Enphase Energy: New Products, New Markets, Increased Marketshare, Lower Product Costs

| About: Enphase Energy (ENPH)

Summary

Enphase's new technology could be a game changer like the Apple iPhone was.

Enphase's 6th-generation microinverter promises a lower cost while still maintaining superiority to the older central string inverter - power optimizer solution.

World leaders are pushing renewable energy — The market is huge!

Enphase now has a new invention, a new home energy solution to sell.

Enphase's Storage Solution gives the company a whole new revenue stream and complements their existing product portfolio.

Well, Cupertino is not that far from Petaluma, so maybe there is some synergy there! It hasn't even been a month since my last article on Enphase Energy (NASDAQ:ENPH), and the simplicity and ease of installation of Enphase's microinverter-based solar PV systems is going viral. Like the first iPhones that hit the streets almost a decade ago, the residential solar PV system which offers almost 100% guaranteed up-time for the system's lifetime is selling globally - and now Enphase has a simplistic, new storage system to accompany it - a whole new market, and the best part is that what Enphase Energy has done for residential solar PV systems by empowering customers with the ability to easily manage and monitor their own solar systems, they are now doing for battery storage, and selling a complete package - the Enphase Home Energy Management System.

Do new and existing solar PV customers need to think about storage with their solar photovoltaic solution? Yes, they should. Are Net Metering and FiTs contracts going to last forever? Most likely not, and in places like Australia, New Zealand, and Hawaii, to name a few, existing and new solar customers are turning to storage to address the policy changes so that they can store the energy their solar systems create instead of supplying the utility grid for free. There is an old saying: victory favors the prepared, and Enphase's long-range vision has prepared them for these changes in policy, and they are ready to take the advantage - Enphase Energy chose "Energy" over "Solar" in their company name because their long-range vision always has been to be a home energy system provider - the new Enphase Home Energy Management System is their masterpiece. The beauty of Enphase's AC Battery storage unit compared to most of the competitors is that their's doesn't push the "mortgage the farm" slogan upon you to buy their solution - instead, they work with your budget allowing you to buy some storage now, then more later on when your budget permits. Because of their storage product's modularity, they can give the customer the lowest cost-of-entry into this new market. Their new storage solution can be retrofitted into any existing solar PV solution out there, and that gives them a much bigger audience. Why should a customer have to make a 1-time, huge investment in a single vendor's storage technology when this safer purchasing option is available? The same way Enphase sells their microinverters is the way they are proceeding with their storage solution. Each of their AC Battery storage units includes its own microinverter - giving each AC Battery complete autonomy from the others - a complete, extremely elegant, lightweight, safe and certified,modular, scalable, all-in-one unit.

Older battery storage solutions required complete cooperation between each battery device, and if any one battery had an issue, it compromised the whole battery farm, that is, all the interconnected batteries. With Enphase's AC Battery storage solution, there is 100% fault tolerance so that even if an AC Battery unit fails, the other AC Battery units will continue working independent of the failed device, giving the customer true reliability. This fault-tolerance is a powerful attribute, and this is Enphase.

Not only do most of the competition's products not have Enphase's product modularity, they do not have their storage device designed with its own, internal state-of-the-art microinverter. Most storage solutions require multiple devices to install, multiple points of failure, multiple vendors to deal with - with Enphase, it's a single vendor, single product SKU - Enphase is simplicity. Remember when you had to buy the PC, buy the keyboard, buy the mouse, buy the monitor, et cetera? Now you have your single iPad, or MacBook Pro or single whatever. SolartEdge's StorEdge, the Tesla battery, the AC transformer device - they all come from different vendors; you need to purchase all of them in order to set up your home's storage solution; if any of them fail, then your whole storage solution is down, and for who knows for how long. The AC Battery is a single, modular, independent device which when configured with multiple AC Batteries gives the customer 100% fault tolerance with the lowest cost-of-entry. Using the computing analogy from above, which storage product do you think people will desire more? As we embrace the Internet of Things, it's easy to see why Enphase is growing market share, and globally, too. People want "cool" products, and people want it to be simple to install and maintain.

There are over half a million Enphase customers out there, with more coming onboard daily. An Enphase problem is a problem, not a crisis. A SolarEdge (NASDAQ:SEDG), SMA (OTCPK:SMTGF), ABB (NYSE:ABB) or Fronius central string inverter failure is a crisis - why? Because when you realize your central string inverter is no longer working for your solar PV system, you really don't know how long your entire solar system will be down for, and you are at the mercy of the installer, the string inverter vendor, and your friendly utility company! As a solar customer and installer, I don't want a crisis - a single failed microinverter problem, sure, I will accept that; for example, if I were to experience a microinverter failure today, I could take care of it some time next week after Labor Day during normal business hours, knowing from the monitoring of my home's solar system using my browser, that the other 72 microinverters of my system were still running fine - that is the power of microinverters over a single central string inverter. Since installation of my solar system in 2013, I have yet to experience a problem, and I have 73 Enphase microinverters.

Enphase is proving their new storage system is cutting-edge in the Australia - New Zealand market right now. An article in the Australian Financial Review on August 31, claims Enphase is more than doubling their initial sales projections with 70,000 battery systems projected for the year alone. A comparison of the AC Battery product to competing products gives excellent marks to Enphase's AC Battery. Enphase's success in the storage battleground regions of Australia and New Zealand, mean only that they will also do well in even bigger markets like Hawaii, Europe, and the USA. A new market means new revenue streams, new customers - new customers do not have to be existing Enphase customers; they could be a SolarEdge convert or some other central string inverter-based solar system.

Enphase's co-founder, Raghu Belur, stated that dumb box solar systems with no Internet intelligence would eventually be replaced by decentralized, smart electronics like Enphase's. Much like the mainframe computers gave way to decentralized servers and PCs, so, too, will central string inverter-based residential solar PV systems be superseded by decentralized, microinverter-based residential solar PV solutions. It is only a matter of time, and the superior technology is gaining marketshare; more and more installers are realizing the ease of installation, simplicity and reliability of an Enphase microinverter-based solar PV solution. They're super quick to install, easy to manage, and they are 100% fault-tolerant offering the customer continuous up-time.

Has the solar market been beat up lately? Yes, it has. The doom and gloom of SunEdison has appeared to give the solar industry a black eye, but Enphase Energy is in a different niche. The ITC expiration fears were a potential nail in the coffin for the solar industry, but thanks to our Congress, that fear evaporated overnight this past year. And this just wasn't some blind act by Congress, no, it was a realization by the politicians that solar is the fastest growing industry in the country, and that equates to future tax revenue. Solar is coming on strong because it is getting affordable - it is not just for the wealthy any longer. The GTM article on September 1, titled "Global Solar Demand Monitor: Q3 2016", states that this year is set to be another record breaker for solar globally, with the market set to grow by 43%. Remember when Apple Macintoshes cost $3,000 to $4,000, and only a select few could afford them? Now, everyone has some form of one. The same progression is happening with solar PV and storage today, and Enphase is in the catbird seat - they have their own solar home energy management system ready to go.

If climate change is real, if Big Coal is being shuttered, if "peak oil" has been reached, if Europe and other countries are coming to the realization that they don't want to be oil importers - then we are on the verge of a mass renewable energy transformation minimizing the need for hydrocarbons (oil, gas, coal) as much as humanly possible. In a bestseller entitled, "The True Story of the Bilderberg Group", the author, Daniel Estulin, writes that at secretive annual meetings, heads of state, leaders of corporations, U.S. Presidents and other leaders are the real decision makers, and these leaders have decided that renewable energy is the way to go, and renewable energy can free us from a potential catastrophe when hydrocarbons run out, like oil, for they are not infinite resources. Whether or not you believe in that happening, whether or not you believe in climate change, things are abuzz with renewables - you could say Enphase Energy is at the right place and the right time, kind of like Apple Computer was with the iPhone.

At these secretive, annual Bilderberg meetings, one of the prevailing subjects of discussion continues to be "energy". According to Jan Lundberg, an oil energy expert, the USA lost between 20% and 25% of its energy supply during Hurricane Katrina in 2005 - yet the Saudis did not increase production. Noting that, the question was raised: has "peak oil" been reached, and is the world on par for diminishing returns on oil? Were the Saudis pumping as much as they could without being able to increase production due to physical limitations? In 2003, then British Foreign Secretary, Jack Straw. stated "the depletion of gas reserves in the North Sea and the Irish Sea…it is expected that Britain will have to import 75 percent of its gas by 2015". Within 10-years, it is expected that Europe will have to import "more than 92% of its oil and 81% of its gas". In 2005, French Prime Minister and Bilderberg member, Dominique de Villepin, was quoted by Reuters saying "We have entered the post-oil era. I want to draw all the consequences of this and give real impulse to energy savings and to the use of renewable energies". Former CIA director, James Woolsey in an interview with the Washington Post in June, 2000, stated the energy crisis "should have a severe impact, global in scope, and be difficult to solve". In a January-February 1999 article titled "The New Petroleum" for the journal Foreign Affairs, he stated "the underlying goal of the U.N. force in Gulf War I, which included 500,000 American troops, was to ensure continued and unfettered access to petroleum". If world leaders at these secretive Bilderberg Group meetings constantly focus on the issue of energy, and they are calling for massive transition to renewables on a global scale, then clearly a gold nugget like Enphase Energy has some serious potential to play a part in the big picture, for Enphase's concept of true fault-tolerance, modularity, and reliability is the superior solution for solar systems on the residential rooftops - it is the best system for the customer.

My monthly utility bill was outrageous before I started adding solar to my home in 2013. I found that 60% of the energy my utility purchased was from Big Coal. If climate change is real, then is Big Coal going to flourish, or will it slowly be retired? My utility company's CEO has posted letters in the company's monthly periodical warning customers what Big Coal's demise truly means in terms of supply and demand and billing. If he thinks coal is being retired, then surely renewable energy is something to embrace and pursue. As one of the most intelligent species on the planet, we must try to address global problems and save our planet, right? Overpopulation is a problem, right? In 1812, there were 1 billion people. In 1912, there were 1.5 billion people. Now, in 2016, there are 7.5 billion people on our planet Earth. OK, so humans are a problem, but feeding the livestock the humans consume is the real crux - there is just not enough Earth available to grow all the feed needed for those animals. Ever work on a farm with a lot of pigs or cattle? What's that one thing that is everywhere, that one smell? Methane is worse than carbon dioxide, ten times over, in terms of causing the "greenhouse effect", but changing people's eating habits, affecting even bigger industries than coal, is going to be an even greater monumental task to address. Is everyone ready to be a herbivore once again? So, solar energy is at least a more attainable goal by humans to try to lessen their carbon footprint on the Earth. With Elon Musk's rocket exploding on 9/1 on the launch pad in Cape Canaveral, destroying Facebook's satellite and their attempt at giving Africans wireless, we had better save this planet first before we consider Mars. I am a fan of Elon Musk, but it is clear that colonizing the red planet is still a ways off. And in reality, how many of us could pull a Matt Damon and be a Martian, it just does not look that desirable a life? This is the planet to save, this is the only planet we really have. So, solar is here to stay regardless of the political rhetoric you might hear from politicians who appear to not favor renewable energy - these politicians take orders or advice from the Bilderberg members, more or less. In reading Bilderberg and CFR member, Zbigniew Brezinski's 1997 book, "The Grand Chessboard", it shows the true blueprint for America's energy policy aka world energy policy, coming straight from the minds of the true leaders - the same leaders who are advisers to the POTUS and to other leaders around the world. Renewable energy is here to stay, and the transformation is just beginning.

Enphase is preparing to debut their 6th-generation microinverter at Solar Power International 2016 in Las Vegas September 12 - 15. This is a big event for Enphase, for it follows the Analyst Day projections made last November of major cost reductions in their microinverter product. Now, juxtapose this with Enphase's global market growth and their new market revenue stream, and you have a serious revolution underway, just like their web site states. The numbers below represent about 3-weeks of data (8/8 through 8/31); these statistics show growth not only in the United States, but all over the world. The beauty of social media is that people are learning better ways to do things more quickly than ever before. In such a brave, new world, Enphase's product superiority is becoming well-known. Maybe in the pre-Internet days, monopolies could trounce a superior product to protect their inferior one, but with Facebook, Twitter, YouTube and so on, it is hard to keep a superior product down - information is flowing too freely these days in multiple directions and multiple channels, and that can be a good thing, especially for Enphase which can take advantage of the marketing muscle of the global media outlets. Microinverters are winning the MLPE (Module Level Power Electronics) war, and the venerable central string inverter, even with its band-aid-like power optimizers, must fade into history, as enlightened customers choose reliability and fault-tolerance for their home energy system. Customers will not want a home energy solution which can be completely disabled due to a single component failure. Enphase microinverters are the future of solar on the residential rooftops.

Public Enphase Systems Coming Online from 8/8 through 8/31

  • Western USA - over 3,036 systems - almost 3% growth
  • Mid-USA - almost 2% growth
  • Eastern-USA - over 1,615 systems!! - solid 3% growth
  • Southeastern USA - almost 3% growth
  • Mexico & Central America - almost 8% growth
  • South America - almost 2% growth
  • United Kingdom - 1% growth
  • Europe - almost 3% growth
  • India - Sri Lanka regions - almost 10% growth
  • Hawaii - 1% growth
  • Northern Australia - almost 8% growth
  • Southwestern Australia - almost 4% growth
  • Eastern Australia - solid 3% growth
  • New Zealand - almost 5% growth

And this is just a little more than 3 weeks of data, and it does not include all Enphase systems or products either. Enphase is on fire, and they are not burning up, their rocket ship is taking off.

The upcoming November 1st conference call should be positive; if anything, it should show a trend towards profitability. The goal is still an iPhone-sized microinverter, and Enphase is on track to reach that goal. The upcoming conference call will demonstrate marketshare gains with new market revenue streams. The threat of the older, inferior solar technology gaining more marketshare due to cheap pricing will be shown to be subsiding. Yes, central string inverters were a great invention by SMA (OTCPK:SMTGF) in 1981, and the 2010 power optimizer gave the older technology some more life, but the fact remains that the microinverter with its 100% fault-tolerant topology is the superior technology. The lower price wins, regardless of superiority, just as long as it can do the job - the very existence and profitability of SolarEdge has proven that, but it is only a won battle not the war. When the superior system, the Enphase microinverter-based one, is at or near the same cost of the inferior one, the central string inverter with power optimizers, then customers will choose the better system. Enphase Energy's debut of their 6th-generation microinverter this month in Las Vegas is going to bring that reality closer to fruition. Furthermore, if you consider the 2 competing solutions, with the microinverter-based system, there is one less device to purchase and install as compared to the central string inverter - power optimizers system.

Affordability and cost are of utmost importance to the customer, and cost must be measured against ROI to verify the purchase's reasonability. A presidential hopeful recently reiterated some real old solar news stating solar had a 19-year ROI. Well, factual proof is everything, and I am sure the hopeful's advisers will enlighten him sooner or later. if you are an installer, a string of 16 Talesun 260-Watt 16% efficient polycrystalline panels at $0.53/Watt with some $85 Enphase M215 micronverters is an incredible deal. Put 5 solar strings of these panels on a roof, and you have a 20,800-Watt system for under $20,000 material cost. Incredible, and 30% of it is deductible. Just one 16-panel string with Enphase microinverters is just under $4,000 cost giving you 4,120-Watts, at about 5 hours of daily solar insolation, for example, your ROI is under 5-years not including labor; 5 is a lot less than 19, right? I am sure people will challenge my numbers, but all I am trying to convey is that solar is getting cheap, affordable, and that means it is not for the wealthy any longer, and a huge market is opening up. If we are going to save the planet, then we are going to want as many rooves as possible to take part in this Green Energy revolution. While you are having a peaceful Labor Day, remember that the solar industry has had our nation's fastest growth, employing young American "laborers" - jobs and energy freedom can make the world great again, and our leaders have made the decision to move in that direction. As we approach the country's most important election, besides making America great again, let's try to make our planet great again by reducing our carbon footprint globally. As Thomas Edison once said, "I'd put my money on solar energy. I hope we don't have to wait till oil and coal run out before we tackle that."

I am long on Enphase. I install solar for friends and neighbors. I have attended the Solar Energy Institute in Paonia, Colorado. I have assisted Grid Alternatives in Colorado installing Enphase microinverter-based solar systems. I have consulted with a local Florida solar company which prefers Enphase, and have seen first-hand what failed central inverters can cause in terms of both power loss, down time and customer frustration. Since 2013, I have designed and added onto my own home's solar system which now consists of 6 separate solar panel strings with 73 Enphase microinverters producing upwards of almost 100,000-Watt-hours on a sunny day in the Sunshine State. My utility bill is history, and I am fortunate enough to enjoy Net Metering with the utility company. I generate solar energy credits which are reconciled at the end of the utility's fiscal year. In terms of ROI alone, my Enphase-based solar system will be paid for in less than 6 years, and it is money well spent - money which is clearly earning more than 0.01% interest in a bank account!

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.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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