2010 shows the strengths and the weaknesses of the PV inverter industry
IMS Research’s analysis of the PV inverter market during 2010 allowed a unique perspective of an industry that although characterised by record shipments and revenues, also displayed some fundamental weaknesses of an industry that is still maturing and learning.
As an industry which relies so intrinsically on the sun, it is safe to assume that seasonal variations in demand will be present. Specifically for PV inverter suppliers, generally the first quarter of the year is the quietest as the core markets in Europe remain restricted by the winter snow. However the first quarter of 2010 was very different and IMS Research’s quarterly PV inverter tracker showed that inverter shipments in the first quarter of 2010 were almost 200% up on the same period in 2009. In contrast, suppliers are reporting that so far in 2011 the seasonal lull of Q1 has well and truly returned, showing just how remarkable the beginning of 2010 was.
The surge in demand at the start of 2010, driven by impending cuts to incentives in several of the major European markets created a race amongst PV inverter suppliers to secure components and expand production capacities. Many suppliers were not able to source a steady supply and a shortage of inverters hit the PV industry. Some suppliers were more affected than others and major shifts in market share occurred. SMA Solar Technology lost market share throughout 2010, whilst other such as Power-One were able to ramp up production and make major share gains.
2010’s turbulent summer was characterised by inverter suppliers struggling to meet demand while aggressively expanding production capacity and customers placing the same order with several different suppliers amidst a panic to complete installations before major incentive cuts. Lead times remained painfully long for customers through the first half of the year with “at least 25 weeks” a common response to enquiries for delivery times. Inverter production hit 8 GW in the third quarter of the year, causing the inverter shortage to ease and the true scale of the double ordering to emerge. By the fourth quarter the inverter shortage had quickly transformed into a vast oversupply of inverters with inventory building throughout the supply chain.
A slowdown in the German market in November and December and a complete stoppage of the French market compounded the problems with Italy remaining one of the few buoyant markets in Europe. Although 2010 was an outstanding year for PV inverter suppliers, the huge demand exposed an industry that was ill-prepared for the surge, with component supply problems and capacity limitations. The industry now faces a very bleak first quarter in 2011 as excess inventory fulfils much of the early demand and suppliers now need to deal with the consequences of them over-supplying the market last year.
One market that has largely by-passed the oversupply problem experience in Europe is the US. Two of the largest suppliers, Advanced Energy and Satcon, enjoyed a very successful 2010 and their outlook continues to be positive with massive growth predicted for the North American market in 2011. These suppliers were less exposed to the German market and so have not been so afflicted by the huge inventory problems being experienced in Europe.
The key question facing the industry now is when the excess inventory in the European market will be depleted. With only the Italian market providing major demand so far in 2011 this point seems to be a little way off. The answer is largely dependent again on Germany and if demand will begin to surge again with the pending cuts to the feed in tariff scheduled for July.