National Renewable Energy Laboratory 

Innovation for Our Energy Future 

A national laboratory of the U.S. Department of Energy

Office of Energy Efficiency & Renewable Energy

NREL is operated by Midwest Research Institute ● Battelle Contract No. DE-AC36-99-GO10337 

A Review of PV Inverter 

Technology Cost and 

Performance Projections 

Navigant Consulting Inc. 

Burlington, Massachusetts 

Subcontract Report 

NREL/SR-620-38771 

January 2006 
A Review of PV Inverter 

Technology Cost and 

Performance Projections 

Navigant Consulting Inc. 

Burlington, Massachusetts 

NREL Technical Monitor: R. Margolis 

Prepared under Subcontract No. KACX-4-44451-01 

Subcontract Report 

NREL/SR-620-38771 

January 2006 

National Renewable Energy Laboratory 

1617 Cole Boulevard, Golden, Colorado 80401-3393 

303-275-3000 • www.nrel.gov 

Operated for the U.S. Department of Energy 

Office of Energy Efficiency and Renewable Energy 

by Midwest Research Institute • Battelle 

Contract No. DE-AC36-99-GO10337
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A Review of PV Inver

Technology Cost and Performance ProjectioFinal Presentation Report toNational Renewable Energy Laboratory

This work was supported by the U.S. Department of Energy’s (U.S. DOE) Office of Energy Efficiency and Renewable Energy (EERE) under National Renewable Energy Laboratory (NREL) Contract No. KACX-4-44451-04

January 2006
1

Table of Contents

1 Executive Summary2 Introduction3 Historical Perspective4 Future Performance and Cost Estima5 Challenges for Achieving Future Tar6 Addressing the Challenges 7 Suggested Role for Government 
2

Table of Contents

1 Executive Summary2 Introduction3 Historical Perspective4 Future Performance and Cost Estima5 Challenges for Achieving Future Tar6 Addressing the Challenges 7 Suggested Role for Government
3

Executive Summary Study Objective

Navigant Consulting Inc. (NCI) evaluated PV invertecost improvements required to meet U.S. DOE goals 

• The National Renewable Energy Laboratory (NREL) has a m

implementation of the U.S. Department of Energy’s (DOE’s) Program. Sandia National Laboratories (SNL) has a major roldevelopment, characterization, standards, certifications, and 

• The Solar Energy Technologies Program recently published a 

which establishes a goal of reducing the Levelized Energy Co(PV) systems to $0.06/kWh by 2020. 

• The Multiyear Technical Plan estimates that, in order to meet 

inverter prices will need to decline to $0.25-0.30 Wp by 2020. 

• DOE determined the need to conduct a rigorous review of th

and economic targets, including the target set for PV inverter

• NREL requested that NCI conduct a review of historical and 

performance improvements for PV inverters, including identidentified and the approaches government might use to addr
4

Executive Summary Key Issues Addressed

NREL’s questions regarding PV inverter cost and perrole they should play, were broken down into three k

What are the critical cost and performance impr

needs for PV inverters that government should 

promote PV market growth?

Do PV inverters face 

challenges in meeting the 

U.S. DOE’s Solar Energy 

Technologies Program 

targets?*

Is there a clear 

understanding and 

consensus for addressing 

key PV inverter 

challenges? 

* This includes the question: “Will inverters reach the cost goal set by the Solar Energy 
5

Executive Summary Key Issues Addressed

Many potential roles for government were identified improve the chances that DOE program targets are ac

What are the critical cost and performance impr

needs for PV inverters that government should 

promote PV market growth?

Do PV inverters face 

challenges in meeting DOE’s

Solar Energy Technologies 

Program targets?*

Is there a clear understanding 

and consensus for addressing 

key PV inverter challenges? 

W

p

c

• Sales-volume increases and 

learning-curve improvements alone appear unlikely to achieve the targeted inverter selling price of $0.25-0.30/W by 2020.

• Inverter lifetimes greater than 15 

years appear difficult to achieve.

• Improvements in manufacturing, 

design, and technology are needed to achieve the price and performance targets. 

• Reducing regulatory complexity 

and long-term, consistent policy will also be required. 

• Manufacturers and industry 

experts do not agree on needs to address key inverter challenges. 

• Support is needed in several 

areas:

− Manufacturing and testing 

improvements: process improvement, training, quality management, HALT/HASS assistance, and documenting field performance data. 

− Design: alternative topologies, 

thermal management, modeling, and DER inverters.

− Technology: advanced switching, 

capacitors, and components. 

• A

mrmu

• S

ptm

• I− − 
6

Executive Summary Future Performance

Achieving the targeted improvements of lower cost areliability for inverters is not a foregone conclusion f

• Based on learning-curve forecasts, the targeted cost reductions fo

achieved with current market growth and learning-rate levels.

 Significant uncertainty exists around the potential for future m

exceed current levels for an extended period of time. 

 Additional cost reductions will require an acceleration of learn

3⁄4Inverter prices have been dropping by about 10% with eve

cumulative production, compared to 20% for PV modules.

• Reliability and life issues for inverters have the potential to dama

the industry and long-term adoption of PV. 

 Because of market demands, manufacturers today are focused 

over improving reliability.

 Reliability and life improvements may not be achieved with c

industry. 

Â In order to increase the probability of achieving the goals of indu

necessary for the PV market to become sustainable over the long government support for inverter R&D is likely to be necessary. 
7

Executive Summary Overcoming Key Challenges

NCI’s assessment is that there is an important role foto support PV inverter improvements for the next sev

• In general, larger companies in the PV inverter business view the role of go

assistance (via programs to reduce cost and increase reliability) as being les

and the long-term future of the industry. 

— Most larger companies that NCI spoke to believe that increasing sales v

factor that will lead to lower cost and higher reliability for PV inverters

• Despite the views of larger companies, introducing a new inverter product 

venture for some large companies. For example:

— Xantrex experienced significant problems with their early PV inverters 

market share to new European market entrants.

— Philips entered the PV inverter market in Europe, only to exit a few yea

significant technical problems with their first product.

• The PV market will be in a critical growth phase during the next 5-10 years, 

significant policy and market support to achieve the overall cost and perforsustainable market.

• If small manufacturers have more difficulty meeting the reliability requirem

cannot afford to provide adequate after-sales service, it could hurt the PV in

(inadequately performing inverters will hurt the industry). 

• While some consolidation in the inverter business should be expected, the b

innovation provided by the smaller companies are likely to be important to 

early stage of development. 
8

Executive Summary Suggested Role for Government

Long-term cost reduction and performance improvemgreatly from the ongoing support of additional gover

• Inverter testing at Sandia National Labs is extremely valuable to the in

support of development of testing protocols is important to the indus

• Documentation of failure analysis in the industry is not conducted un

for government would be in collecting and documenting inverter failu

industry. 

• Modeling tools would be helpful to manufacturers, but developing ac

challenging. An assessment of issues and needs related to modeling wbefore embarking on new modeling efforts.

• The High Reliability Inverter Initiative (HRII) program is generally co

successful. Follow-on public-private R&D partnerships such as this sh

government support.

• Cost and efficiency benefits of tranformerless inverters are understood

and cons of tranformerless inverters as a means of educating inspecto

be beneficial to encourage adoption of regulations and codes that allo

• Analysis of the interaction of the various federal, state, and municipal 

be increasingly important to future industry growth needed for long-
9

Executive Summary Suggested Role for Government

Several issues identified are common to all DER invebe addressed as part of crosscutting research program

• Comprehensive information on inverter components (capacitors, 

power semiconductors, etc.) and options would assist manufactubest products.

• Innovative inverter topologies have been suggested to provide m

for government may be in support of experimental topologies as 

the industry.

• Manufacturers would benefit from understanding the costs and b

Accelerated Life Testing (HALT) and Highly Accelerated Stress Stesting programs. Government could assist by providing general 

experience from other industries. 

• Several other areas identified for PV inverters may also have broa

inverters, such as modeling and specific HALT and HASS testing programs targeted specifically for PV are likely to be required.
10

Table of Contents

1 Executive Summary2 Introduction3 Historical Perspective4 Future Performance and Cost Estima5 Challenges for Achieving Future Tar6 Addressing the Challenges 7 Suggested Role for Government
11

Introduction Objective

Navigant Consulting Inc. (NCI) evaluated the PV invand cost improvements required to meet U.S. DOE g

• The National Renewable Energy Laboratory (NREL) has a m

implementation of the U.S. Department of Energy’s (DOE’s) Program. Sandia National Laboratories (SNL) has a major roldevelopment, characterization, standards, certifications, and 

• The Solar Energy Technologies Program recently published a 

which establishes a goal of reducing the Levelized Energy Co(PV) systems to $0.06/kWh by 2020. 

• The Multiyear Technical Plan estimates that, in order to meet 

inverter prices will need to decline to $0.25-0.30 Wp by 2020. 

• DOE determined the need to conduct a rigorous review of th

and economic targets, including the target set for PV inverter

• NREL requested that NCI conduct a review of historical and 

performance improvements for PV inverters, including identidentified and the approaches government might use to addr
12

Introduction Issues Analysis

NREL’s key questions regarding PV inverter cost and the role they should play, can be broken down into th

What are the critical cost and performance impr

needs for PV inverters that government should 

promote PV market growth?

Do PV inverters face 

challenges in meeting the 

U.S. DOE’s Solar Energy 

Technologies Program 

targets?*

Is there a clear 

understanding and 

consensus for addressing 

key PV inverter 

challenges? 

* This includes the question: “Will inverters reach cost goal set by the Solar Energy Tec
13

Introduction Approach

NCI’s five-step project approach provided the basis fNREL’s questions. 

Historical Perspective

1

Future Performance and Cost Estimates

2

Challenges for Achieving Targets

3

Addressing Challenges for Achieving Targets

4

GovernmRole in AddressChallen

5

Do PV inverters face challenges in 

meeting the U.S. DOE’s Solar 

Energy Technologies Program’s 

targets?

What role sho

play in add

challenges that 

Is there a clear understanding and 

consensus for addressing key PV 

inverter challenges?
14

Introduction Step 1 – Historical Perspective

NCI first collected data on inverter trends for the pas

Historical Perspective

1

Objective

•Provide 

performance and cost information on typical inverters used for U.S. residential and commercial buildings, and central power/utility applications.

Tasks

•Pricing information and key 

performance information for inverters during the past 3-5 years. 

•Key information about product 

attributes, such as weight, voltage range, and sizes of commercial and residential units.

•Advantages and limitations of past 

products.

•Obta

from 

•Call t

Xantperfo

•Inter

moduEuroBarceas weother 
15

Introduction Step 2 – Future Performance and Cost Estimates

NCI conducted interviews with inverter players in EuStates to identify likely cost and performance trends 

Future Performance and Cost Estimates

2

Objective

•Provide 

information on inverter cost and performance trends that are expected during the next 10-20 years. 

Tasks

•Show how inverter prices are likely to 

change during the next 10-20 years. 

(Include assumptions about market size driving economies of scale and learning)

•Discuss likely customer inverter needs 

for residential, commercial, and central inverter applications.

•Show likely changes in inverter 

performance during the next 10-20 years. 

•U

b

•C

Sda

•In

mEBvrd
16

Introduction Step 3 – Challenges for Achieving Targets

The interviews provided information on some of the achieving the cost and performance targets. 

Challenges for Achieving Targets

3

Objective

•Identify 

challenges for achieving the cost and performance targets. 

Tasks

•Discuss potential barriers for cost and 

performance targets for residential, commercial, and central station applications. 

•Discuss technical, manufacturing, 

regulatory, policy, and market challenges.

•R•In

mmd

•In

oSEF
17

Introduction Step 4 – Addressing Challenges

NCI then identified possible ways to address the chaachieving the cost and performance targets. 

Addressing Challenges for Achieving Targets

4

Objective

•Identify possible 

ways to overcome key cost and performance challenges. 

Tasks

•Identify possible ways to address 

inverter challenges during the next 10 years that can help industry achieve its cost and performance targets. 

•C

wsm

•S

fi
18

Introduction Step 5 – Role for U.S. DOE

NCI then identified activities the U.S. DOE could supPV inverter challenges in achieving cost and perform

DOE’s Role in Addressing Challenges

5

Objective

•Identify possible 

ways to overcome key cost and performance challenges. 

Tasks

•Identify possible ways to address 

inverter challenges during the next 10 years that can help industry achieve its cost and performance targets. 

•C

wsm

•S

fi
19

Table of Contents

1 Executive Summary2 Introduction3 Historical Perspective4 Future Performance and Cost Estima5 Challenges for Achieving Future Tar6 Addressing the Challenges 7 Suggested Role for Government
20

Historical Perspective U.S. PV Market » Size and Growth

The U.S. grid-connected market has been strongest in buy-down programs make systems more economical

• There has not been a national subsidy program for PV, only 

tax credit on commercial applications and a 5-year acceleratesupport has been dependent largely on state programs.

• The recently passed Energy Bill includes $400 million worth 

and solar thermal), including a 30% investment tax credit for homeowners and commercial building owners for the next 2 credit is capped at $2,000 per credit. 

• NCI estimates the U.S. grid-connected market to be 51 MW i

largest market with 37 MW installed in 2004, resulting in a cuabout 93 MW for grid-connected systems at the end of 2004.

• The most common installation size for residential systems in 

Installations of greater than 10 kW are becoming more commEnergy Commission (CEC) is considering a feed-in tariff (uti

• In the United States, where grid reliability has been a problem 

demand for grid-connected inverters that can also provide bbatteries is higher than in Europe.

U.S. Market
21

Historical Perspective U.S. PV Market » Installation Sizes

CEC data shows the proportion of installations of 3 kdeclining, while 10-30 kW installations are on the ris

Installation Size Distribution in CEC Program (kW 

Residential and Small Commercial (<30 kW

kW 2001 2002 2003 

0 - < 2.0 419.3 15.1% 798.6 11.1% 6.

21

273410

100

24.7%27.3%32.3%

4.6%

100.0%

32.0%29.8%21.8%

1.3%

100.0%

779.8 

2.0 - < 3.0 885.6 1,777.1 2,595.0 3.0 - < 5.0 824.7 1,964.2 3,214.8 5.0 - < 10.0 605.0 2,328.7 4,070.0 10.0 - < 30.0 36.4 332.8 1,256.2 TOTAL 2,771.0 7,201.4 11,915.8 

100

7.

92

100.0%

10.6%89.4%

100.0%

16.5%83.5%

TOTAL 3,319.9 8,058.6 12,878.0 30 + 548.9 857.2 962.2 < 30 2,771.0 7,201.4 11,915.8 

Residential and Small Commercial (<30 kW) vs. Larg

Installation size refers to the size of the PV system, not the size of the individual inverters.kW shown are for systems installed within the CEC program only.

Source: 
22

Historical Perspective U.S. PV Market » Installation Sizes

Compared to CEC, data for New Jersey residential aninstallations shows an even stronger trend toward lar

Installation Size Distribution in NJ (kW insta

Residential and Small Commercial (<30 kW

kW 2001 2002 2003 

0 - < 2.0 1.5 20.0% 7.4 5.5% 0.

3.

214231

100

24.2%13.0%19.3%37.9%

100.0%

30.7%50.7%

0.0%0.0%

100.0%

1.4 

2.0 - < 3.0 2.3 32.3 41.9 3.0 - < 5.0 3.8 17.4 271.9 5.0 - < 10.0 0.0 25.8 531.7 10.0 - < 30.0 0.0 50.5 392.0 TOTAL 7.5 133.4 1,238.9 

100

8118

100.0%

78.4%21.6%

100.0%

0.0%

100.0%

TOTAL 7.5 618.4 6,753.7 30 + 0.0 485.0 5,514.8 < 30 7.5 133.4 1,238.9 

Residential and Small Commercial (<30 kW) vs. Larg
23

Historical Perspective U.S. PV Market » Inverter Sizes

CEC data shows that inverters in the 2-3 kW range domarket (SMA SB 2500). Sharp’s Sunvista 3500 accoungrowth in the 3-5 kW range.

Inverter Size Distribution in CEC Progra

Size of Installed PV System Capacit

inverter(s) 

used (kW) 2001 2002 2003 

0 - < 2.0 183.9 5.5% 429.8 5.3% 5

7

3552

10

67.8%

4.2%6.3%6.5%2.4%7.4%

100.0%

37.5%

0.6%0.3%2.2%0.0%

53.9%

100.0%

658.8 

2.0 - < 3.0 1,243.7 5,466.2 9,905.0 3.0 - < 5.0 20.0 339.8 173.0 5.0 - < 10.0 8.8 509.4 430.2 10.0 - < 30.0 73.6 520.9 668.5 30.0 + 0.0 192.8 760.5 Inverter size not reported 1,790.0 599.7 282.0 TOTAL 3,319.9 8,058.6 12,878.0 

Data shown are for systems installed within CEC program only. Source: C
24

Historical Perspective Inverter Features » Evolution 1990-2000

Despite modest production volumes, inverters have esignificantly since the 1980s through manufacturer intechnology improvements. 

1991 The early 1990s saw the first large-scale series 

production of PV inverters (SMA PV-WR).

1980s Inverters were bulky, heavy, difficult to install, 

unreliable, and their efficiency was in the 85-90% range. They were strictly devices for converting DC to AC.

1995 First PV string inverter (SMA SB 700). Allows 

connection of modules in series, modular systems, higher system efficiency, and reliability. String inverter becomes most common on the market.

Late 1990s

 Basic data-acquisition system, “plug-and-play” insta Transformerless and high frequency (HF) designs re

 Reliability improves. Warranties (2-5 years) offered.
25

Historical Perspective Inverter Features » Recent Developments

Along with a trend toward increasing sizes, inverters increasingly sophisticated, with added capabilities.

• Inverter manufacturers have been increasing the size of models 

and small commercial applications. New models are generally 

• Many manufacturers report that the typical residential installat

kW range, and that 10 kW installations are also becoming more 

Larger Size (> 2 kW)

• The latest inverters feature data logging and communication ca

manufacturers provide the software required to process the dat

– Allows quick diagnostic when the system is not operating 

allows the user to adjust system parameters for optimal o

Data logging, communications, and diagn

• A “master” inverter controls the operation of one or two “slave

the slaves are brought online only when the power produced bsufficient. In this way, inverters always operate at an optimized higher system efficiency.

Master-Slave Configuration for Improved Efficiency 
26

Historical Perspective Inverter Features » Recent Developments

Multi-string inverters allow a single inverter to convfrom several module strings, reducing inverter costs 

• In many installations, strings of PV modules operate under d

requires a separate inverter for each string. Multi-string techn(usually two or three) strings to be connected to a single inve

inverters feature a separate Maximum Power Point Tracker (ensuring maximum energy yield.

• Examples of differences that can be accommodated with a sin

are:

– Orientation– Shading– Number of modules– Module type or cell type

• This feature appears to be an increasingly important one, as s

there is a need to accommodate modules in different orientat

• Many popular residential inverter models being used in the U

not have this feature.

Multi-string Capability
27

Historical Perspective Inverter Features » Recent Developments

Transformerless designs – popular in Germany and Jinverter size, cost, and weight, while improving effic

• The transformer in conventional inverter designs is responsible for los

efficiency and accounts for the larger part of the inverter’s weight. Detransformer are cheaper, more efficient, and lighter.

• However, transformers also provide automatic protection against DC 

grid in case of system malfunction. “Transformerless” designs feature control components to provide DC injection protection.

• High frequency (HF) transformers are a compromise between the con

transformers and transformerless designs. HF transformers are small, electrical isolation. 

• Even though manufacturers claim that transformerless inverters can b

they cannot be installed in some countries1:

 Issues related to galvanic protection are the most important hu

of their use.

 Manufacturers expect changes in regulations or in utility requir

inverters with transformers will continue to be needed to serve 

Transformerless / HF Design

1. Transformerless inverters are not currently allowed in Spain and Italy. In the United States, the Nallows ungrounded PV arrays, but resistance from the utilities prevents the use of transformerless in
28

Historical Perspective Inverter Prices » Cost vs. Price

Data on production cost are not available for inverterdata must be used as a proxy.

•In the long run, price trends reflect cost trends; but, in the shor

other dynamics at play that are not related to actual productio

•Price trends over periods of 10 years or less may not reflect co

and should be analyzed with care and in context.

time

$

Cost of 

production

Price

Stability 

period

“Shakeout” 

period

 During stabi

grow and nemarket – the the decrease 

 During “shak

by fierce combankruptciesprices can decosts.

Source: References 12 and 13
29

Historical Perspective Inverter Prices » Determining Factors

An “average” price per kW is difficult to ascertain fo

• The rated power of the inverter is not the only factor that de

3⁄4 The technology varies considerably from manufacturer t

to differences in efficiency, size, weight, reliability, etc. T

the cost of producing inverters and the price that consum

3⁄4 Additional features, such as a visual display, data monit

communication capabilities, can lead to substantial price inverters of comparable rated power.

• Analysis of inverter price trends over time must take into ac

inverter features.

3⁄4 In the past 5-10 years, inverters have evolved significant

installation, user friendliness, efficiency, size and weightsignificantly. As a result, a simple analysis of $/kW pricethe real improvement in inverters.

• Inverter size has an important impact on cost. For instance, 

50% cheaper than a 1 kW unit on a $/kW basis. So, even withsize range, a single average $/kW figure inevitably hides lar
30

Historical Perspective Inverter Prices » TEAM-UP residential inst

Inverter prices reported by SEPA for the TEAM-UP ithe $1.50/kW to $2.00/kW range for residential applic

• From 1996 to 2000, 644 residential installations were put in pl

price data was not reported for all installations.

$0.00$0.50$1.00$1.50$2.00$2.50

1996 1997 1

Year Number of 

installations

kW Average size 

(kW)

1996 91 350.93 3.861997 83 309.08 3.721998 65 83.05 1.281999 201 296.3 1.472000 199 183.14 0.92

Source: Reference 14

Inverter Prices for TE

Install

1. From to 2001, the Solar Electric Power Association (SEPA) managed TEAM-UP, a cost-sharing pro

grid-tied PV installations. 

2.Inverter prices reported for 1997 by SEPA for the TEAM-UP initiative were later determined not to 

was also not available for the entire sample size. Because of limitations in sizes of available invert

reported on $/kW basis may not accurately reflect the true selling prices being used at the time. 

2

2
31

Historical Perspective Inverter Prices » TEAM-UP large installatio

Inverter prices for larger installations (> 70 kW) for Tgenerally in the $0.40/kW to $0.80/kW price range.

• From 1996 to 2000, 23 systems ranging from 70 kW to 400 kW 

$0.00$0.20$0.40$0.60$0.80$1.00

1996 1997 1

Inverter Prices for TE

Install

Year Number of 

installations

kW Average size 

(kW)

1996 2 317.2 158.601997 4 478.4 119.601998 7 648.1 92.591999 4 393.6 98.402000 6 1029.4 171.57

Source: Reference 15
32

Historical Perspective Inverter Prices » NCI Survey of U.S. Prices 

In 2004, prices for small inverters (<10 kW) in the Unfrom $0.67/W to $2.67/W. In 2005, they ranged from $0

U.S. Sample Prices - Residential Inverters ($/W

0.000.501.001.502.002.503.00

0 1000 2000 3000 4000 5000 60

Price ($/Wac)

Nominal Output Power (Wac)

 ̈ Our data indicates that U.S. prices have dropped by roughl

Source: Navigant Consulting Inc., 2005.
33

Historical Perspective Inverter Prices » Solarbuzz Data

Solarbuzz tracks average inverter prices in Europe an

• During the past 2 years, prices have fallen by about 13% in • Contrary to NCI data, Solarbuzz reports stable prices in the 

0.500.550.600.650.700.750.800.850.900.951.00

Jul-03

Sep-03

Nov-03

Jan-04

Mar-04

May-04

Jul-04

Sep-04

Nov-04

Jan-05

Mar-05

May05

$/W
34

Historical Perspective Inverter Prices » IEA PVPS Data

The IEA PVPS program conducted surveys of PV invand 2002 for U.S., European, and Japanese manufactu

Inverter Prices
35

Historical Perspective Inverter Dimensions » IEA PVPS Data

IEA PVPS data shows that smaller inverters (~1kW) habout 15L/kW, whereas larger ones (~5kW) are aroun

Inverter Volumes (2002 data)

Normalized Inverter System

Volume (liter/kW)

Source: Reference 11
36

Historical Perspective Inverter Weight » IEA PVPS Data

IEA PVPS data shows that the weight of transformerinverters (~5kg/kW) is 50-75% less than that of LF un

Inverter Weights (2002 data)

Source: Reference 11
37

Historical Perspective Inverter Reliability

Inverter reliability has an impact on life-cycle cost. Einverter cost reductions should consider reliability im

05

10

PV Project Sim

Assumes expenses on other parts of 

 The inverter accounts for 10-20% of the 

initial system cost.

 Inverters generally need to be replaced 

every 5-10 years, whereas modules and other system components have a life of 25 years or more.

» Investment in a new inverter is required 

3-5 times over the life of a PV system.

Inverter Present v1)Discou2)Inverte

Cash Flow ($)
38

Historical Perspective Inverter Reliability

NCI analysis indicates that the benefits of designing can operate for 10-15 years or more before replaceme

NPV of life-cycle cost / initial system cos

Discount rate = 5%; Price reduction rate = 5% Discount rate = 10%

Inverter cost Inverter replacement interval

(% initial 

system) 5 10 15 25+

10% 114.1% 105.0% 102.2% 100%15% 121.2% 107.5% 103.3% 100%20% 128.3% 110.1% 104.5% 100%

Inverter cost In

(% initial 

system) 5 

10% 105.8% 15% 108.6% 20% 111.5% 

The benefits of increased reliability must be weighted a

Assuming an initial PV system cost of $

NPV of lifecycle cost ($/W)

9.70 8.60 8.26

NPV 

8.69 

Note: If one assumes that an inverter can be repaired instead of replaced, this would bring down the NPV 

of the inverter and yield figures lower than the ones shown above.
39

Historical Perspective Inverter Reliability

The economics of long-life inverters are doubtful, buconsiderations can change this conclusion.

• Based on NPV calculations, the case for developing inverters that 

years appears weak.

• The behavior of consumers, who focus mainly on first cost and te

payback periods, suggests that the discount rate to be used with high. This favors inverter development focused on first cost rathe

However:

• If consumers who are buying PV systems today are not aware of 

associated with replacing or repairing an inverter, the frustration unexpected and significant expense could lead some consumers tand it could tarnish the image of PV.

• This is particularly a concern where adoption of PV is based on la

California, where consumers sometimes pay as little as 10% of th

system, the expense associated with replacing the inverter can be compared to the first cost of the system.

3⁄4Will consumers be eligible for a rebate on replacement inver
40

Historical Perspective Inverter Reliability » Recent Developments

Reliability of inverters is still inadequate, but improvmade. 

Inverter mean time between failure (MTBF) is repof 5 to 10 years.1* This short MTBF has a significa

competitiveness of PV systems and will inhibit e

1. Reference 8. *Note: MTBF is indicative of inverter economic life. It is a calculated number based on sta

numbers assigned to each component used in a design, and depends on the stress and thermal environm

2. Reference 2

Recent improvements in reliability:•In recent years, almost every manufacturer of PV inverters has i

expected lifetime substantially.2

•A 5-year warranty has become the norm in the industry, wherea

most common just a few years ago.

•These longer warranties are somewhat controversial. The manu

claim that they have gained a better understanding of the causecollecting and studying field data, that they have reduced part cquality components, and modified product design to lessen comvulnerabilities were identified. Other manufacturers and industthese warranties are mere marketing tools.

•Manufacturers currently are evaluating offering extended warra

available for an additional cost. This has become common for otand is a way for consumers to reduce risk associated with near-t
41

Historical Perspective Inverter Reliability » Recent Developments

In the past year, North American manufacturers have innovative products and set new standards for invert

• PV Powered (PVP) of Oregon and Sustainable Energy Tech

(SET) of Canada offer a 10-year warranty, the best available i

industry.

•PVP and SET inverters have a lower part count than other pro

market today,* which increases reliability because:

1.Fewer parts mean fewer failures.2.Higher-quality parts can be used while still meeting inverte

•Both manufacturers use Digital Signal Processing (DSP).

 A DSP chip translates the waveform into digital format, wh

processed, evaluated, and modified in very short time periinverter can respond quickly to a wide range of situations, reliability and efficiency.

* Note: Other manufacturers point out that different methods of counting parts may 
42

Table of Contents

1 Executive Summary2 Introduction3 Historical Perspective4 Future Performance and Cost Estima5 Challenges for Achieving Future Tar6 Addressing Challenges 7 Suggested Role for Government
43

Future Performance Experience Curve » Basic Concept

Experience curves model the relationship between coand production volume, which indicates the level of 

Basic Assumption: Cost of production declines by a constant percentage 

the total number of units produced. This cost-reduction rate is called the 

ranges from 0% to 35% across various technologies.

0

20406080

100

0 100 200 300 400 500 600 700 800 900 1000

LR=0.1

LR=0.2

LR=0.3

1

10

100

1 10 

Cumulative Production Cumulative Pr

Production Cost

Production Cost (log scale)
44

Future Performance Experience Curve » Results for PV

The learning rate for PV modules and balance-of-sysFor inverters, however, the learning rate appears sign

A comprehensive EU-supported study of prices and production and BOS found that the learning rate in the PV industry is in thÂ For inverters, the learning rate is significantly lower: approx

• This figure does not give a complete picture of inverter impro

1.This learning-rate estimate is based on inverter prices, or u

basis), rather than life-cycle cost. Therefore, improvementreliability – which improve inverter life-cycle costs – are n

2.Other inverter improvements (e.g. reductions in weight an

plug-and-play, multi-string, etc.) are also not taken into ac

• In addition, it must be noted that this result is based on an an

1995-2002 period, because of insufficient data prior to 1995. Arate obtained is subject to significant uncertainty, because trenot reflect trends in production costs accurately over periods 

Source: References 12 and 13

1. The study points out that this implies a learning rate in excess of 20% for non-inverter balance-of-systemlearning rate for non-inverter BOS is estimated to be 24%.
45

Future Performance Experience Curve » Results for PV

Data used to estimate the learning ratio for inverters inverter retail prices in the Netherlands and in Germ

Experience curve for inverter list prices (19

Learning Rate: 7%

Learn

Note: The Progress Ratio (PR) is related to the Learning Ratio (LR): PR = 

Source: References 12 and 13
46

Future Performance Experience Curve » Discussion of Inverter Da

Until recently, the markets for inverters in each counseparate, but this situation is changing, particularly i

• Market boundaries: For PV inverters, differences in regulation

hindered the emergence of a global market. During the period manufacturers served only one country.

3⁄4The extent of the “Learning System” for inverters was natio

learning rate was obtained on the basis of installed capacity 

Note: Germany and the Netherlands were selected, because 

for other countries was insufficient.

• Today, the market for inverters can be broadly segmented amo

Germany), and the United States. It has internationalized someseveral manufacturers serving more than one of the above segbe noted that manufacturers serving multiple markets typicalleach market.

Â Going forward, the learning system for inverters will become 

especially across European countries. This trend will be less mbecause of the level of state control of regulations.
47

Future Performance Experience Curve » Discussion of Inverter Da

Production volumes can be measured in units or megmegawatts is a more practical alternative.

•Production volumes: The Photex study measured production in MW rather than in num

historical data and projections of PV installed capacity are generally available in MW is this methodology.

• Because average inverter sizes have generally been increasing (from < 2 kW to > 3-5 kW

if it was based on number of units rather than MW. This is because the growth rate as m

been lower than the growth rate in MW, but the observed prices are obviously not affecmeasured.

LRunits > LRMW

• If the analysis is done based on units, then LRunits would have to be applied to projectio

require making an assumption concerning future trends in inverter sizes.

3⁄4 If the past trend of increasing inverter sizes is assumed to continue, then the price p

whether the learning curve analysis is based on units or MW.

3⁄4 If inverter sizes are assumed to stabilize, then the learning-curve analysis based on 

This is because LRunits > LRMW, while the growth rate in units would be the same as 

Â Future trends in inverter sizes cannot be determined with a great degre

great number of factors that influence inverter prices and the high unclearning-curve analysis, adding this extra step to the analysis is not lik

*NOTE: Inverter prices have been decreasing partly because size has been increasing. Hence, if inverter siz

the learning rate inferred from past prices will be too high when applied to future production. This is true w

MW, i.e. LRunits or LRMW would both be too high. But the fact remains that LRunits>LRMW (they do not chan

data and are therefore independent of our assumptions about future size trends), so a learning-curve analyprices than an analysis based on MW. But both analyses would overstate the price reductions, if inverter si
48

Future Performance Experience Curve » Projections for Inverter P

Using a 20% growth rate in annual sales and a learnininverter prices would drop by about 35% in 10 years 

U.S. PV Inverter Prices – Learning Curve Pro

Projections for Various Learning Rates and Industry Growth R

LR = 5% LR = 10% 

0

102030405060708090

100

2005 2010 2015 2020 2025

0

102030405060708090

100

2005 2010 2015 2020 2025

0

102030405060708090

100

2

% of 2004 Price

% of 2004 Price

% of 2004 Price

Year Year 

DOE Target DOE Target 

Annual Sales Growth Rate: 10% 20% 

Assumptions:Installed capacity as of the end of 2004: 163 MWSales in 2005: 64 MW
49

Future Performance Experience Curve » Projections for Inverter P

Price projections based on world inverter sales yield nearly identical to the U.S. case. 

World PV Inverter Prices – Learning Curve P

Projections for Various Learning Rates and Industry Growth R

LR = 5% LR = 10% 

0

102030405060708090

100

2005 2010 2015 2020 2025

0

102030405060708090

100

2005 2010 2015 2020 2025

0

102030405060708090

100

2

% of 2004 Price

% of 2004 Price

% of 2004 Price

Year Year 

Annual Sales Growth Rate: 10% 20% 

Assumptions:Installed capacity as of the end of 2004: 2,080 MWSales in 2005: 908 MW
50

Future Performance Experience Curve » Discussion of Projections

Based on NCI analysis of learning-curve rates, we bereasonable estimate for both the U.S. and internation

• Our central estimate for the learning rate is 10%, which is slig

figure obtained by the PHOTEX study. We believe the learninthe future for the following reasons:

1.Consolidation: As the inverter market matures, smaller m

rooted out and a limited number of manufacturers will takshares. As these manufacturers benefit from increasing vo

likely to accelerate.

2.Globalization: As manufacturers expand into new market

suppliers, they will benefit from larger sales volumes. In ain several markets will limit their exposure to unpredictabshould promote investment. The eventual harmonization oinstallations, interconnection, and inverters will help to ac

• The high degree of similarity between U.S. and world projecti

world and U.S. PV markets are both growing at a similar rate2005 represents about 40% of installed capacity for the United only slightly higher for the world, at 44%. Should the market the future, inverter price trends may differ more significantly world markets.
51

Future Performance Experience Curve » Discussion of Projections

Our central estimate based on learning-curve projectprices going down by about 42% by 2020.

• This assumes a 20% per annum market growth and a 10% learni• However, additional features and other technology improvemen

over time, such as data logging capabilities, communications anAdditional features are likely to be added in the future. Thereforcompare inverter prices over time, as the products are not unifo

• Therefore, while the DOE goal may appear difficult to achieve o

learning-curve improvements, it is likely that future products w

customer benefits. 

0

0.10.20.30.40.50.60.7

DOE G

Inv

The DOE target for inverter prices is $0.25-0.30/W by 2020.

3⁄4If the basis for current inverter prices is taken as 

~$1.00/W, which is representative of inverters in the 1-3 kW size range, then the price forecast for 2020 is $0.58/W, or about twice the DOE target.

3⁄4If the basis for current inverter prices is taken as 

~$0.65/W, which is representative of inverters in the 3-6 kW size range (Xantrex GT 3.0, SMA SB 6000), then the price forecast for 2020 is $0.38/W, still about 30% higher than the DOE goal.
52

Future Performance Future Prices » Manufacturer Expectations

Inverter manufacturers have diverging cost expectatiprojections made in the past have generally been ina

•SMA stated in mid-2004 that it wanted to reduce inverter prices b

2006.1 The observed evolution in inverter prices since then sugges

unlikely that this objective will be obtained. However, it is interes

further stated that:

ÖCost reductions to less than €250/kW did not seem possible wi

Break-through technologies that may enable further cost reducmodule-integrated inverters, high-frequency converters, and h

•More recently, SMA has stated that their goal for inverter costs w

specific price ($/kW) by 50% every five years.2

•Photon International reports that inverter prices have gone down 

2005 and that most manufacturers expect costs to decrease by 15-2years3. However, expectations vary across manufacturers:

ÖExendis expects reductions of more than 30% during the next 

ÖSun Power foresees only slight reductions in cost in the near fu

inverter prices to stabilize, at least for the next few years.

1. References 12 and 132. Reference 16

3. Reference 2
53

Future Performance Reliability » Manufacturer Expectations

Inverter manufacturers do not think that lifetime on years is achievable in the near term...

• Xantrex, Managing Director: “Why make inverters with a longer life when 

replacing the inverter every 10 years or so anyway? The inverters available products with higher efficiency.”

• SMA America, President: “Why focus on higher reliability? Our customers 

cost. In any case, it’s more cost-effective to just replace the inverter in 10 ye

• Sustainable Energy Technologies, Director of Operations: “A 20-year lifet

least 10 years away.”

• Mitsubishi: “A 20-plus-year life for inverters is impossible. Some parts of t

be replaced over such an extended period.”

• SMA, Head of Solar: “A 20-year lifetime is not possible.”• Fronius, Head of Sales (Germany): “Inverter MTBF may reach 12 years by 

can’t be achieved.”

• GE Energy indicated that 20-year life would not be practical without a sign

15-year life is more reasonable, and that should be reviewed based on life-c

• Contrary to statements made in a recent Photon International article (April 

other industry experts we spoke to do not believe that capacitor improveminverters that can “keep going for more than 20 years.”

... and most interviewed by NCI do not see this as 
54

Future Performance Next-Generation Inverters » Needed Improve

Next-generation inverters will enhance the competitithrough lower cost, higher reliability, and better perf

Next-Generation Inverter

Feature Description

Higher Efficiency

 Currently, maximum efficiencies are on the order of 95% for 

transformerless designs and innovative topologies are yieldone model claiming 98%.1

Lower Cost  A price target of around $0.2-0.3/W by 2020 has been set for 

a reduction of 50-75% from current levels. This is most likely increased production volumes and learning-curve improvem

Better Reliability  Inverter MTBF is now in the 5- to 10-year range. Ideally, inv

other PV system components (i.e. 25 years), but many questimprovements will ever be achievable at a reasonable cost. Ian MTBF of >10 years is likely to be achievable through impheat dissipation, and reducing complexity. 

Advanced Communication Capabilities

 Today, inverters can record and relay information using ma

protocols. Next-generation units should use a universal comrelay more comprehensive system information, enabling adand communication with the utility to support grid stability

DG Inverter  An inverter that can convert DC input from various DG sou

wind) will benefit from economies of scale, and new technocheaper, more reliable products for many DG applications.

1. SMA Sunny Mini Central 8000TL
55

Future Performance Summary

Achieving the targeted improvements of lower cost areliability for inverters is not a foregone conclusion f

• Based on learning-curve forecasts, the targeted cost reductions fo

achieved with current market growth and learning-rate levels.

 Significant uncertainty exists around the potential for future m

exceed current levels for an extended period of time. 

 Additional cost reductions will require an acceleration of learn

3⁄4Inverter prices have been dropping by about 10% with eve

cumulative production, compared to 20% for PV modules.

• Reliability and life issues for inverters have the potential to dama

the industry and long-term adoption of PV. 

 Because of market demands, manufacturers today are focused 

over improving reliability.

 Reliability and life improvements may not be achieved with c

industry. 

Â In order to increase the probability of achieving the goals of indu

necessary for the PV market to become sustainable over the long government support for inverter R&D is likely to be necessary. 
56

Table of Contents

1 Executive Summary2 Introduction3 Historical Perspective4 Future Performance and Cost Estima5 Challenges for Achieving Future Tar6 Addressing the Challenges 7 Suggested Role for Government
57

Challenges Overview

The PV inverter industry faces some significant challits longer-term targets for cost and performance impr

• Research shows that inverters have a slower learning curve than the PV m

implies that cost and performance improvements for inverters will lag beh

• Historical data shows that inverter costs have been falling approximately 5

– We anticipate this cost reduction curve to continue into the future, assu

as forecast. 

• Manufacturers generally feel that designing inverters for longer than 15 ye

general, is not necessary. Most manufacturers say that the more important lower first-cost. 

– A 20-year MTBF is viewed as not possible and may not be an appropria

• Inconsistent national and state regulatory standards have hurt PV inverter 

grow in the past, limiting many to focus on regional markets.

– This issue is gradually improving; but, in the United States, differences 

will likely continue to impede cost benefits associated with larger markthe next few years. 

• On the other hand, given their small size and relatively low level of sophis

manufacturers may benefit tremendously from small improvements to des(e.g. low-hanging fruit for cost and performance improvements).

– Improvement in components (such as capacitors), the trend to high-freq

transformerless designs are examples of opportunities that will contribu

performance improvements. 
58

Challenges Overview

Many of the challenges for PV inverters are a result omanufacturing and an inconsistent regulatory enviro

Manufacturing 1. Inadequate product-improvement processes

2. Lack of training3. Products rushed to market too quickly4. Lack of good quality-control processes5. Lack of investment in sophisticated testing and manufa6. Components purchased in small quantities

Design/Technology 7. Advanced semiconductor devices for switching needed 

8. Need to improve efficiency9. Limited experimentation with alternative inverter topo10. Capacitors available on the market are not well-suited t11. Lack of sophistication in inverter designs (e.g. leveragin

Regulatory 12. Regulations differ across PV markets

13. Regulatory complexity generally increases cost14. U.S. grid-interconnection regulations are a heavy burde15. U.S. requirements for PV installation increase costs sub16. Utility resistance to ungrounded systems

Policy 17. Few states have adequate incentives to promote PV ma

18. Changing policies hamper long-term investment decisi
59

Challenges Manufacturing Issues » Inadequate Internal Processes

Many manufacturers are small startups that lack the needed for quality control of product development a

1. Inadequate 

product improvement processes

Â Internal processes that provide the discipline, resource

needed for continuous product improvement are lackininverter manufacturers.

2. Lack of 

training

Â Inverter manufacturers typically have a small workfor

asked to perform several different tasks, often without 

3. Products 

rushed to market

Â The pressure to ship as soon as possible leads manufac

written and insufficient documentation, leading to low satisfaction and expensive customer support.

4. Lack of good 

qualitycontrol processes

 Due to limited resources, inverter manufacturers comp

– Inspections that can identify problems early in the m

not carried out properly.

– Proven methods such as “Highly Accelerated Life T

overlooked or not used.

– “Failure” documentation is inadequate or nonexiste

manufacturers typically have little information on ffield or during testing, making it difficult to identifcorrective action.

Â Inadequate quality control leads to reliability problem

additional costs on inverter manufacturers.
60

Challenges Manufacturing Issues » Small Production Volumes

Low production volumes make it impossible for manadvantage of mass-production technologies and volu

5. Lack of 

investment in sophisticated testing and manufacturing equipment

 Most inverter manufacturers are small companies

– They cannot afford expensive testing equipment ba

volume.

– Low production volumes cannot justify the investm

automated production line, and they do not have t

Â Inverter manufacturers cannot make investments that 

product quality, because their sales volumes don’t currmethods to detect design flaws such as “Highly Accelenot used.

6. Components 

purchased in small quantities

 Most inverter manufacturers purchase components in 

modest sales volume:

– They cannot benefit from discounts offered on larg

chain management

– With each new order for a given component, inver

purchase from different suppliers, depending on wprice. This results in wide component variations anproduct.

– Inverter manufacturers typically do not audit their 

Â Purchasing components in small quantities leads to hig

and impacts reliability.
61

Challenges Design/Technical Issues » Component Limitations

Components available on the market today do not adtechnical requirements of the inverters.

7. Advanced 

semiconductor devices needed for switching. (e.g. SiC devices)

 The various switching devices used in inverters to 

are another weak point for inverter reliability.

 There are technologies (e.g. SiC switches and integ

promise for better performance, but inverter manuin influencing the direction of R&D and most have 

capabilities in this area.

Â Switch reliability is currently inadequate for PV in

heat generation. New developments (such as SiC) aelectronics/semiconductor industry issue, and invehave little influence in directing research in this ind
62

Challenges Design/Technical Issues » Design and Testing Standar

Lack of resources and design experience hampers invdesign and development improvements.

 Converting DC to AC current can be done 

using a variety of approaches. The various designs that inverter manufacturers incorporate in their inverters to accomplish this task are known as “topologies.”

 Various topologies yield different inverter 

performances in terms of reliability, efficiency, and cost. While there is generally a trade-off between these three objectives, some topologies are simply better than others and can improve inverters in every respect.

Â Inverter manufacturers do not have the resources to ex

extensively, so potential inverter improvements may be 

9. Limited 

experimentation with inverter topologies

Cost 

 Maximum efficiencies are typically near 95% for U.S. in

do not have consistent methods for rating inverters and the load curve for quoting the rating. 

 Consumers do not have an easy way to compare invert

Â Certification processes could provide standard test me

Design improvements and elimination of transformers 2% or more. 

8. Need to improve 

efficiency and the standards for ratings1

1. The CEC recently adopted and is using a major portion of Sandia's Test Protocol for Certification of Invert

California's published numbers. Still, more needs to be done for features such as MPPT.
63

Challenges Design/Technical Issues » Components Limitations

Component limitations and lack of design experiencinverter product design and development.

10. Capacitors 

available on the market not suited for PV inverter applications.

 Capacitors are often cited as the most severe reliability 

They are extremely sensitive to temperature (electrolymanufacturer reports that an increase of even 10°C ca(Heliotronics, President, January 2005).

 There are capacitor technologies that show promise fo

PV inverters, but R&D in the capacitor industry is lim

 The capacitor industry is not responsive to PV inverte

inverters account for a small fraction of capacitors sold

Â Capacitor reliability is currently inadequate for PV in

that inverter manufacturers can do to influence the ca

than design around the problem, which impacts cost. 

11. Lack of 

sophistication in inverter designs

 Engineers from other, more mature industries where p

have commented that inverter designs are unsophistic

improved with some fairly easy fixes (Sun Power, NoJune 2005). 

Â Many PV inverter manufacturers lack knowledge or b

power electronics design.
64

Challenges Regulatory Issues » Inconsistent Requirements and Comple

Lack of an international standard creates regional maIn the U.S., regulations are particularly burdensome 

12. Regulations 

differ across PV markets

 Regulations for grid-connected PV inverters vary a

requirements across some countries (e.g. Germany, Switzerland) vary only slightly, and manufacturers inverter models to reach these markets.

 Requirements are most stringent in the United Stat

manufacturers who want to serve this market need specifically for the United States in order to meet re

Â This lack of uniformity creates regional markets, m

for manufacturers to create a global product (as wistandardization across markets, potential economie

13. Regulatory 

complexity increases cost

 Regulatory differences between states or countries 

modifications and specialization, which increases c

 Different safety requirements, interconnection, or t

increase the cost for manufacturers for selling their 

markets.

Â Product lines vary by market, and some companie

states and not others. These issues lead to higher p
65

Challenges Regulatory Issues » Requirements for Grid Connection

Requirements for grid connection vary significantly IEEE standards that are expensive for manufacturers 

14. U.S. gridconnection 

regulations are a heavy burden on inverter manufacturers

 U.S. manufacturers face confusing regulations.

– In 2005, UL 1741 and IEEE 1547 have apparently 

way that should help resolve some of the confus

with these two standards. Ongoing changes to thstandards is likely to continue to create challeng

– Acquiring the UL 1741 standard costs nearly $10

for small players; and modifications typically reqwhich is a barrier to making improvements.

– Utilities can also adopt their own standards, add

Â UL standards are a damper on innovation, because 

require new testing for modest changes to designs. Ugovernment can also require their own standards, w
66

Challenges Regulatory Issues » System Configuration and Grounding

Inverter and installation costs are significantly higheby complex requirements and local codes that still re

15. U.S. 

requirements for PV installations increase costs substantially

 Manufacturers who sell PV inverters in European m

States – report that installation costs are substantiall

– The installed cost of a 5 kW system is about €4.2 

opposed to $6.50 – 9.00/W in the United States (HSolar Electronics Division, Fronius, January 2005

– The cost of installation of a 5 kW system is about 

Germany, as opposed to $1,400/kW in the U.S.

 One of the areas of higher cost in the United States i

for externally accessible AC disconnects and condui

Â Roughly speaking, installation costs for PV in the U

that of Germany.

16. Utility and local 

resistance to ungrounded systems

 Ungrounded PV array installations are allowed by t

Code, which means that transformerless inverters co

 However, it is expected that these systems may be d

and regulators to accept without substantial additiostandards.

Â Resistance to transformerless designs impacts oppo

inverter improvements: higher efficiency, lower wei
67

Challenges Policy Issues » Fragmentation and Inconsistency

PV market growth is restricted to a handful of states, for inverter manufacturers and hampering investmen

17. Few states have 

adequate incentives to promote PV market growth

 Several states have very good incentives for PV (e.g. 

states in areas such the Southeast have no buy-down 

incentives to stimulate installations of PV. 

Â Where incentives are inadequate, the PV market wil

and potential economies of scale in the United States will remain untapped.

18. Changing 

policies hamper investment

 Major investment on the part of inverter manufactur

of confidence in future income streams.

 Uncertain or changing incentives for PV create the w

manufacturers, who respond by putting their produas possible, without investing in lengthy product deassembly and testing equipment.

Â Without stable PV support policies, inverter manufa

make substantial investments to improve their prod
68

Challenges Low Production Volumes

The majority of challenges faced by PV inverter mantraced back to low production volumes.

“Economies of scale will create a downward pressure on PV inverter costs.”Sun Power, North American Manager, June 2005“Our costs have gone down 50% due to volume. Volume is the only cost driver.”SolarMax, Managing Director, June 2005

“Sales volume in will drive the priSiemens, June 2005“SMA believes threductions will bof new designs, nless components, quantities.”SMA, Head of Solar 

 There does not a appear to be a “silver bullet” technology 

could cause a major drop in inverter cost. 

 The industry anticipates incremental cost and performanc

the foreseeable future.
69

Challenges Market Share of Inverter Manufacturers

The PV inverter supplier base is composed of a few bwith considerable resources and many smaller playeare more likely to benefit from government program

SMA

41%

Xantrex

19%

Sharp

13%

Siemens

6%

Outback

6%

PV 

Pow ered

6%

Others 3%

Fronius

6%

Studer

11%

Siemens

5%

Mastervolt

5%

Philips

5%

Kaco

5%

Sputnik

5%

Xantr

5%

U.S. Inverter Market Distribution 

(% KW Sold in 2004)

European Inverter 

(% of KW S

Source: Navigant Consulting Analysis, August 2005
70

Challenges Conclusion

NCI’s assessment is that there is an important role fothe support of PV inverter improvements for the nex

• In general, larger companies in the PV inverter business view the role of go

assistance (via programs to reduce cost and increase reliability) as being les

and the long-term future of the industry. 

— Most larger companies NCI spoke to believe that increasing sales volum

factor that will lead to lower cost and higher reliability for PV inverters

• Despite the views of larger companies, introducing a new inverter product 

venture for some large companies. For example:

— Xantrex experienced significant problems with their early PV inverters 

market share to new European market entrants.

— Philips entered the PV inverter market in Europe, only to exit a few yea

significant technical problems with their first product.

• The PV market will be in a critical growth phase during the next 5-10 years, 

significant policy and market support to achieve the overall cost and perforsustainable market.

• If small manufacturers have more difficulty meeting the reliability requirem

cannot afford to provide adequate after-sales service, it could hurt the PV in

(inadequately performing inverters will hurt the industry). 

• While some consolidation in the inverter business should be expected, the b

innovation provided by the smaller companies are likely to be important to 

early stage of development. 
71

Table of Contents

1 Executive Summary2 Introduction3 Historical Perspective4 Future Performance and Cost Estima5 Challenges for Achieving Future Tar6 Addressing the Challenges 7 Suggested Role for Government
72

Addressing the Challenges Overview

Apart from influencing standards and increasing magains will come from addressing design/manufacturi

Challenge Addressing th

Manufacturing/Testing

1. Inadequate product improvement processes2. Lack of training3. Products rushed to market too quickly4. Lack of good quality-control processes5. Lack of investment in sophisticated testing and 

manufacturing equipment 

6. Components purchased in small quantities

 Assistance for inverte

process improvement 

 Better understanding  Training and support  Standard testing meth Assistance with HALT 

lowering risk associat

 Consistent informatio

Technology/Design

7. Advanced semiconductor devices for switching needed 

(e.g. SiC diodes)

8. Need to improve efficiency9. Limited experimentation with alternative inverter 

topologies

10. Capacitors available on the market are not well-suited to 

PV inverter applications

11. Lack of sophistication in inverter designs12. Regulations differ across PV markets13. Regulatory complexity generally increases cost14. U.S. grid-interconnection regulations are a heavy burden 

on inverter manufacturers

15. U.S. requirements for PV installation increase costs 

substantially

16. Utility resistance to ungrounded systems

Regulatory

17. Few states have adequate incentives to promote PV 

market growth

18. Changing policies hamper investment

 Development of advan

component technolog

 Modeling tools for exp

thermal management 

 Support design of alte

reduce cost of inverter

 Modular designs that 

components for multi

 Development of appro

 Harmonization of reg Simplification and sta

requirements

 Studies and assessmen

safety issues, and a br

Policy  Long-term programs f

 Policy that supports th

support the inverter in
73

Addressing the Challenges Assistance for Inverter Manufacturers

Some manufacturers can benefit from assistance in pthe tasks they cannot do, due to their small size and l

Inverter Manufacturing and Testing

Process Improvement Techniques and Training

 General support in understanding process-imp

other industries (semiconductors, electronics, emanufacturing cost.

 Training and support in quality-control techniq

volume manufacturing industries (semiconduc

Failure Documentation

 Development of a database to document invert

Analysis of this database would allow inverter failure modes and correct their designs to impr

Testing Support –Performance, HALT and HASS

 Assist manufacturers by providing support for 

imaging for thermal management testing, highidentify weaknesses, HALT and HASS, etc.

 Assistance in developing methods and protoco

specifying inverter efficiency.

Component Testing and Documentation

 Test components (e.g. capacitors) to measure th

their performance – and document the results. variation between components available on the documentation would allow inverter manufactavailable components to incorporate into their 
74

Addressing the Challenges Assistance with Technology and Desi

Many potential inverter technology and design imprbeen identified. 

New Inverter Technology and Design (1 of 

DER inverters1  Inverters used for a variety of DER applications cou

quantities, allowing manufacturers to benefit from 

 The challenge for PV inverter manufacturers is to u

requirements of other DER applications and design other applications.

Note: Sustainable Energy Technologies has already 

that relies on essentially the same design as its fuel 

Modeling  Develop and provide modeling tools to enable man

various inverter designs.

 Develop models for environmental conditions and 

to help inverter designers understand operational r

Innovative Topologies

 Innovative topologies can reduce capacitor require

thermal management problems that lead to premat

components – but developing new topologies takes 

Installation and Connection Features

 Connectors have been a reliability issue for inverte

needed to simplify, standardize, and improve inve

1. Inverters that can be used for multiple distributed generation energy sources are referred to as distribute

generation (DG) or distributed energy resource (DER) inverters.
75

Addressing the Challenges Assistance with Technology and Desi

Many potential inverter technology improvements hidentified (continued).

New Inverter Technology and Design (2 of 3

Circuit Integration  Interconnections between internal inverter comp

for reliability. Integration of functions within imthe number of interconnections. R&D is needed 

and bring it to maturity.

Thermal Management

 Thermal management is a major reliability issue 

many components are highly sensitive to tempemodeling tools are needed to allow manufacturethermal management strategies.

Modular Design  Modular construction of inverters would reduce 

internal functional elements of inverters. This is that could benefit from further study.

Note: Modularity may cause listing difficulties w

Replaceable Capacitors

 To cope with the limited life of capacitors, it has 

inverters be designed such that capacitors may bcost-effectiveness of this approach needs to be a
76

Addressing the Challenges Advanced Inverter Components

Inverter manufacturers need cheaper, more reliable cmake less expensive, more reliable inverters.

New Inverter Technology and Design (3 of 3) - Advanced 

Capacitors  Inverter manufacturers frequently state that the c

are inadequate. Specifically, manufacturers need cost of today’s capacitors.

 R&D is needed to develop improved capacitors, 

industry does not have the resources to carry out the capacitor industry, due to the relatively low vother electronics applications.

Switches  Switches based on SiC hold the promise of better 

tolerate higher temperatures, can handle very higlow resistance, and can operate at high frequency inverter improvements in weight, size, cost, relia

 Commercial applications of SiC are currently lim

immaturity and high cost.

Transient Surge Devices

 Research in TSDs is currently minimal, but impro

both DC and AC circuits.
77

Addressing the Challenges Assistance with Regulatory Standards

Manufacturers need regulatory standards that are cleacross markets – and not constantly changing. 

Regulatory Assistance

Harmonization  Push for harmonization of the various standard

connection of PV inverters and other DER.

Reduce Burden on Manufacturers

 Increase participation of manufacturers in devel

subsidizing cost of attending meetings.

 Subsidize cost of acquiring standards.

Acceptance of Ungrounded Arrays

 Address utility misgivings regarding safety con

arrays and transformerless inverters. Experience needs to be transferred to the United States.

Communications Standard

 A standard for communicating DG system infor

1. Remote monitoring and system diagnostics 

software platform.

2. Efficient communication between DG invert

minimize DG interruptions and improve gri

Note: Efforts underway at IEEE and IEC will addr

Standard Metrics for Inverter Performance

 There are no established methods for rating inve

consumers and installers can use to compare invbe reported in any number of ways). This would the market and favor better inverters while root

1. The CEC recently adopted and is using a major portion of Sandia's Test Protocol for Certification of Inve
78

Addressing the Challenges Assistance with PV Policy

One of the most important challenges facing the indulong-term, consistent policy to support market develonational basis.

Policy Assistance

Long-Term, Consistent PV Policy Support

 The U.S. policies for support of PV are currently 

state, and local programs. While some programs are multiyear programs to meet PV installation g

 Long-term support to programs to build the mar

without stops and starts, will help the industry mvolumes in a way that will allow continual cost rreliability and performance improvement. Becaumost important driver in achieving goals of the inof the most critical to the industry. These policies whole, not just for inverters. 
79

Table of Contents

1 Executive Summary2 Introduction3 Historical Perspective4 Future Performance and Cost Estima5 Challenges for Achieving Future Tar6 Addressing Challenges 7 Suggested Role for Government
80

Suggested Role for Government Overview

Long-term cost reduction and performance improvemgreatly from the ongoing support of additional gover

• Inverter testing at Sandia National Labs is extremely valuable to the in

support of development of testing protocols is important to the indus

• Documentation of failure analysis in the industry is not conducted un

for government would be in collecting and documenting inverter failu

industry. 

• Modeling tools would be helpful to manufacturers, but developing ac

challenging. An assessment of issues and needs related to modeling wbefore embarking on new modeling efforts.

• The HRII program is generally considered to have been successful. Fo

R&D partnerships such as this should receive government support.

• Cost and efficiency benefits of tranformerless inverters are understood

and cons of tranformerless inverters as a means of educating inspectobe beneficial.

• Analysis of the interaction of the various federal, state, and municipal 

be increasingly important to future industry growth needed for long-
81

Suggested Role for Government Overview

Several issues identified are common to all DER invebe addressed as part of crosscutting research program

• Comprehensive information on inverter components (capacitors, 

power semiconductors, etc.) and options would assist manufactubest products.

• Innovative inverter topologies have been suggested to provide m

for government may be to support experimental topologies as a mthe industry.

• Manufacturers would benefit from understanding the costs and b

HASS testing programs. Government could assist by providing gexperience from other industries. 

• Several other areas identified for PV inverters may also have broa

inverters, such as modeling and HALT and HASS testing protocoprograms for PV are likely to be required. 
82

Suggested Role for Government Overview

Government’s most important role will continue to bstudies and information to facilitate design and prod

Addressing the Challenge (Industry Need) R

Manufacturing/Testing

 Assistance for inverter manufacturers with information and 

process improvement techniques from other industries

 Better understanding of failure causes Training and support in quality management Standard testing methods to measure and quote efficiency Assistance with HALT and HASS methods and techniques for 

lowering risk associated with new product introduction

 Consistent information on component design characteristics

 Government facili

class inverter testiestablishing rating

 Provide access to 

capabilities to sup

 Provide training a

techniques from o

 Provide support t

provide better inf

 Studies on HALT 

Technology/Design

 Development of advanced switching, capacitor and other 

component technologies for PV and DER inverters

 Modeling tools for experimentation with alternative 

topologies, thermal management techniques, and new designs

 Support design of alternative inverter topologies to simplify 

and reduce cost of inverters

 Modular designs would allow lower cost, interchangeable 

components for multiple applications

 Develop appropriate standards across the industry Harmonization of regulatory requirements Simplification and standardization of interconnection 

requirements

 Studies and assessments of options for ungrounded designs, 

safety issues, and a broader understanding of the implications

Regulatory

 Long-term programs for national incentives for PV.

 Policy that supports the PV industry broadly, which will also 

support the inverter industry

 Government can p

support the develsupport DG needs 

 Funding assistanc

that significantly lefficiency

 Provide support f

design work (e.g. 

 Assist the industr

regulatory require

 Support studies th

regulatory require

 Support studies an

cons of unground

Policy  Conduct analysis 

better understandmarket growth
83

Suggested Role for Government Inverter Testing 

Inverter testing at Sandia National Laboratories helpexperiment with innovative designs and improve the

Inverter Testing Benchmarking tests to evaluate inverters against manufacturer specifica

generally agree that a comprehensive program of inverter testing and perbe very valuable to the industry.

 Development testing protocols to assist manufacturers in testing new inv

 Utility compatibility and islanding tests. This type of testing provides m

information on their inverters’ ability to meet UL 1741 requirements. Varsystem-specific tests to be performed to understand the effect of PV inverexists regarding the value of this, but it will remain a requirement.

 Temperature evaluations. These tests allow manufacturers to study temp

various strategies for thermal management, which are critical for produc

Verification, validation, and characterization is extremely valuable 

who often do not have extensive in-house testing capabilities. Sandthe resources necessary to support development of inverters for th
84

Suggested Role for Government Failure Documentation

Government can assist manufacturers in improving pby studying and documenting failure of inverters in 

Documentation of Inverter Failures Data of failure of inverters in the field is lacking. Most inverter manufact

number of shipped units that were returned by customers, and little mor

look into what caused the inverter to fail.

 Larger companies are apparently capturing and documenting informatio

but information is considered confidential. 

 A comprehensive database of inverter failures would enable manufactur

weakness in designs and take corrective measures.

A possible role for government would be to conduct an extensive s

document inverter failures and provide the results to manufacture
85

Suggested Role for Government Component Documentation

Documentation of information on key inverter compassist manufacturers with design choices. 

Component documentation Inverter manufacturers have commented there are substantial differences 

components (e.g. capacitors) available from different suppliers.

 Inconsistent specification, data sheets, and testing results exist on some o

inverters (e.g. capacitors, fans, electrical connectors, power semiconductofor manufacturers to make proper comparisons of options. 

A comprehensive study of inverter components would help manufavailable products.However, because components used in inverters are also used in mlikely this type of work should be conducted as crosscutting researand power electronics. 
86

Suggested Role for Government Modeling Tools

Manufacturers need modeling tools to help with probut do not have the resources to develop them.

Modeling Tools Manufacturers lack the resources to develop modeling tools for inverters

manufacturers’ ability to explore options and select the optimal design.

 Sandia has the expertise to develop inverter models, and this type of wor

However, one Sandia expert has commented that modeling of inverters wcompletely accurate models may be nearly impossible to achieve, simplifuseful.

While modeling tools would help manufacturers develop their promodels is challenging. Therefore, resource requirements and the lim

results with this type of work needs to be examined before making new modeling tools.
87

Suggested Role for Government HALT and HASS

Manufacturers would benefit from understanding thbenefits associated with HALT and HASS testing. 

HALT and HASS Testing Methods Highly Accelerated Life Testing (HALT). This type of test subjects the in

conditions in order to identify weak points in reliability for new designs. manufacturers conduct this testing, but most do not have resources or an testing procedures to follow.

 Highly Accelerated Stress Screening (HASS). Production testing to scre

operating and destruct limits based on HALT testing. Few manufacturers perform this testing, and its value for PV inverters is not understood by m

Information and guidance regarding the value and applicability of 

inverters would benefit the industry. The trade-offs on cost, reliabi

need to be more fully understood. A possible role for government would be to provide assistance to mHALT and HASS programs, as well as general guidelines to follow
88

Suggested Role for Government Public-Private R&D Partnership 

The success of HRII indicates that government shoulfunding another similar initiative.

Public-Private R&D Partnership The High Reliability Inverter Initiative (HRII), launched in 2002, will com

contractors selected (GE, Satcon, Xantrex) are developing prototypes of one manufacturer has commented that their involvement in HRII has sig

development, by allowing them to explore options that would otherwise 

 It should be noted that Sandia received many responses to their RFQ, six 

excellent. But only three manufacturers could be selected due to funding 

 Programs such as this may be appropriate for development of advanced 

switches, capacitors, and connectors that would benefit the broader DER 

A formal review of the HRII program should be completed and shallow others to understand some of the key findings.At this point, the results of HRII appear promising. Pending an evappraisal of HRII success, another similar initiative may be a good Use of similar approaches for DER inverter components should be 
89

Suggested Role for Government Alternative Inverter Topologies 

Innovative inverter topologies could be a source for areduction and reliability and performance improvemfor government may be to fund studies to understand 

Alternative Inverter Topologies Innovative control and inverter design topologies have the potential to be 

improved thermal management, and improved reliability. Several manufthere could be many advantages to the exploration of alternative topolog

 Alternative topologies could be used to standardize “sub components” th

product lines or in power electronics for other DER products. 

Government could consider funding studies on the potential beneftopologies. Many benefits have been suggested, but there does not direct evidence of the specific gains that might be achieved. Research could focus on experimental topologies, with the objectiv
90

Suggested Role for Government Ungrounded Arrays 

Government should consider conducting an assessmcost, and reliability benefits that could be derived froof transformerless inverters. 

Benefits and Issues Associated with Ungrounded Arrays The 2005 National Electric Code allows the use of ungrounded arrays, bu

utility interconnection in the United States still requires grounding. Therbenefits associated with eliminating transformers, but there is not accepta

schemes – and there are concerns about safety at local and utility levels. Lregulators do not generally accept other protection schemes. 

A sponsored study on the pros and cons of ungrounded arrays and could be a general benefit to the DER industry. There is significant tranformerless inverters and transferring this knowledge to the Unvaluable to the industry. 

Note:

Magnetek announced on January 9, 2006, that its transformerless Aurora invCEC. (source: Business Wire)If the Aurora inverters are adopted by some PV system designers/installers, 

first step in allowing transformerless inverters to enter the U.S. market.
91

Suggested Role for Government Standards 

Standards are a major complaint of manufacturers, bfor DOE in this area may be limited.

Standards Grid connection: Manufacturers repeatedly ask for standards to be harmonize

and transformerless inverters to be accepted, and for relaxation of installation 

 Communication: Standards for communicating PV system information are nee

for utility interaction. Without a single, universal standard, manufacturers will 

standards that will lead to fragmentation and hamper growth of this technolog

 Performance metrics: Sandia and Endecon Engineering (now BEW) are curren

Performance Test Procedure. Manufacturers have been asking for this type of s

activity should continue.

Grid connection and installation: These standards are the domain of orIEEE (IEEE 1547), and NFPA (NEC 2005). However, DOE may be able tor provide leadership to help bring about the changes that inverter man

addition, the following specific recommendations have been made relat

1. Subsidize the cost of acquiring the UL 1741 standard.2. Subsidize the cost of attending UL 1741 meetings to encourage indu

Communication: EPRI is leading the effort to develop a communication 

should support this initiative.Performance metrics: Sandia and Endecon Engineering are currently dePerformance Test Protocol. Manufacturers have been asking for this typ

this activity should continue.
92

Suggested Role for Government Policy Assessment 

Understanding the role of incentive programs and pobe critical to the long-term growth necessary to meet performance, and reliability goals. 

The Impact of Alternative Policies and Incentives for PV Increasing market volume is one of the major drivers in achieving cost a

inverters. Market volume in the United States is growing, but not to the 

Japan.

 There is significant fragmentation in policies to promote the adoption of 

and New York lead the country with programs to buy-down the price opolicy provides investment tax incentives. European feed-in tariffs have 

rapidly growing market and are driving most of the investment in the in

 An assessment of impact of alternative policies would benefit the indust

Government could fund a study of the impact of PV policy prograunderstanding the relationship of program design to market growmaking U.S. policies more effective. Understanding the interactio

municipal programs will be increasingly important to further indu
93

References

1. Photon International, Invasion of the inverters, April 2004.2. Photon International, Market Survey of Inverters, April 2005.

3. Renewable Energy World, Choosing the right inverter, March-April 2004.4. Photovoltaics, Looking to Spain, September-October 2004.

5. R.West et al., Status and Needs of Power Electronics for Photovoltaic Inverters: Summ

SAND2002-1085, May 2002.

6. Dan Ton, Ward Bower, Summary Report on the DOE High-tech Inverter Workshop, 7. Dan Ton, Ward Bower, Summary Report on the DOE Workshop On a Systems-drive

Development, September 2003.

8. Gonzalez et al., PV Inverter Testing, Modeling, and New Initiatives, NCPV and Sola

NREL/CD-520-33586.

9. Bonn, Russell H., Developing a “Next Generation” PV Inverter, IEEE 2002.10. Sarjeant et al., Capacitive Components for Power Electronics, IEEE 2001.11. IEA, Grid-connected photovoltaic power systems: Survey of inverter and related protec

Report IEA-PVPS T5-05: 2002, December 2002.

12. Jan Schaeffer et al, Learning from the Sun, Final report of the Photex project, Aug13. Jan Schaeffer et al, Photovoltaic Experiences, Synthesis report of the Photex-projec14. Solar Electric Power Association, Residential PV Systems Cost Report, December 215. Solar Electric Power Association, Large Systems Cost Report – 2001 Update, Septem16. Photon International, PV industry in high spirits at Intersolar, August 2005
94

References

Conference Interviews June 6-9, Barcelona, Spain

1. Mitsubishi2. SMA3. Fronius4. Outback5. GE6. Xantrex7. Sustainable Energy Technologies8. Heliotronics9. SunPower10. Siemens11. PowerLight12. SolarMax
95

NCI Contacts

Lisa Frantzis | Director

Lfrantzis@navigantconsulting.com781-270-8314 direct

Etienne Parent | Consultanteparent@navigantconsulting.com781-270-8428 direct

Paula Mints | Associate Directorpmints@navigantconsulting.com415-356-7174 directDavid Walls | Directordwalls@navigantconsulting.com781-270-8436 direct

Shannon Graham | Managing Consultant

sgraham@navigantconsulting.com415-399-2164 direct
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4. TITLE AND SUBTITLE

A Review of PV Inverter Technology Cost and Performance 

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The National Renewable Energy Laboratory (NREL) has a major responsibility in the implementation of the U.S. 

Department of Energy’s (DOE’s) Solar Energy Technologies Program. Sandia National Laboratories (SNL) has a 

major role in supporting inverter development, characterization, standards, certifications, and verifications. The Solar 

Energy Technologies Program recently published a Multiyear Technical Plan, which establishes a goal of reducing 

the Levelized Energy Cost (LEC) for photovoltaic (PV) systems to $0.06/kWh by 2020. The Multiyear Technical Plan 

estimates that, in order to meet the PV system goal, PV inverter prices will need to decline to $0.25-0.30 Wp by 

2020. DOE determined the need to conduct a rigorous review of the PV Program’s technical and economic targets, 

including the target set for PV inverters. NREL requested that Navigant Consulting Inc.(NCI) conduct a review of 

historical and projected cost and performance improvements for PV inverters, including identification of critical 

barriers identified and the approaches government might use to address them. 

15. SUBJECT TERMS

NREL; Navigant Consulting Inc.; NCI; Solar Energy Technologeis Program; solar; PV; photovoltaics; PV inverters; 

Sandia National Laboratories; SNL; multiyear technical plan; European market; learning rate; U.S. manufacturers; 

inverter topologies; Highly Accelerated Life Testing; HALT; Highly Accelerated Stress Screening; HASS; High 

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