SAN FRANCISCO --- Who needs energy storage when you have a smart inverter?

Battery banks and other energy storage technologies essentially absorb power produced by solar panels and wind farms and distribute it to the grid in a smooth, orderly fashion. Smart inverters, meanwhile, convert DC power from panels and turbines and then deliver it to the grid in a smooth, orderly fashion through the magic of networking and communications. In other words, the process is the same, but the smart inverter is probably cheaper.

"An inverter can act like a capacitor," said Owen Schelenz, an lead engineer at General Electric, speaking at a solar electronics symposium at Intersolar in San Francisco this week. "Energy storage is still unproven technology. Should it be at a photovoltaic power plant or a substation?"

Inverters can also ameliorate voltage dips and spikes to stabilize the grid, he added. GE's inverters in the wind market already provide this sort of functionality, he said.

Inverters and solar electronics are at a crossroads these days. Intense competition has begun to drive prices and margins down. Chinese manufacturers will also increasingly scoop market share from the Europeans and U.S. manufacturers that currently dominate the space. Under the SunShot program sponsored by the Department of Energy, solar companies will try to bring the cost of solar power, including installation, down to $1 per watt: only 10 cents will be allocated to inverters.

But luckily for the inverter industry, inverters are based around chips, one of those somewhat rare industrial products that get cheaper, better and faster simultaneously. Thus, inverter manufacturers have a golden opportunity to integrate functionality and other applications. The so-called balance of system costs, which include everything but the solar panel, will rise from 44.8 percent in 2010 to 50.6 percent in 2012, according to GTM Research. If inverter makers can grab a larger share of that, they could break out of SunShot's 10-cent ghetto.

Solectria Renewables, for instance, is coming out with a menu of smart add-ons, according to senior design engineer Lu Jiang. Features that will be more prominent in Solectria's inverters in the future include low-voltage ride-through, which stabilizes power; control of onsite storage assets; master control for PV plants; communication with other grid assets and control over the ramp rate of power production. In other words, inverters will essentially act like computers or servers.

Inverter makers will also become consultants. "Inverter makers will be required to provide low-flow models to assist in plant certification," he said.

If that sounds like a stretch, look to the computer industry again. Dell and Hewlett-Packard started out as desktop companies before graduating to servers and consulting. Meanwhile, IBM execs have also mused about putting the equivalent of servers on power poles to manage renewables, demand response and power production. Inverter convergence from certain angles starts to look inevitable.

Inverter nirvana, however, won't happen overnight or in a vacuum. Communications standards and other protocols will have to be established before utilities begin to allow solar inverters to provide high-value services like voltage regulation, said Schelenz. (Side note: although Schelenz expressed doubts about storage, GE has made a huge investment in sodium batteries for grid storage. Sodium batteries sit at places like substations and power plants so would likely be compatible with smart inverters.)

Other notes out of the session:

--Richard Berrios from the California-Spain Chamber of Commerce, trotted out some interesting economic facts. China has allocated $7.3 billion to smart grid investments, leading the world, while the U.S. came in second with $7.1 billion. China, he added, needs to double its energy capacity by 2020 and will spend $96 billion overall on smart grid investments by then. It is estimated that 18.2 percent of smart appliances will be bought in China by 2015.

Brazil's an interesting case study. Energy consumption will rise by 60 percent from 2007 to 2017, and 63 million smart meters will be in place by 2021. Thirty-four percent of new power production will come from renewables including hydro, he added. Unfortunately, Brazil has a creaky grid infrastructure so it may face challenges matching its renewable goal with the assets it has on the ground.