The last week of February saw a flurry of news tied to three of the largest solar PV inverter vendors in the world.
The week began with 11 senators penning a letter to Secretaries Rick Perry of the Department of Energy and Kirstjen Nielsen of Homeland Security. The senators formally requested that the federal government take steps to ban Huawei inverters, citing cybersecurity risks.
Cybersecurity concerns surrounding Huawei, whether founded or not, stem from the fact that Chinese companies are not entirely independent of the government. Huawei in particular has closer ties to the government than most inverter vendors, as its founder, Ren Zhengfei, was an engineer for the People’s Liberation Army prior to founding the company.
Furthermore, Huawei has been accused of stealing intellectual property in the U.S. on several separate occasions, contributing to overall distrust of the company.
There are fears that Huawei could be working on behalf of the Chinese government and could build a “back door” into its inverter technology. This would allow for Huawei to control its inverters remotely and potentially shut off systems, leaving energy consumers in a vulnerable position. To date, there is no evidence that Huawei inverters have such a feature.
In 2017, Huawei was ranked the top inverter manufacturer globally in terms of shipments, according to Wood Mackenzie Power & Renewables. While the company holds the largest global market share, Huawei only represents about 4 percent of the total U.S. market, where it supplies its three-phase string inverters for commercial and utility-scale uses.
Huawei recently released its residential inverter with plans to expand into the U.S. market. The residential inverter is central to the company’s FusionHome Smart Energy Solution product line, a smart-home solution that includes an inverter, energy storage, an optimizer and energy management controls.
The proposed inverter ban, if adopted, would effectively halt Huawei’s expansion into the U.S. residential market. It could also complicate warranty fulfillment for its existing commercial and utility-scale customers in the U.S., presenting a potential issue for installers and developers in the future.
Wednesday, February 27, 2019
Shortly after the Huawei letter from Congress, Siemens announced the purchase of Kaco new energy GmbH, a solar PV string inverter company that also recently acquired Energy Depot, a German company that manufactures energy storage inverters.
This past January, Kaco announced it was exiting the central inverter business to focus on its string inverter and energy storage offering. The company did so by selling off its Korean subsidiary, Kaco New Energy Inc., to OCI Power, which operates in the utility and distributed generation solar markets.
In 2017, Wood Mackenzie Power & Renewables estimated that Kaco held an estimated 2 percent of the market in terms of shipments.
With the acquisition of Kaco and the company’s intention to launch its Smart Infrastructure Business on April 1, 2019, Siemens is strategically positioning itself to be a strong player in the distributed energy and services market.
Friday, March 1, 2019
The third piece of news came from Schneider Electric, which finally confirmed that it is exiting the utility-scale inverter business. The company is repositioning itself toward the residential and commercial and industrial (C&I) segments and will be focusing on its internet-of-things platform, EcoStruxure.
As of 2017, Schneider controlled 3 percent of the total global PV inverter market, according to Wood Mackenzie Power & Renewables.
Recent events speak to larger trends
Recent events surrounding these large inverter vendors speak to two global inverter trends.
First, all three companies are entering or expanding their offerings to add additional value to homeowners and commercial asset owners. For the most part, there is less diversity among utility-scale inverters, as they have similar functionalities and thus mainly compete on price. Companies that are positioning themselves in the residential/commercial sectors to provide additional services (storage, EV charging, etc.) can distinguish themselves from the crowded, competitive landscape.
Given that e-mobility and DERs are expected to play an important role in the future of the grid, entry and expansion into this market seems like a smart bet. Looking out through 2019, it is likely that the market will see more companies exit the utility-scale inverter business and focus on residential and C&I in an effort to separate themselves from their competition.
The cause of this shift may be attributed to the fact that innovation goes unrewarded in the utility-scale inverter segment as customers buy primarily on price. If inverter companies are repositioning themselves toward residential and commercial offerings, they must see an opportunity present there that is lacking in the utility sector.
Second, the proposed ban on Huawei highlights a growing concern over cybersecurity risks regarding intelligent infrastructure. Inverters’ ability to communicate with the grid will be crucial to facilitating the growth of distributed generation. However, these advancements will lead to greater national security concerns. Cyber threats will need to be addressed more comprehensively by regulators, asset owners, utilities, policymakers and other stakeholders.
Whether or not the concerns surrounding Huawei are founded, blanket bans on inverter companies — such as the one proposed on February 25 — are not long-term solutions to cybersecurity risks. While there is some effort being made to address the threat, more is needed. Inverter vendors will have to work with stakeholders to develop better protocols and standards for cyber threats, especially as these companies expand into internet-of-things and smart-home offerings.
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