It used to be so easy.
In the not-too-distant past, anybody interested in pinpointing the strongest globalsolarmarkets needed only to examine public policy. Germany’s feed-in tariff long provided generous subsidies to make the cloudy European nation the world’s largest market, while sunny California’s rebate program helped it grab its perennial spot atop the U.S. market rankings.
These days, figuring out where markets are most likely to be vibrant isn’t so simple. As the cost of panels and inverters has plummeted, the economics of solar have become attractive even without lavish incentives. This is good news, both for the solar industry and those broadly focused on the world’s transition to a low-carbon economy.
Still, for manufacturers of equipment like solar panels and inverters, this shift demands three things: an understanding of where conditions are right for market growth, what each market requires from equipment suppliers, and, as always, an ongoing commitment to driving prices ever downward.
“As your incentives are being reduced, the fact that feed-in tariffs and other incentives are fading puts pressure on engineers and manufacturers to come up with lower-cost system solutions,” said Allan Gregg, the director of application engineering for inverter manufacturer Sungrow. “To maintain return on investment, you have to reduce installed costs and operation and maintenance costs.”
The (not-so) United States of America
There is no such thing as an American solar market. Rather, because each state has control over policies that either encourage or discourage solar development -- net-metering and renewable portfolio standards being two important ones -- there are 50 individual markets.
Gregg noted that the importance of policy has largely dictated where Sungrow has been active, including states like New Jersey, Massachusetts, California and Colorado. Today, though, the improved economics of solar has convinced states with little development activity to encourage more. “Minnesota is a growing market, even though you don’t think of the solar resource [being very strong] in Minnesota,” said Gregg. “There are a lot of large-scale systems going into Minnesota.”
Though it’s important for inverter manufacturers like Sungrow to monitor state-level market and policy conditions, Gregg said it’s also vital to ensure that the company’s equipment is able to meet the unique requirements utilities set for connecting solar to the grid.
“We have to have an inverter and an integrated system product that can meet the requirements of Minnesota and California and New Jersey and all the markets,” he said. “It is a challenge because of the significant differences. It’s definitely not one-size-fits-all.”
Different markets, different demands
Though state incentives and interconnection policies vary widely, there is one factor that unites these disparate American markets. “When a U.S. company looks at a solar power system, they’re focused on long-term costs,” said Gregg. “That has driven us to design inverters that stand the test of time and that operate with high uptime over their entire expected lifespan.”
Put another way, U.S. solar developers are willing to pay more for inverters if they are convinced that the manufacturer has a quality product and a long-term commitment to service. “They have to know if there is going to be a service organization around for the life of the product. Will there be spare parts available?” said Gregg. “In the U.S., customers have been burned by inverter failures, where they went with what was supposed to be a bankable company and everything looked good, and then the company went bankrupt.”
Indian solar developers have different priorities. India is a growing market where Sungrow is involved with hundreds of megawatts' worth of projects. Developers there are focused on price above all other factors. “It’s about price, price, price, and they don’t put a lot of weight on the cost of O&M because labor is cheap and not as big a factor,” said Gregg. “So the way to get into the India market is all about the lowest price upfront.”
To meet that demand, Gregg said Sungrow alters its inverters in a way that reduces the price without compromising quality. “We don’t have different product, but we sell into India a stripped-down version that doesn’t have extras and the built-in recombiner panels that the U.S. market demands,” he said. “We take the same essentials of the inverter and delete some extras and come in at a competitive price point for that market.”
Markets in the developing world
The demand for clean energy in the many areas of the world that lack reliable electricity has never been stronger. In the past, inverter companies have been hesitant to pursue those opportunities because the lack of quality infrastructure, especially roads, meant reaching remote areas was difficult and expensive.
“A company may say, 'I have to charge 30 percent more to service the warranty because of the costs to do business in that country for after-sale support,'” said Gregg.
The emergence of string inverter technology may well change that calculation and open up new markets in Africa and Asia. Sungrow is working with a company installing large-scale solar systems in northwestern Africa. Compared to central inverters, string inverters are simple and cheap to replace, which could drive more and more solar development.
“Using all string inverters means you can have spares on-site and need just a minimum technical capability to swap out the inverter and get back in business,” said Gregg. “Internationally, I see the value of string inverters pushing out central inverters in a lot of these applications.”
Why innovation will open up more markets
At September’s Solar Power International (SPI) trade show, Sungrow will introduce the world’s first 1,500-volt string inverter. If you believe that continuing to reduce costs opens up more and more markets, this kind of innovation is a big deal.
Why? A higher-voltage string inverter means developers can increase the number of panels they have on each string and thereby reduce the total number of strings. This translates into savings because it reduces the number of combiner boxes required. There are other benefits to a higher-voltage string inverter.
“Because you have a higher voltage, you have a lower current, so you can reduce wire size and reduce labor costs,” said Gregg. “At the end of the day, you have lower costs per installed system by just increasing the DC voltage.” Just as important, higher voltage allows for more kilowatts to come out of the same sized inverter -- another source of cost savings.
All of which is to say that innovation will play an increasingly important part in determining which markets around the world are the most promising. At Sungrow, that means doing what it has always done.
“We have always taken a leadership position to reduce costs,” said Gregg. “I’ve always said that the solar power business is about money.”