China's photovoltaic inverter market has bright prospects

According to a special report from the Chinese research department of IHS iSuppli, the Chinese PV inverter market will increase nearly threefold in four years, supported by the Chinese government's promotion of clean energy policies and strong potential financial gains to stimulate the investment of manufacturers.

Inverters are a key component for solar power generation. China's inverter shipments will increase from 1.4GW at the end of 2011 to 5.0GW by 2015, with a compound annual growth rate of 31%, as shown in Figure 3. This year's growth is particularly strong, which is a sharp increase of 117% from last year's 657MW. Next year, the market will increase significantly by 85% to 2.6 GW, after which the growth will become more moderate.

The growth of China's inverter market in the next four years will enhance China's position in the global solar inverter industry. Last year, China accounted for only 3% of global PV inverter shipments, while Germany’s share was as high as 42%, Italy 22%, Czechoslovakia 7%, the United States and Japan 6%, and France 4%. But by 2015, China’s share will rise sharply to 13%.

The Chinese government is the main factor driving the growth of China's inverter market. Since 2005, a series of policies promulgated and implemented by the Chinese government have directly promoted the growth of inverter shipments of local companies. This year, the NDRC issued three documents supporting the Chinese solar energy industry, which will benefit the domestic PV inverter industry. However, China's overall PV policy on specific issues remains unclear, such as the cost of grid connection and capital equipment.

Financial considerations are also a major contributing factor to the inverter market. For example, compared with solar cells and battery modules, China's PV inverter industry has little price pressure and only accounts for a small part of the cost of the entire PV system. PV cells account for 64% of the overall cost of the PV system, while inverters only account for 7%. The number of domestic inverter manufacturers is also lower than that of manufacturers of batteries and PV cells. The gross margin of inverters is higher than other components.

Among local inverter manufacturers, Sungrow Power is one of the few manufacturers that has achieved a large market share, accounting for more than 40% of the domestic inverter market, and even surpassed foreign companies such as Emerson of the United States. Sunlight Power is located in Anhui Province in southeastern China, and data from IHS iSuppli Corporation shows that its 2010 operating income was approximately US$8,600.

Other important local PV companies include Shanghai Hangrui Power Technology Co., Ltd., Jiangsu Esso New Energy, Jiangsu Greit New Energy, and Beijing KLNE.

The Chinese shared-use market last year accounted for 54% of the country's total inverter operating revenue, the commercial market accounted for 42%, and the residential sector accounted for 4%. The output of inverters with output power from 10 kW to 499 kW accounts for the majority of the market, followed by inverters with power greater than 500 kW. At the same time, due to higher efficiency and lower cost per watt, manufacturers such as Sun Power are developing inverters with higher output power.

Author Alex Liu is an industry analyst for China Research at IHS.