Microinverter pioneer Enphase is now going after the commercial solar market with more of an end-to-end system approach. The fast-growing power electronics and software company is adding an operations and maintenance (O&M) arm to its hardware sales business and is also introducing a new microinverter aimed squarely at commercial rooftops.
The promise of commercial solar and its huge unharnessed potential has become one of the prominent themes in the solar market today. There are more than 5 million commercial buildings in the U.S., and GTM Research has predicted a revival of small commercial solar projects. We recently provided a banker's take on commercial solar financing. SolarCity just announced that it is directing its Zep hardware and resources toward lowering the cost of commercial solar installation. And GTM Research has taken note of a new crop of companies "looking to lower the administrative burden associated with financing small commercial through solutions such as project scores, online diligence tools, and investment platforms."
GTM Research's solar analyst team expects the U.S. non-residential PV market to exceed 1.3 gigawatts this year, growing 21 percent over 2013's totals.
Here's the opportunity as Enphase sees it:
Enphase shipped 598,000 microinverters in Q2 and was very near GAAP profitability with record revenue of $82.0 million. Q3 guidance has revenue in the range of $93 million to $98 million.
The company sees strong growth in U.S. residential, but its high-growth path lies in the 10X growth of the U.S. commercial and utility-scale market.
"This is the roadmap on how we grow our business," said Brian Korgaonkar, product manager at Enphase, adding, "U.S. commercial is growth driver No. 2." He said that Enphase has already had success in commercial microinverter installations, with more than 1,500 installs ranging from 10 kilowatts to greater than 2 megawatts.
The product manager told GTM, "Enphase has had success in small and large commercial" with a 208-volt solution, a level driven by the service voltage at the site. He noted that 208 volts makes sense for smaller commercial and schools, but that larger installations make gains in balance-of-system efficiencies at higher voltages.
"Commercial solar is multifaceted and has a complex deal cycle. You need to build the ecosystem and a robust infrastructure to support the commercial landscape. It's not just selling a piece of hardware. It's about an end-to-end solution with your partners across the entire value chain and deal cycle," he said.
Enphase contributes the new C250 microinverter, financing partners such as Figtree Financing PACE, system layout help courtesy of Folsom Labs' HelioScope rooftop design software, along with its new O&M service.
"We are putting a commercial project design team together, working with Folsom Labs to integrate the C250 into that company's HelioScope software, and rolling out the solution in Q1," said Korgaonkar.
Enphase promises large commercial customers "lower LCOE, higher IRR and a better ROI," along with "balance-of-systems savings, increased energy harvest, warranty and O&M services" with its new system built for 480-volt, three-phase systems for 72-cell and 60-cell solar modules.
Martin Rogers, Enphase's VP of Worldwide Customer Service and Support, told GTM. "What we're doing is providing an offering that solves a major pain point. We're bringing ease of design to commercial." He added that Enphase's finance partners can make sure more deals get funded, while its O&M business provides a "proactive solution" that can spot reliability issues before they become failures and schedule the proper time for the system to be cleaned. He said that the O&M service "allows crew time to be spent generating revenue -- not messing with O&M."
"We offer a set-it-and-forget-it solution" for the commercial rooftop owner with "a much higher uptime warranty," Rogers added.
The Enphase execs envision the O&M team eventually servicing other non-Enphase technology with a small but growing fleet of orange trucks.
The C250 will be native 430-volt according to the company, and it requires an auto-transformer "to kick up the voltage to 480." Enphase claims that the new microinverter system delivers "a ~10% lower LCOE versus a central inverter system," and a 480-Vac system lowers cost by $0.05 per watt to $0.10 per watt with a 4 percent reduction in losses compared to a 208-Vac system.
GTM Research's director of solar research MJ Shiao had this take: "The rule of thumb indicates that microinverters are best suited for residential and small commercial, but conventional wisdom should always be questioned in a fast-paced industry. Enphase has been targeting commercial markets for years, with a few meaningful wins, but it has not been a strong player in this market. Our U.S. PV Leaderboard puts Enphase at just 3 percent commercial market share in the U.S. in the first half of 2014. With a product line that now truly targets the 480-Vac space, it stands a better chance at penetrating the commercial market, where according to the Q2 2014 Solar Market Insight report, more than 50 percent of systems have been larger than 1 megawatt."
Shiao adds, "Some of the benefits of microinverters translate very well to commercial rooftops: better shade mitigation, more flexibility in piecing the array around obstructions, more resistance to major change orders, and an increasing modularity that helps with installation speed and the susceptibility to individual failures. However, pricing for commercial inverters and systems is considerably lower than in the residential market -- and with tighter margins overall, increased upfront expenses will be a difficult sell. Furthermore, commercial EPCs and developers will have to evaluate whether the balance of cost point and benefits of three-phase string inverters -- which is estimated to command as much as 35 percent of the U.S. commercial market in 2014 -- will outweigh those of the microinverter. These commercial inverters are often tapping into additional BOS cost savings advantages by increasing array voltages to 1000 Vdc."
"The Enphase solution brings strong value to the system, including day-one savings on the non-inverter balance of system, performance resilience on the O&M front, and eliminating high-voltage DC as a safety concern, but it faces an uphill battle in a very cost-conscious commercial project landscape," he said.
Enphase is not the first to bring a commercial microinverter solutions to market. APS has a three-phase microinverter available, and earlier stage "mini-inverter" vendors like CyboEnergy and HiQ Solar are also active in the market.