Market Analysis

Market Analysis March 2023 - Knotty string inverter supply

Anyone who has followed the solar market for more than a decade is experiencing déjà vu thanks to a shortage of inverters. While small, 10 kW hybrid products typically used with energy storage in small systems are again available, larger, 60 kW to 100 kW units are sufficiently scarce to prompt project developers and engineering, procurement, and construction service providers to desperately comb the market. The European market for large string inverters is virtually exhausted, with no short-term supply in sight. Speaking to inverter market players and project developers, explanations range from conjecture with little factual basis to wild conspiracy theories.

There is little news in module price trends this month. As expected, price declines have slowed or halted. Some big manufacturers are making small upward price adjustments again, in response to rising silicon prices although inventories and the volume of products already being shipped to Europe is slowing upward pressure. A comparison of European project and wholesale prices suggests there is still space for module prices to fall. The direction prices move in the coming weeks will depend on actual demand at the start of the installation season. If large inverters continue to be unavailable, that will likely have a negative impact on purchasing behavior among project customers and cause module prices to fall even further.

So what is causing the poor supply situation in large-scale equipment for low- and medium-voltage products? Here are a few thoughts on the subject.

Whereas the bottleneck was blamed, a few months ago, on a general shortage of chips - triggered, among other things, by increased demand from the automotive industry - the current problem is a lack of the key power electronics components needed to produce inverters. The name Infineon keeps coming up in this context.

Infineon, together with two or three other Western semiconductor manufacturers, apparently produced certain IGBT modules - electronic switching elements - which are urgently needed for all high-power inverters and which Chinese manufacturers are unable to produce themselves. Opinions differ as to whether this is a politically-induced artificial shortage or whether production capacity is simply too low to meet the high demand.

European inverter manufacturers feel at a disadvantage because the components or assemblies they need can only be obtained from China, with very long delivery times. The presumption among the affected stakeholders is that the domestic Chinese industry is being served first and thus being given preferential treatment.

On the other hand, the West-facing microelectronics producers are being accused of trying to squeeze out Chinese manufacturers. So is this an economic cold war between the USA and China, being fought on the backs of the solar industry? It is hard to believe that there is some larger plan behind it. It is probably more of an interplay of supply and demand with the highest bidders for the most sought-after semiconductor components getting first dibs. In any case, the automotive industry has an advantage and other sectors can often pay more than the energy sector, which is used to bargain prices.

Both sides are working hard to make themselves independent of the other economic area and are developing their own technology and components. It can take several months, if not years, however, before a new generation of inverters is developed, tested, and certified ready for operation. Currently, it looks as if the new devices from Asian manufacturers will be available in the second half of the year, at the latest, and certified with standards such as VDE-AR 4105 and VDE-AR-N 4110.

Customers that cannot wait that long will have to switch to smaller devices or alternative products from unknown manufacturers. Many installers turn their noses up at these options, however. Some still have a bad taste in their mouth from experiences they had 10 years to 12 years ago with the exotic products from Asia produced during a similarly severe supply bottleneck. No sooner had the demand for alternative manufacturers died down than these companies disappeared, leaving their customers to deal with equipment problems on their own.

Some project developers are also switching from the much-hyped string inverter concept back to central inverters, which seems to make sense, at least for installations north of the megawatt limit. This may require a somewhat larger lead time and planning effort, but subsequent operations are then quite economically attractive and reliable. Should problems and failures arise, it is not necessary to send complete units around the world and it is sufficient to replace individual assemblies. With some spare parts management on the part of an operation and maintenance partner, this does not even have to mean longer downtimes for a PV farm operator.

At inverter maker SMA, delivery times for its Sunny Central series are not quite six months while new customers may have to wait eight months to 12 months for the large string inverters - from 100 kW upwards - from the same company.

Overview of price points broken down by technology in March 2023 including changes over the previous month (as of 16 March 2023):

Overview of price points broken down by technology in March 2023 including changes over the previous month