Last week, I was privileged to attend Solar Power International and Energy Storage International - aka Smart Energy Week. Companies including Canadian Solar (CSIQ), Jinko (JKS), LG (OTC:LGEAF), Panasonic (OTCPK:PCRFF), and SolarEdge (SEDG) spared no expense on displaying their latest products.
The biggest booths had an eerie feel to them that was not apparent until I finished exploring for several hours. The feeling: there is not a whole lot differentiating one company from the next. All the major players seemed to have flashy displays, Keurigs for the morning, and kegs for the (very early) afternoon. Salespeople and PR types formed a perimeter and intercepted anyone interested to make sure they got the party line about how their newest panel was the biggest and that their home energy storage battery had the best LG Chemical could provide. (Pretty much everyone was using the same battery.)
It was surprising to see that some major American contenders didn't even have a 10x10' booth. SolarWorld Americas was on the list, but arriving at their plot revealed signage taking up what should have been sought after real estate. SunPower (SPWR) didn't sign up for a booth and neither did Enphase Energy (ENPH).
Everywhere you looked the pitch echoed over and over: biggest panels, home battery systems, simpler systems.
To be sure, the panels on display by Jinko, LG, Panasonic, and Canadian Solar were big. Real big. What these companies have done is increase the power a single panel can generate to about double what it was just a decade ago while cranking up the visual appeal several notches. Some panels were so large that they required two junction boxes apiece. All black, high-efficiency, and hiding the bus bars was the goal.
LG Chemical (OTCPK:LGCLF) was the favorite in storage; both according to distributors and by the obvious partnerships with panel and inverter manufacturers. LG's RESU battery was included in systems from SMA (OTCPK:SMTGF) - Sunny Boy Storage, SolarEdge - StorEdge, Huawei (get out your reading glasses - it's in the fine print), and LG Electronics. LG Chemical's materials highlight that they are backlogged on orders and have shipped only about 16,000 units since 2017. LG Chemical expects to catch up in Q1 2019.
The adjective "simple" was thrown around to the point of abuse. Too many companies claimed their systems to be simple while making displays of product integration that included undefined components, sometimes dozens of SKUs, and the need for carefully planned system design. Enel, Midnite Solar, SMA, Huawei, LG, Simpliphi, and many others attempted to shoehorn confusing product arrangements into the definition of simple (so confusing that many of the booth personnel were unable to answer questions about system size limitations and ability to power various home energy needs like refrigerators and air conditioners).
The best example of a truly simple installation came from a private firm. Solaria's CEO Suvi Sharma walked me through their proprietary technology and explained how their partnerships will simplify residential solar systems, not just for end-users, but for the installers who are their direct customers. Solaria initially joined forces with Enphase and then with Quick Mount PV to provide the simplest solution through purpose-built modular systems.
Solaria's AC modules integrate Enphase microinverters (eliminating assembly on the roof) and now have a custom designed racking solution that will translate into time saved for installers. Solaria's Howard Wenger explained that three years ago it took three installers two days to install a 7kw system. Now, with the number of SKUs required drastically reduced, the same set of installers can install two systems per day. Through repetition of a smaller set of components, the installers will quickly become familiar with a limited installation process. Also, system design concerns have been simplified to the point where the primary concern will be aesthetics of the layout of the panels.
Solaria's integrated solution is so popular that they recently sold out of racks. Going forward, Solaria is tripling their overall manufacturing capacity.
Takeaways Taken Away
EnergySage completely stole my thunder when they released their Solar Market Intel Report at the close of the show. I spent 18 hours scouring the show for empirical evidence of the direction of the industry only to have my conclusions neatly encapsulated in a few paragraphs. The report showed that panel brands and inverter brands quoted have both gone down over the last year. Panels went down from 48 brands in H2 2017 to 44 brands H1 2018. Inverters consolidated even further, from 30 brands H2 2017 to 21 brands H1 2018.
EnergySage also showed that costs of installing residential solar have recovered from initial tariff impacts and continue to decline.
Earlier in the week Abigail Ross Hopper, President and CEO of SEIA, said the solar industry would likely experience consolidation as it matures.
EnergySage's report shows that the five most quoted brands of panels (Panasonic, LG, Silfab, Hanwha, and Trina) have increased their combined position to over 70%. The closing of the acquisition of SolarWorld America by SunPower was announced after the bell on October 1st. The acquisition combined with SunPower's tariff exemption could propel them as far as third among the most quoted panel brands. As of the writing of this article, the market seems to agree. SunPower's stock saw a boost of over 5% in midday trading.
As for inverters: SolarEdge and Enphase dominate the landscape, accounting for 88% of quotes. Enphase already recaptured market share from SolarEdge before their acquisition of fourth place inverter manufacturer SunPower. As the last major American inverter manufacturer standing, Enphase will likely see continued market share growth thanks to their current partnerships for AC Modules, including four of the top seven panel manufacturers (Panasonic, LG, Jinko, SunPower); growing list of collaborators (Sunpro, Momentum, Solaria); and upcoming tariff-free inventory.
Watch Future Developments Carefully
The LG Chemical cell shortage will limit their partners' ability to meet demand.
Blood will be spilled as panel manufacturers strive to outdo each other.
Companies able to meet demand will survive. Companies able to truly simplify the entire process will thrive.
Even as the industry projects steady growth, it will not be distributed equally.
Now it's time to answer the question: where's the beef?
Pictures from Solar Power International Below:
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.
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