The battle of the solar microinverters is heating up, and here’s one potential trans-Atlantic matchup.
On one side you’ve got U.S.-based Enphase, which has shipped 1 million microinverters at home and is planning an IPO. On Monday the Petaluma, Calif.-based startup announced that it’s invading Europe via France, Belgium and the Netherlands, where its devices have passed Continental standards and are ready to be installed.
On the other side you’ve got Enecsys, a British startup with about one-hundredth the number of microinverters deployed as Enphase (roughly 15,000), though it claims a big potential advantage in Germany (more on that later). On Tuesday the startup announced a partnership that allows it to sell in Canada’s Ontario province’s lucrative solar market, its first big landing on North American shores.
It’s the first salvo in a trans-Atlantic squabble that’s sure to bring in other combatants. Main line armies fielded by Germany’s SMA and Power-One’s promised microinverter models will duke it out with rebel armies Direct Grid, SolarEdge, Tigo, eIQ, etc., which are wielding microinverters, DC optimizers and other weapons.
In this case, however, it’s not technical or pricing differences but regulatory compliance acumen that have delivered Enphase and Enecsys their most recent victories. These regulatory victories will serve as an increasingly important distinction between competitors striving for success on the solar battlefields of North America and Europe.
Take Enecsys’ beachhead in Ontario. The province has a lucrative solar feed-in tariff program, but it requires solar systems built with parts and labor from within the province -- 40 percent today, but 60 percent starting in 2012. Cambridge, U.K.-based Enecsys can’t meet that requirement.
But SMTC, the global semiconductor manufacturing giant, has a plant in Markham, Ontario, so Enecsys teamed up with them to assemble the final products up to spec with Ontario’s “domestic content” rule, said Louis Lalonde, Enecsys’ VP of worldwide marketing and product management. Base plate components will be built in Poland by Jabil at first, and later by another contract manufacturer in China, he said.
Mixing and matching the global manufacturing economy with onshore manufacturing requirements may become increasingly important as time goes on. U.S. green stimulus policy encourages these requirements, and China’s (allegedly) got de facto rules forcing them on foreign competitors. If the solar trade war between the two countries gets any worse, we might see a local sourcing arms race underway -- who knows?
The North American-European conflicts, on the other hand, are largely around slightly different standards that pertain to each continent, and making sure products built for one market match the rules in another.
In the case of Enphase, its beachhead in Europe was reconnoitered months ago, when it won regulatory approval to deploy systems in France, Italy, Belgium, Luxembourg and the Netherlands under so-called VDE specifications, which are roughly equivalent to the United States' National Electric Code (NEC). For the most part, these regulations hold across the continent.
But Germany presents an interesting twist, according to Enecsys’ Lalonde. That’s because the solar-saturated country is instituting new rules come Jan. 1, 2012 that will require new inverters to come with several key grid-balancing capabilities built in, he said.
Simply put, the new rules will require all inverters introduced to the market to come with beefed-up power quality, reactive power control and power phase balancing capabilities (it’s all in the new VDE AR-N 4105 rules for generators connected to low-voltage grids, for those interested). The main point is to make sure lots of rooftop solar panels don’t unbalance the grid, a problem that solar-rich German cities may be the first, but certainly won't be the last, to encounter.
Enecsys’ products are fully compliant with VDE AR-N 4105, Lalonde said. That won’t give the company a lock on the market -- he’s guessing that SMA, Fronius and other major German inverter makers will have big string inverters that are compliant with the new standard as well. But they might not have microinverters ready for it, he suggested -- and the same may go for Enphase.
“Enphase set the table [in North America], and they’ve done a good job,” Lalonde said. “We’ve set the table in Europe. We’re competitors in both areas. But there are only three to five countries in Europe that they’re in right now, and I know Germany is not one.”
Whether this technical advantage yields market advantage remains to be seen, of course. Microinverters, DC optimizers and other such PV distributed optimization technologies still represented only about 2 percent of the solar inverter market as of 2010, according to GTM Research. In other words, the microinverter battle is a small part of the war, and has yet to prove it has staying power.
It will be interesting to see how both companies do in their transnational forays. Enphase, which had raised about $167 million at the start of 2011, is raising an additional $51.5 million in new equity (on top of planning its IPO) on the promise that its remarkable sales growth will continue at current levels. But it may struggle to keep margins intact while rolling out new products every year to keep sales going.
Still, with its microinverters installed on about 30,000 projects, mainly in North America, it’s certainly the major player in the market. Enecsys is a relative newcomer, by contrast, with $41 million raised in a Series B round in May, and $10 million in 2009. As for market share, Enecsys’ Lalonde wouldn’t say how many microinverters the company has built or has under contract, though he did say that about 15,000 of them had been installed across 15 countries, 13 of them in Europe.
The companies also differ in how they’re linking their smart inverters to the grid. Enecsys is going with ZigBee wireless to network its inverters, while Enphase has a proprietary powerline carrier technology that links its inverters, though it's bridging that communications to systems from partners like Silver Spring Networks.