London — Due to rapidly falling prices for commercial and utility-scale inverters and cost pressures in mature markets, including Germany and Italy, where subsidies have been reduced or eliminated, IHS has cut its 2013 revenue forecast for the global solar photovoltaic (PV) inverter market. The market research firm expects revenues for PV inverters to fall by nine percent in 2013, despite unit shipments increasing by seven percent this year.
Inverters are used to convert direct current (DC) electricity from solar panels into alternating current (AC). Revenue for these components is projected to fall to $6.4 billion, down from $7.1 billion in 2012. The previous IHS forecast issued in July predicted a five percent decline in revenue in 2013.
Average inverter prices will decrease to $0.18 per watt in 2013, down from $0.22 per watt in 2012, according to the latest IHS PV Inverter Market Tracker report. IHS also noted that all players in the supply chain, including inverter suppliers, are under increasing pressure to cut prices as total PV system prices continue to fall.
"During the past few years, solar module makers have endured much more price pressure than the inverter suppliers have," said Cormac Gilligan, senior PV market analyst at IHS, in a statement. "However, module prices now have reached an inflection point and have begun to rise. This is having major ramifications for inverter suppliers, with price pressure having shifted to their segment of the business."
Inverter makers are being forced to absorb some of the price pressure that module suppliers can no longer sustain, said IHS. Another contributing factor is a highly competitive market thanks in part to reduced or eliminated government subsidies in many countries, which means inverter suppliers have had to cut costs and reduce prices to remain competitive. For example, IHS projects the combined inverter shipments to Germany and Italy will fall by more than half in 2013 from 11.5 gigawatts in 2012 to 5.7 GW in 2013.
Another issue is the number of Chinese suppliers targeting the low-power three-phase inverter (up to 35 kilowatts (KW) in size) market, reported IHS. The price of these inverters is expected to fall by 20 percent to $0.14 per watt in the commercial and utility-scale markets in key European markets.
Although pricing is higher in the U.S., Gilligan said "it is likely that the presence of SMA and Power-One will contribute to American prices decreasing to European levels." Both SMA and Power-One have released inverters in this power range and have earned certifications from Underwriters Laboratories, he said.
In the utility-scale market, installations are expected to account for one-third of global demand in 2013 compared to 29 percent in 2012, while global prices for large central inverters used in this market is projected to decrease by 16 percent to $0.12 per watt. However, prices could be as low as $0.06 per watt in some Asia countries, including China, India, and Thailand, according to Gilligan.
One factor causing the rapid price decline of large central inverters is "an increasing number of projects are being awarded through bids and tenders, rather than via fixed feed-in-tariffs, particularly in emerging markets," said IHS.
"Tender and bid mechanisms place a stronger emphasis on upfront inverter prices, which are being lowered in order to win large PV projects, particularly in today’s highly competitive market environment," Gilligan stated.
"In tandem with the very low prices for central inverters in Asia and smaller emerging markets, prices have decreased faster than predicted in European utility-scale projects as subsidies have been reduced and competition has increased. Even markets that attract relatively higher prices, such as the United States, are forecast to experience intense price pressure as new suppliers, mainly from Europe, enter the market," he further stated.