Microinverter manufacturer Enphase held an analyst briefing last week during U.S. solar's biggest event, the Solar Power International conference in Las Vegas, and Enphase CEO Paul Nahi seemed more animated than his usual reserved self.
Vegas does that to people, apparently.
Co-founder Raghu Belur and other senior staff also presented.
On microinverter competition
Nahi said, "There are no reports that show microinverter market share because they would look stupid. You'd see Enphase at 97, 98 percent and you'd see 50 other companies at a fraction of 1 percent. So you don't see that report."
"I think as a result of that, people feel...there is no competition." He said that it isn't as if Enphase didn't have competition. "The reality is we've had fierce competition. We've had incredibly aggressive competition. The issue is that we've beat the competition."
"SMA and Power-One, the two largest inverter manufacturers in the world, have had multiple generations of microinverters for years to no success," said Nahi. "In fact, SMA is no longer even showing their micro in their booth. I can't speak for them, but it's almost like they've punted. They tried to compete and were completely unsuccessful."
An SMA spokesperson called that suggestion "patently false," and added, "SMA continues to sell the Sunny Boy 240 microinverter in both the U.S., where it’s assembled in Denver, Colo., and in select international markets, and we’ve seen enthusiasm for the product from many integrators. SMA America did not display it in our booth this year, just as we did not display several other key products. When you sell into the residential, commercial, utility, and hybrid energy markets, as SMA does, fitting our entire product line into a booth often isn’t possible. This year, we chose to display only the products that we were debuting as new offerings (i.e., two new Sunny Boy string inverters, a Sunny Tripower commercial kit, the MLX 60, the Utility Power System featuring the Sunny Central 2000-US, and commercial, plant-wide O&M)."
"The Sunny Boy 240-US was on display, however, inside our solar sprinter van that was parked right out front of the south hall, and we had many good discussions around it during the three days of the show," added the SMA representative.
But the Enphase CEO also said, "We've had...one or two dozen very well-funded startups in this space that are today, all of them, dead or dying. There's probably 30 or 40 Asian companies that have been around for four or five years trying to compete with Enphase, all to no avail."
"The competition has been incredibly strenuous, incredibly harsh. The difference is that we have overcome that competition -- and now we're in bigger and bigger volumes everyday," Nahi said.
Michael Ludgate of microinverter maker APS comments to GTM, "Reports of Enphase’s competitors’ deaths are greatly exaggerated. Look no further than APS to see how vibrant and dynamic today’s microinverter market really is, and how a nimble company like ours can expand the field and drive it in new directions. The solar market has embraced groundbreaking solutions like [a] dual-module microinverter, an advanced design available nowhere else in the industry while our...native 3-phase unit will finally show the real potential for commercial-scale solar."
Ludgate adds, "As we enter new markets across the U.S., we're enjoying tremendous year-over-year growth. We’re also profitable, a measure of success that seems to elude some of the more vocal players."
The right business model
"We're really the only company in the solar industry that has a tech business model," said Enphase CEO Nahi. "It's very standard for all of us, very prosaic in Silicon Valley, but wildly unique in solar. By that I mean, we focus our opex on the development of intellectual property -- semiconductor design, software, services so that we can provide more features, functions and products to our customers -- to help elevate our ASP while working with a Flextronics (a contract manufacturer) to continuously reduce our price and build products at the highest possible quality."
He continued, "That combination is where you see the gross margin expansion. That combination is the definition of a Silicon Valley hardware company -- that's what Enphase is. [...] Again, this a business model with decades of proven success, but [it's one that's] unique in the solar space."
Enphase on solar's future
"The residential space will turn from just solar to energy management with the advent of storage and load management. You're going to see storage and solar coupled together in the utility space," the CEO said.
Nahi added, "Utility-scale solar systems: these big 250- or 500-megawatt inverters are dinosaurs. They are dinosaurs. As we enter the utility market -- and we've said many times that we're entering the utility space -- people will understand that a distributed network architecture is the only real architecture that scales."
Raghu Belur, co-founder of the firm, said, "We can completely alter the behavior of that inverter through software," adding, "Solar is a twenty-year asset, and...grid conditions are changing dramatically, load conditions are changing dramatically, and weather conditions are changing dramatically. So you cannot expect to have a static PV system [that's...] going to last 20 years -- it's just not going to happen. You need a system that's fully adaptive. You need a system that you can push remote software upgrades to and alter the behavior."
Belur remarked that Enphase had seen this play out in places like Hawaii, where the utility contacted Enphase about a device located "in a high-penetration solar environment and requested to change the microinverter's behavior with a software change."
Enphase's relationship with Vivint Solar
One more thing -- and this isn't from the analyst call.
Enphase is losing exclusivity with its largest customer: Vivint Solar, the No. 2 solar installer and financier in the U.S., according to sources close to the companies. Vivint Solar recently went public and has had a supply agreement that has made Vivint responsible for 27 percent of Enphase's revenue in the first six months of 2014, according to the Enphase 10-Q.
Our sources indicate that the combination of Tigo's solar panel optimizers and Fronius' FE Inverter Line will soon be deployed on Vivint's rooftop installations. Tigo would not comment. Enphase, Fronius and Vivint have not yet responded to inquiries.
"No company has done more (or even close) to what Enphase has done to push forward microinverters in the industry," writes MJ Shiao, Director of Solar Research at GTM, adding. "For much of the industry, Enphase is synonymous with microinverters, owning over 80 percent market share globally in terms of megawatts shipped. While Enphase has plenty of victories to celebrate (and will continue to see more) the path forward remains difficult as it tries to copy similar success in foreign and commercial markets."
"Meanwhile, the path for competitors has been tough, but there continues to be resilience in the competitive landscape. Microinverter startups continue to raise funds and new suppliers continue to enter the market. Some of the major inverter companies are still internally torn about string versus module-level power electronics, but after SPI, every major residential inverter supplier in the U.S. has a module-level power electronics offering. Furthermore, while Enphase may think it has other microinverters beat, SolarEdge has also grown quickly within the residential sector and is now the No. 3 residential inverter supplier in the U.S. according to GTM Research's U.S. PV Leaderboard."
Shiao notes, "Enphase has brought innovation and sophistication in distributed PV power electronics in a way that was unseen elsewhere in the U.S. residential market -- but in the ever-shifting inverter industry, there will continue to be tough competition.
"By the way, that report on microinverters showing a market share chart? We have it and lots of people are interested - because there are other companies that aren't just 1 percent of the global microinverter market," plugged Shiao.