Enphase Energy's Latest Victories In The Solar Electronics War

| About: Enphase Energy (ENPH)

Summary

Through social media and product awareness, both customers and installers are becoming aware of the simplicity of microinverters verses the older central string inverter solar PV technology.

Cheaper solar panels and solar electronics are making smaller solar PV system sales profitable, something microinverters allow and central string inverters do not allow.

Enphase Energy is lowest cost-of-entry, simplicity, fault-tolerance, modularity, safety and intelligence, and sales increases around the world are testimony to these qualities.

As more and more installers realize the simplicity and ease of installation of an Enphase Energy (NASDAQ:ENPH), solar PV-based microinverter system, more and more systems are coming online all over the world proving Enphase Energy's superiority with their 100% fault-tolerant system - a safe system which generates AC electricity off of the customer's roof and not high-voltage DC. With over 1,000 installers in Australia and New Zealand alone and social media, Enphase Energy's microinverter technology and its superiority over the older central string inverter technology is starting to become known.

The beauty of a micro inverter-based solar system is that it can be designed in segments, meaning a homeowner can buy what their wallet can afford - for example, the material cost for just a 4,200-watt system is under $5,000 now. Enphase's lowest cost-of-entry mantra is important to understand, and it is helping them win the solar PV storage battle currently taking place in Australia and New Zealand right now! Why must a customer be saddled with a huge up-front cost for a solar PV system? Why can't the customer buy what they can afford now, and have the luxury of being able to add more later, at a lower cost and getting even better technology for the price?

With the old central string inverter - power optimizer solar system technology, the installers want you to buy a huge solar system up-front, basically a 1-time sale, like buying a house. They say that you must do it this way because the central string inverter must be sized to all of the solar panels, and it is the most expensive device in the purchase. Why must it be that way? With the price of solar panels and the inverter electronics getting cheaper and cheaper, small solar system sales actually make sense - there is margin there for the local installers. Microinverters make the small solar sale possible, something that is impossible or not economically feasible with a central string inverter-based solar system.

Some companies like Fannie Mae have understood the negativity of the big solar system and its high cost and have provided a way of moving that cost into the whole home purchase price - it is a good idea, and a single mortgage bill is something the customer can deal with - rather than deal with a SolarCity (NASDAQ:SCTY). The once-in-a-lifetime purchase now including the solar system cost should equate to more solar systems being sold. Still, other companies are offering homeowners even a better option for owning solar like Spruce. No longer is it just SolarCity, Vivint (NYSE:VSLR), Sunrun (NASDAQ:RUN) and other big solar installation outfits in the solar installation picture. It is starting to get more competitive allowing more players, and that is good for solar - more product will sell, and companies like Enphase Energy will benefit.

For the salesperson, the most important thing is getting the sale. For the customer, the most important thing is to start saving money right away to get their ROI. Chipping away at their utility bill is the smartest move for a customer to take when they cannot afford a huge solar PV system. With microinverters, Enphase Energy makes purchasing a solar PV system affordable, giving it the lowest cost-of-entry mantra. If I could buy 1/3rd of a solar PV system this year, start saving immediately, then another 1/3rd, better system in 15 months and start saving even more, and then complete the system in another 24 months, doesn't that make more sense economically speaking? Plus, I would be guaranteed better technology for systems #2 and #3. Since customers just want a solar system, and to at least start saving money, it is really up to the installers to sell the customer the correct solar system, something they recommend. In a tight economy, Enphase has the lowest common denominator, the lowest cost-of-entry, and with social media, more installers, and more customers are starting to realize that. Enphase's micro inverters offer the lowest cost-of-entry because Enphase sells simplicity, all-in-one designs, and true vision; they are the Apple of the solar PV electronics arena.

The competition will state that Enphase is more expensive than a central string inverter - power optimizer solar system, and if you buy the 1-time, complete solar system up front, Enphase is more expensive. But, in reality, if you look at the total cost of ownership, Enphase is not that much more expensive, and may be even cheaper. If you look at the difference in warranties and warranty extensions, a real gimmick, look at the down time cost which is truly an unknown in the future when the central string inverter does fail, and you look at the costs of a central string inverter out-of-warranty cost, then is Enphase's microinverter-based system really more expensive? If the total cost of ownership is studied, an Enphase solar PV system is the cheaper option.

If a customer installs a small solar system, say 4,200 watts, a string of 16 panels, with the ability to install a second or third solar string of panels at a later date, Enphase is definitely the cheaper option, plus it is the better, more technologically superior option offering 10% fault-tolerance to the customer. I have 73 micro inverters in 6 separate solar strings on my home, and I have yet to have a single microinverter failure since installation started in 2013. I no longer fear my utility bill! Solar is the way, and the idea of solar being just for the wealthy is just not true anymore.

With a central string inverter-based solar system, you have to go big, and it is 1-time sell. Sure, installers want the big, 1-time sale, but what about looking at the solar sale in a different way, in a more economical approach, one that parallels the current global depression we are in. Why not sell the solar system in, say, 2 or 3 separate segments, a more financially palatable purchase for the cash-strapped residential homeowner? A central inverter must be sized to the amount of solar panels your system will have, so it is really a 1-time purchase because the central string inverter is the most expensive part of the system, and it makes the system non-fault-tolerant. When, not if, your central string inverter fails, your entire solar system goes down - for how long? Who knows. Remember, the I'm a Mac, I'm a PC wars Apple had years ago with their Windows nemesis Microsoft ? Well, the Enphase microinverter verses the rest of the competition's central string inverter/power optimizer technology is analogous to that, and with statistics I am seeing, the Apple of the solar PV electronics or MLPE (Module Layer Power Electronics) arena, is starting to win the war by winning back marketshare with its superior technology.

With micro inverters you really get a superior system. If a micro inverter fails, you can get it fixed in stride for the other 98% of your system will still be up and running. So, you don't need to be frantic searching for a solar technician. With a single mouse-click on my portable's desktop reveals the status of every solar panel in my system, what each panel generated for electricity for the day, and a grand total. I generate about 100,000 watts daily, and no longer fear the monthly utility bill! Solar is the way, and I am a big fan of fault-tolerance. I don't like dealing with crises; problems are OK, but not crises. A central string inverter-based solar system comes with a future crisis, a hidden cost; an Enphase microinverter-based solution does not, so what is the cost of that crisis? Believe me, the older I get, the less I want to do, so dealing with my entire solar system being down due to a central string inverter failure is a huge cost for me!

This past July, Enphase's first month into their 3rd quarter, the amount of Enphase systems which came online is impressive and should be broadcast loudly in the solar PV community. Just some of the Enphase Energy solar systems which came online from June 30, 2016 to August 8, 2016 are -

- 550 systems in Eastern Australia, a 5.6% increase,

- 132 systems in New Zealand, a 6.8% increase,

- 113 systems in Southeastern Australia, an almost 8.5% increase,

- 22 systems in the Indian region of the world, an almost a 25% increase,

- 4,300 systems in the western area of the USA, an over 3% increase,

- 153 systems in the Mexico-Central American regions, an almost 15% increase,

- 175 systems in the mid-USA region, an almost 22% increase,

- 682 systems in the Southeast USA region, an almost 5% increase,

- 2,454 systems in the Northeast USA region, an almost 3.1% increase,

- 472 systems in the UK, an almost 2% increase,

- 475 systems in Europe, an almost 5% increase,

- 402 systems in Hawaii, an almost 1% increase,

- 35 systems in Italy, an almost 4% increase.

These statistics are only about a month's worth of recent data! Some numbers may seem small, but they represent entirely new markets for Enphase like the Indian region, or European regions. These numbers mean that microinverter knowledge is spreading, and more and more residential rooftops are opting for them because of their reliability, simplicity, ease-of-installation, safety, modularity, and intelligence. These numbers were compiled from Enphase's social community web page; they do not tell us how many microinverters were sold with each system, or their model, nor do they tell us in the case of the Australian-New Zealand region if any potential AC Battery systems were part of the deal. Furthermore, such as in Hawaii where Enphase already has a huge market, the numbers don't tell us if existing solar systems were added onto or retrofitted. Enphase's microinverter and storage solution offer customers the ability to expand their existing systems, and that is a powerful option for a solar PV system to have.

I am long on Enphase stock. In the end, every solar panel will have its own micro inverter, built-in most likely, considering how cheap solar panels are becoming. Will Enphase be the winner in this evolution of solar technology? If the solar energy and storage markets are "infinite" according to Enphase CEO Paul Nahi, isn't a slice of that market just as good? With about 500,000 Enlightened customers, where Enphase has that "halo-effect" of getting brand loyalty and repeat customer purchases, 500,000 customers can't be wrong, can they?

Disclosure: I am/we are long "ENPH".

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.