there friends how wonderful solar is and why they should learn from their mistakes and not buy the cheapest systems they can find. Thirdly, price data from several sources shows that despite the super low advertised prices, a large majority actually buy systems at a higher price than we often see promoted.

So, the data suggests that more people are willing to pay a premium if they can be convinced that there is real value in it.

This in itself tells us there is an increasing opportunity for companies to sell  systems with micro inverters. But more importantly, when you crunch the numbers and compare apples to apples, the gap between micro inverters and string inverters is not as big as it first appears. In fact, one installer I spoke to today quoted me his numbers and demonstrated that from where he sits, micro inverter systems are cheaper when you factor in warranty periods, ease of design, speed of installation and the simplicity of ordering and stock holding.

Even of this isn’t the case in every situation, it certainly demonstrates that taking a second look at the real gap is probably worth while.

The second element of this equation is solar retailers (that would mostly be you).

What many solar retailers also tell me that they need to increase sales and/or, to cut costs. At the beginning of last year you could sell at perhaps $2.10/W net and today you have to sell at around $1.60/W net. That’s a drop of almost 25% in revenue and margin dollars for the exact same work load. It’s a hamster wheel that you have to get off.

Operational efficiency is one way to help cut costs that our industry simply has to tackle head on.  Finding ways to get the same outcomes with less effort is crucial; be it in design, purchasing, advertising, lead costs or conversion ratio’s.  This where micro’s can really help.

Need an easier design process for your relatively unskilled sales people? Would you really like to optimise the output of every single system through product matching but cant afford the time?  Micro inverters make it about as simple as it can be, with their lego-like configuration models and intrinsic performance optimisation.

Sick of carrying a  range of inverters to suit your ever widening range of system sizes? Ever been caught with old inverter stock that didn’t suit the markets needs and had to sell it below cost to clear it? Problem solved with micro inverters. One model, perhaps two at most and you have a range for almost every application.

Buying too many sales leads which have shaded roofs? Seeing increasing numbers of  roofs that have multiple orientations? Worried that your commission incentivised sales gun might be overlooking minor shading? That’s dead money and a recipe for disappointment. Micro inverters will help. 

The other way is to increase price. Few can get away with simply ratcheting price up without adding value, so tuning into what customers really want and developing offers loaded with  benefits is essential.

Although we highlighted earlier that micro inverters are much closer to the price of existing systems than was previously the case, lets assume there is a gap for  a moment.  I ran a quick model comparing three 3kw system types.

  • A Tier 3 inverter/ module combo at $1/W (net)
  • A Tier 1 inverter/module combo at $1.50/W (net)
  • A Tier 1 micro inverter/module combo at $1.73 (net)

Lets assume you sell 500  x 3kW systems a year at 25% Gross Margin and compare the results. What you can see pretty quickly is that (logically) if you sell higher priced systems you’ll make more revenue and margin dollars. But more importantly, you can also see that if you sold almost 40% LESS micro inverter systems at that higher price, you would make the same revenue and gross profit as you would selling 500 crappy systems. For a whole lot less effort. And you would generate more energy for your customers.

In a nutshell I think micro inverters provide a really compelling business case for clever solar retailers in a declining market, full of crappy products.

In our next feature on micro’s I’ll focus on some of the other reasons we believe that micro inverters could really challenge the market share of string inverters.

string v micro

 

 

 

Post expires at 3:29pm on Friday April 3rd, 2015

About the author

Nigel Morris
Nigel Morris

Nigel is the Director of SolarBusinessServices. After almost 20 years working for other companies SbS Director Nigel Morris, established the company in 2009 with a view to providing other organisations with the benefits of his wide experience in the renewable energy industry.

Related Posts

10 Comments

  1. April 27, 2014

    Hi Nigel, Interesting your article on Micros i am a very small player in the scheme of things and have only ever done hi priced Jobs tailored to an individual situation , i have recently ventured into Micros on 3 Jobs ,using the profile data from smart meters in Vic i have set orientations as best as the roof will allow to follow that profile,
    there has been some minor product hiccups on two jobs (only to be expected on new product ) this will be sorted in time , the third job with east/north/west set up is flying in production and benefit to the customer even on 8c/Kwh
    I will now stick with them in future Quotes .Also a friend of mine has installed them in Northern Ireland combined with a product im now looking at to utilize the excess

    • Nigel Morris
      April 28, 2014

      Hi Geoff

      Thansk for your feedback; great use of the technology mate – matching output to demand profile is something we all need to do better to keep customers happier.

  2. April 28, 2014

    I made a list of 25 reasons why micro-inverters are better than string inverters for systems up to 30 kWp.

    1. Micro-Inverters include a data link back to an Energy Control Unit (ECU) so that live performance down to a single panel is graphically displayed on any PC, Tablet or Smartphone connected to the internet. String Inverters often require additional data communications equipment and can only present performance of the whole solar array.

    2. String inverters have DC cabling on the roof with potential voltages up to 1000 volts. This very dangerous voltage cannot be turned off when the sun is shining and is still present across the panel arrays even when roof top isolation fuses are removed.

    3. String Inverters require DC isolators and string fuses installed on the roof to provide some level of disconnection, these can have catastrophic failure and may cause fires.

    4. String inverter’s DC potential as high as 1000 volts can cause arcing across MC4 connectors and crimp terminations and will thus suffer degradation, meaning all MC4 connectors should be replaced at around 10 years.

    5. Micro-Inverter’s isolate each panel at the panel when the AC power is turned off, so no risk of electrocution, anywhere.

    6. Micro-Inverter’s DC voltage is around 30 to 40 volts and max 8 amps thus eliminating any arcing of wet terminations to ground.

    7. Cell failure in a panel is the most common problem in solar power systems and randomly affects all manufacturers of solar panels. With Micro-Inverters the Energy Control Unit (ECU) allows identifying the individual panel that is not performing as well. You could even use a local electrician to safely remove the faulty solar panel and replace it, saving you a long trip.

    8. With string inverters you cannot tell if one panel is under-performing. This faulty panel will decrease the output of all the other panels in that string and even affect slightly other parallel strings. You have no idea a cell failure has occurred until a significant variation is noticed in inverter production. For this variation to be noticed would require long term continuous spreadsheet analysis of performance data and thus is often missed. Identifying the faulty panel across many panels is time consuming and expensive and can only be done by an experienced solar engineer?

    9. If a Micro-Inverter fails, you lose the output of just one solar panel. A fault alarm can be sent immediately by the ECU. Any local electrician can safely remove the faulty Micro-Inverter and replace with one of the spares supplied as it is a plug and play device.

    10. If a String Inverter fails, you lose the output of all solar panels. A Solar Installer is required to remove this heavy unit. It will take at least 5 days or longer to send a replacement. The Solar Installer then needs to return and refit the replacement unit. The replacement unit is usually a refurbished unit and could be many years old.

    11. Micro-Inverters have a 25 Year Warranty and are designed to last 25 years on a roof under a solar panel.

    12. String Inverters can have a 10 year warranty if you pay for the extra 5 years. The manufacturers state that they have an expected lifetime of around 12 years. The cost of replacing string inverters after 12 years needs to be taken into account.

    13. Micro-Inverters ensure the maximum amount of power is extracted (MPPT) from each individual solar panel.

    14. Most string inverters have just one Maximum Power Point Tracker (MPPT) for all solar panels. It is impossible to ensure accurate power point tracking with many panels in one string. Losses of up to 10 % with String Inverters compared to Micro-Inverters, see Wiki.

    15. String Inverters are TRANSFORMERLESS, they do not isolate the mains voltage from the DC cabling connecting the solar panels. This is potentially a very dangerous situation. Leakage to earth from the cell conductors to the frame in the solar panel, leakage from DC cables and MC4 connectors to earth, leakage from DC isolators and string fuses to earth are potential problems. String Inverters will sometimes shut down if the amount of leakage to earth is greater than 15 mA. If inverters do not shut down, potentially lethal voltages could be present. During wet weather earth leakage reduces solar generation.

    16. The high DC voltage of string inverters causes Potential Induced Degradation (PID) in many panels. This is a major problem where an electrical charge is built up between the solar panel materials and the earth of the metal roof or solar frame. This charge can be very slow to dissipate. Remaining electrostatic charge causes significant losses in power production.

    17. Micro-Inverters have GALVANIC ISOLATION. They completely isolate the mains from the panels DC. There is no Earth Leakage Problems. There is no possibility of potentially dangerous voltages being present on the solar panels or the DC side.

    18. Micro-Inverters reduce the effects of PID to almost zero. The electrical charge from panel to ground is negligible and any small built up dissipates overnight.

    19. If a string inverter’s operating temperature exceeds 40 degrees they will automatically start reducing their rate of conversion of DC to AC. This can be a significant factor in generation losses.

    20. Micro-Inverters are designed to run at full power up to 65 degrees. Because they are converting a maximum of just 250 watts at low voltages, little heating of the unit occurs. The Micro-Inverter is screwed firmly to the aluminium solar mounting rail, this acts as a large heat-sink so its temperature is kept well below the panel temperature and is often cooler than ambient air temperature due to the thermal mass of the mounting rail.

    21. Because Micro-Inverters allow each panel to work totally independently, installers can make use of any roof space available regardless of azimuth, pitch or shading. Installers can even position the panels on the roof to match the demand profile across the whole day to maximise feed in or consumption benefits.

    22. Adding capacity is as simple as adding panels and Micro-Inverters and does not require redesign of the whole system. Just about any solar panel can be used on Micro-Inverters so no matching of existing panels is required should panels fail or an upgrade is required. Any number of panels can be installed wherever sufficient sized AC Power cabling is present.

    23. Removing and relocating a Micro-Inverter solar Installation is significant easier as the whole system is located on the roof, with just one AC cable and Circuit Breaker installed in the nearest electrical sub-board for every 5 kWp of solar capacity.

    24. Equipment security is better with Micro-Inverters as everything is located on the roof. There are no wall mounted inverters, DC isolation breakers or power switches. The Micro-Inverter system shuts down when the power is turned off. This can be done via the installed AC Circuit breaker or breakers marked ‘SOLAR SUPPLY” or by just turning off all power at the mains switch.

    25. Micro-Inverters are now in widespread use in America and Asia and have demonstrated their reliability and performance.

    Australia has not embraced Micro-inverters as yet because it is a very price conscious market with Solar Installers competing by offering the cheapest solar installation. Very cheap, mostly Chinese string inverters and panels are now widely available, so offering a more expensive solar product is not even considered or even offered to Australian customers. Most solar installation companies are mass sales and marketing specialists, they are not technical specialists, so their main focus is to make sales. Unfortunately “Never let facts get in the way of making a sale” is one of the most important rules in sales and marketing.
    Product performance, reliability or suitability to the client’s needs are of little importance to most solar installers. Commission-only paid solar sales people do not have the highly technical knowledge required to sell solar power. This is an area that the government should be seriously investigating.

    Choosing Micro-Inverters over conventional string inverters is a greater up front cost, however the long term financial benefits easily out way this in better solar generation, fast detection and replacement of cell failure or degradation, and long 25 year warranty replacement cost savings.

    • Nigel Morris
      April 28, 2014

      Hi John

      WOW! Nice list! I have done similar exercise in the past and agree with pretty much everything you said, and could even add a few more. Of course, the reality is that (although I’m a fan) there remain some challenges and one could equally develop a list of string advantages probably. I also think weighting is really important but this is where it gets subjective. I would put DC safety as really important for example; others may say its all about price. Great list though, thanks so much for sharing

  3. April 28, 2014

    Hi Nigel, I would like to see a direct comparison between Micro Inverters and DC optimisers. I have sold both SolarEdge and Tigo DC optimisation solutions over the past three years, and have determined that my preference is the Tigo system for its ease of setup, functionality, reliability and low part count, amongst other things.
    Tigo’s comparison of micro inverters vs DC optimisers makes sense to me, but I would be interested to hear an impartial view of how the two compare.

    • Nigel Morris
      April 28, 2014

      Hi Jim

      I think that’s a great idea. Ill chat to some folks I know and see what is possible!

  4. April 28, 2014

    Impressive list John – there are a lot of good reasons there to use micro inverters and I don’t really know as much about them as I probably should.
    As I said I am a fan of the DC optimisation system that Tigo offers and have a fair deal of experience with it. I think it covers most of your points (not all) and also has some advantages too.
    Check out this article, I think it is worth reading even allowing for the fact that it is obviously Tigo marketing.

    http://www.tigoenergy.com/sites/default/files/attachments/microinverter_analysis.pdf

    Also feel free to check out this link to one of the systems we have installed using Tigo. Since it’s installation in 2012 it has averaged over 18kW per day, and for a 4kW north west facing system on a 22deg roof I think that is pretty good.

    http://www.tigoenergy.com/site.php?Nabiac_NSW_4kW_Trina250W_SMA_NW_aspect_22Deg_roof

Leave a reply