Why SunPower Is Buying A Microinverter Manufacturer

SunPower (NASDAQ:SPWR), the second largest U.S. solar products manufacturer, announced that it would be acquiring SolarBridge, a venture-capital funded startup that specializes in panel-integrated microinverters for the solar industry. While SunPower already had a strategic investment and business partnership with SolarBridge, the acquisition will allow SunPower to become more vertically integrated and could help it to better customize microinverter technology for its panels. The deal also fits well with SunPower’s central theme of improving the energy efficiency and yield of its solar systems, as it tries to differentiate itself in an increasingly commoditized solar market. While the financial terms of the deal were not disclosed, it is worth noting that SolarBridge has raised over $105 million through its backers. Here is a brief look at how the deal could help SunPower.

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Microinverters Help To Improve The Performance Of Solar Systems

Inverters are a crucial component of solar power systems that convert the direct current (DC) produced by a solar panel into an alternating current (AC) that can be fed onto the electric grid or utilized at an off-grid electrical network. While conventional solar inverters are typically centralized, with one inverter connected to an array of solar panels, microinverters are designed to serve a single solar panel. Since solar panels are subject to changing environmental factors such as shade, dust and sub-optimal angles of solar irradiance, the electrical output of panels can vary. With conventional inverters, the performance of the overall system can be held back by the weak performance of a single solar panel. ^[1] However, microinverters circumvent this problem by adapting to the energy output of each solar panel, helping to improve the performance of the solar system. While there are many manufacturers of solar microinverters, most players including market leader Enphase Energy (NASDAQ:ENPH) offer their solutions as a separate module. SolarBridge, on the other hand, sells technology that can be fully integrated into the solar panel at the factory level. SunPower had been working with SolarBridge since 2011, when it started selling factory-integrated AC panels. SolarBridge also supplies panels to other panel vendors including Kyocera and BenQ Solar.

Microinverters Could Help Bring Down Installation Costs

Since the SolarBridge inverters are integrated into panels at the factory, they help to cut down on installation time on the field, bringing down balance of systems and labor-related costs for solar power systems. While current data on labor-related savings is not available, as of 2011 SolarBridge estimated it to be around $0.25 per watt. ^[2]  It is possible that the potential savings as a percentage of the total systems costs have actually increased since then, given that labor is likely to constitute a larger portion of a solar system’s cost as panel and component prices have been falling rapidly.  Additionally, having an integrated solution instead of a standalone device could also eliminate the need for inspections from local authorities in some regions. ^[3] These attributes are likely to be particularly valuable for the residential and commercial solar market that SunPower has been increasingly targeting. However, there could be some downsides to having integrated inverters. Firstly, inverters – which are power electronics – could  have a higher failure rate when compared to solar panels. This could potentially make repairs and maintenance more cumbersome when inverters are integrated into the panel. Additionally, module level power electronics such as microinverters typically cost more when compared to traditional inverters, although this cost is likely to be offset by the labor costs and the better system performance over the longer term.

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1. Microinverter Advantages, Alternative Energy Magazine [↩]
2. SolarBrige Collaborates With SunPower To Deliver AC Panels, SolarBridge, October 2011 [↩]
3. Updated: SunPower Buys VC-Funded Microinverter Startup SolarBridge, Greentech Solar, November 2014 [↩]