My three questions asking solar industry thought leaders

Picture taken by Susanna Huang at Dublin, Ohio, USA

I have three questions in my mind facing this uncharted territory at this uncertain time in the U.S. solar business.

My view might be limited and biased. That’s why I want to reach out to my solar friends and listen to the options from our solar industry thought leaders who I have the privilege to know and learn from. I really appreciate the responses I received so quickly.

If you have a crystal ball, how do you foresee that the Solar industry will change in the next three to five years?

There are a few interesting trends that have emerged. Modules for the past decade have been largely identical — the differences were only 72-cell or 60-cell, mono or multi. Now there seems to be a race to differentiate technology and this push to differentiate is impacting system design. As modules grow in size and their output specifications change, trackers and eBOS must start to provide customizable options. The one size fits all approach of the past decade will no longer work. This trend will bear heavily on the DC side of the system, up from the combiner boxes. It will probably affect inverters less significantly, but RSD may be impacted. Financing is likely be impacted. I think this chaos will last three to five years before settling down. Manufacturing scale is also becoming extremely large, so it will be increasingly difficult for the smaller players to complete unless they deliver a differentiated product. The market share of the top 10 will likely grow.

I hope the industry continues to mature as a community so that it can successfully take on the fossil fuel lobbies which have a great deal of influence over national and many state’s policies. A June 4 GTM article titled “Solar, Wind, Storage Link Arms in Push for “Majority Renewables” by 2030” captures one key element of what needs to happen as part of that maturation process. Solar needs to consider itself a key force in a collaboration of all the renewable technologies: combined the industry accounts for 10% of generation today (add hydro and it is 17%) with a forecast of 20% (29% with hydro) by 2030. Working as a “renewables collaborative” to actively participate in electing sympathetic legislators, executives, congress, etc., and lobbying for policies to at least level the playing field with fossil fuels is critical to the long-term success and climate impact of both the solar community and the wider renewables community.

Unless the ITC is extended — there will be a massive safe harbor buy in 2021. The presindential election will have a significant impact — in case Trump gets reelected — I expect a further escalation of trade conflicts with China and other countries resulting in the need to work more with domestic companies. A Trump administration will also try to undercut net metering laws through FERC regulation. If Biden gets elected there will be numerous efforts to mend international relations. For inverters the concern about cyber security will persist regardless of administration — i.e. all suppliers will need to address this.

What are the lessons we could learn from the past failures of many solar inverter businesses in the United States?

Inverter and module producers that have tried to enter the U.S. market without the appropriate budget and patience have almost universally exited after one year of poor sales. Ginlong (Solis inverters) is already beyond this threshold. In the U.S. specifically, successful suppliers must dedicate resources to building a reputation for product quality and financial stability. This reputation can be achieved through investments in independent testing (which is offered by PVEL) and bankability reports. It takes time to achieve market acceptance in the U.S., but it is a competitive advantage in the long term. For inverter vendors specifically, the number one complaint I hear from portfolio operators is lack of support. Sooner or later, all inverter suppliers will have issues in the field. It really annoys system owners when there is nobody to answer the customer support phone or it takes a long time to get a response. I’ve also heard that when the customer support team is responsive and dedicates clear and quick effort to resolving issues, it is very appreciated. Several developers have told me “I’ll never buy from Brand X again” about several inverter suppliers exclusively because of their absence or push back during field issues.

I haven’t really studied any of the failures in the US in depth. But I’d have to assume that failures are caused by the same factors that cause businesses in any field to fail:

1. Undercapitalization and under estimating competition. The Solar industry in particular is a tough industry with lots of challenges to navigate and a company that can’t adequately invest in product, marketing, sales and industry engagement (meaning participating in legislative, regulatory, standardization and industry building activities) will be continually blind-sided by policy and competition.
2. Product and product quality including setting and exceeding customer expectations (while making a profit) is a critical factor. We put solar on our rooftop in 2009 after SolarCity came along with their leasing options. They provided great value and met our expectations at a price that was unbelievable (and which almost led to their demise). All the other options were very complex and needed way more of my time and capital than I wanted to invest.
3. For Solar in particular, the regulatory and competitive environments are brutal and companies that can’t influence and take advantage of the regulatory challenges while beating the competition are the winners. Just watch SolarEdge and EnPhase operate in both spheres.
4. Industry leadership rather than followership. Companies that bring quality products to market profitably and set the standard (for quality, value as opposed to price, marketing, industry leadership) for everyone else tend to survive if they are well capitalized and can execute well.
5. Good business management. Success is not about the best product, the best sales, the deepest pockets, etc. It is about managing the combination of assets a company has to deliver a competitive product (technology, pricing, value, service, etc) profitably.

String inverter companies lost market share because they had no technical solution to the changes in NEC — no string RSD and no Module RSD despite multi year warnings. => stay very close to NEC developments, try to influence this Now the next risk is not to be integrated with multiple storage / battery suppliers (Tesla, LG Chem, BYD, etc…_ ) as storage becomes a much bigger share of the market Proactively address the cyber security topic, invest in external reviews, invest in lobbying — just providing all the information to show maximum openness.

How would solar inverter business uniquely contribute to the local solar eco-system in United States? What are the thoughts, from your own business perspective?

As systems get more intelligent and complex with energy storage and ancillary grid services, inverters have become the brains of the system. They have the ability to effectively manage complex resources, but there is major risk that will adversely impact the system and interconnected other equipment. In the U.S., Huawei did a good job of promoting string inverter architecture, specifically the ability of a string inverter to do some remote diagnostics like IV curves. With their departure from the market, there is probably an opportunity for other string inverter suppliers take on that role in the market.

I think this is the wrong question Susanna. See 1 above. How can an inverter vendor contribute to the renewables generation industry locally, regionally and nationally? Perhaps thinking of the inverter business not as just a solar business but any renewable inverter based business — with the new IEEE 1547 applying to solar, storage and EVs, the inverters are getting more standardized. We are seeing companies expanding from one domain to another. So contributing to the standards regulations and eco-system(s) development seems most useful.

A good model is SPI which embraces solar, storage, EVs, Hydrogen — i.e., all inverter based renewable power sources.

Countrywide there are STEM classes in High Schools — help them to set up a solar program workshop and create a lot of PR out of those few schools Work with companies like Grid Alternatives for solar on low income housing — and generate a lot of PR out of it => be seen as a good corporate citizen Participate in SEIA — and be politically active and involved — showing up at events and supporting events creates some goodwill.

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