Renewable Energy Markets Continue To Shine

Ash Sharma Research Director IMS Research



Renewable energy is currently one of the most exciting sectors for power companies. This is particularly the case for solar power, not least because of the major market growth, but also because of changes in architecture and interesting market dynamics that present massive opportunities for power electronics manufacturers. The solar (PV) power market continues to show incredible resilience and has captured the attention of many major component vendors. Despite one of the market's key generators of demand (Spain) collapsing in 2008, the overall market still achieved growth of more than 30% in 2009, amidst one of the worst economic environments in decades. In 2010, with most developing nations still recovering from the recession, the global PV market will more than double in size. Global installations are likely to exceed 16 GW (roughly the same as the four previous years combined) and solar power now provides 20% of market leader Germany's peak power requirements - quite an incredible feat. To put this rapid industry growth in context, the total PV equipment industry generated revenues of more than $40 billion in 2010. If you included the construction, financing, design, and maintenance of installations and also the production equipment needed to make the components, this figure would be closer to $100 billion. The power electronics industry's share of this market is not insignificant either: DC-AC inverter revenues are likely to surpass $5.5 billion this year. Again, in context, this is larger than either the datacom or computing merchant power supply markets. Furthermore, although short-term fluctuations in demand are likely, the PV market is set to grow on average at more than 20% per year over the next five years. High growth aside, the solar industry presents a particularly attractive opportunity for power component vendors due to its appetite for high efficiency, high-value devices (e.g. Silicon Carbide diodes), its high power density requirements, and typically low pricing pressure, with suppliers often enjoying margins of close to 40%. Although many inverter designs use discrete components, most of the industry's opportunity currently exists for high power IGBT module vendors. And whilst inverter volumes are still relatively low (a few million shipped this year), the emergence of micro inverters and DC-DC power optimizers presents a major new market for power semiconductor suppliers. These power conversion products are deployed on a per panel basis (typically around 200W), rather than on a per-string or per-plant basis used in traditional architectures. As such, potential volumes for these devices are orders of magnitude higher, making them very attractive to suppliers of devices like power ICs and MOSFETs. The outlook for the micro inverter and power optimizer market has improved considerably in recent months following announcements from several leading panel companies that they would be integrating these technologies directly into their panels. A year ago it appeared these new disruptive products would be limited to small-scale residential systems, but now they appear well placed to take centre stage.