Solar hardware doesn’t make for the splashiest headline in the energy industry, and inverters may be the most niche among that equipment.
But inverters are a complex and integral part of a solar system: They have hundreds of components, are tasked with interconnecting to the grid and are responsible for modulating a system’s production. How an inverter performs has a significant impact on a solar project’s output and thus its value.
The threat to a project’s bottom line is an especially salient point as more types of investors, like pension funds and insurance companies, jump into solar deals expecting consistent and guaranteed returns.
“Inverters are the No. 1 cause of lost revenue in [a project’s] first half of a decade — by orders of magnitude,” said Jenya Meydbray, CEO at PV Evolution Labs, an independent solar test lab. “Inverters are like the brains of the whole power plant.”
PV Evolution Labs recently released its first-ever inverter scorecard, which analyzed 35 inverter models — including string inverters, power optimizers and microinverters — from 12 manufacturers. The company tested stresses such as operation in high temperature, reactions to arc faults and conversion efficiency.
While PV Evolution Labs lined up top inverter performers including Delta Group, SMA and Fronius (Huawei ranked in the top as well, but those results may be moot for the U.S. market), the findings for poor performers — which PV Evolution Labs does not name due to methodology— are disconcerting.
After temperature stress tests, 21 to 25 percent of tested inverters failed to operate correctly. According to Meydbray, one-third of the tested inverters didn’t turn off in the case of an electrical arc, which is a safety hazard. In one test of a simulated ground fault, an inverter just blew up.
While many inverters didn’t turn on or stopped working altogether after a stress test, others saw significantly reduced performance, which impacts the overall output of a solar system. In one field test, a particularly well-performing inverter had 11.3 percent more energy yield than a poorly performing competitor.
Source: PV Evolution Labs
According to PV Evolution Labs, inverters are more likely to fail than any other solar component.
Source: PV Evolution Labs
An analysis from the lab shows that inverters represent by far the largest source of maintenance tickets for solar systems.
“It’s not just reliability, it’s the performance and it’s the functionality that are also sources of huge pain for operators,” said Meydbray. “The [biggest] single risk is not [whether it's] going to last 10 years versus 15 years, but rather, how...is it going to perform in the first five years? [Inverters] all have at least a 10-year warranty now. But they’re not [all] performing well in the field.”
Performance matters when the solar market is looking at tighter returns and increasing exposure to residual, post-power-purchase agreement value. (Read my reporting on those dynamics and concerns about a finance bubble in the solar industry here.)
In the case of failures, reaping the benefits of inverter warranties can also be cumbersome, according to Meydbray. Though inverter warranties now generally exceed the timeline within which failures are likely to show up, Meydbray said, “Warranties are borderline worthless unless you get into litigation.”
Another recent paper from Borrego Solar suggests inverter warranties have limited utility because they typically don’t include “performance requirements or liquidated damages” for the original equipment manufacturer. Warranties also generally limit repairs and work by third parties, which could invalidate the warranty.
“Owners typically only realize the negative impact of this limited warranty language long after they’ve lost the leverage they have at the time of procurement,” writes Borrego.
In an analysis of its solar plants, Borrego found that inverter failures and associated warranty claims ranked second only to environmental conditions as a cause for underperformance. Those issues accounted for a quarter of all reports of underperformance, which results in direct economic impact for a project.
“In the first five years of solar project operation, inverters are among the top determinants of economic success,” said Joe Song, vice president of project operations at solar developer Sol Systems, as quoted in PVEL’s report. “When an inverter does not perform as expected, it almost always results in underperformance and economic losses.”
Those economic losses could undercut the expected returns baked into project assumptions. Project assumptions aren’t always accurate (as I’ve covered previously in a Squared column), which can be overlooked by financiers who see solar as a low-risk investment.
Understanding the nitty-gritty attributes of inverters may help investors better assess the reliability of a solar project’s financial models.
“Actual field performance of solar projects can differ from estimates, and we’re beginning to learn this as an industry,” said Michelle Davis, a senior solar analyst at Wood Mackenzie Power & Renewables. “Because of a general lack of historical data depth, it makes sense that we’re going to see adjustments in estimates of project pro-formas as the industry matures. And of course, this has implications for project returns. Buyers are incentivized to be careful about aggressive assumptions.”
Meydbray said the most careful buyers “are the ones that have been burned a couple times” by malfunctioning products. He said the independent testing conducted by PV Evolution Labs, and the firm's expansion into inverter testing, can offer clarity for the industry.
“I think that’s exactly the point of [PV Evolution Labs’] existence. The design of these testing programs and the analysis of all the data is pretty...complex, and most banks and investors, and developers even, don’t have in-house expertise on this, which is fine,” said Meydbray. “That’s the whole value proposition we have in the industry. It’s a complicated challenge to qualify vendors, and it’s super-expensive if you were to do it by yourself, to the point where it’s cost-prohibitive.”
With more novice investors looking to engage with solar, many of which don’t possess the technical expertise necessary to accurately analyze a project, testing may provide key insights. A project’s potential risk factors trickle down to even the most technical and overlooked of components, like the inverters.
“[It’s] a good lesson for folks to know as they’re looking to invest in the space,” Davis said of the changing financial and risk landscape in solar. “Not that the space is unreliable; it’s just not risk-free.”
