US Solar Developers Need to Look Beyond Capex—and Start Thinking About the Long Term
A more holistic view of capex could drive U.S. EPCs toward string inverters.
Utility-scale solar projects in North America are different from those built elsewhere in the world. Solar project costs drive procurement and design decisions no matter the location. But in the U.S., upfront cost is king.
“The engineering, procurement and construction (EPC) firms in North America tend to have a capex-oriented perspective while most everyone else in the deal has a long-run perspective,” said Bates Marshall, vice president and general manager of Huawei FusionSolar Smart PV solution for North America.
The strong focus that North American EPCs have on capital expenditure is the result of two central factors: risk and time. “Because of the [Investment Tax Credit], the deal structure in large-scale solar plants in the U.S. is very complex,” said Marshall.
In particular, it requires EPCs to serve not just as construction companies, but also as guarantors that the power plant will meet its nameplate power output.
“That is unique. Construction companies elsewhere in the world usually build the plant and that’s it,” said Marshall. “They’re not providing this big risk transfer. The critical task that we have is to show the EPC companies that string inverters offer less risk when compared to traditional central inverters. The other interesting aspect of U.S. EPCs is that they’re not in it for the long haul. Their time horizon is one year or two, and then they’re out.”
This large measure of risk combined with a short time horizon translates into U.S. EPCs' laser focus on capex. “Those different perspectives can be in opposition because there’s lots of technology that has come into the market with the promise of long-run benefits in exchange for a short-run premium,” added Marshall.
The focus on capital expenditure means that EPCs in the U.S. have historically chosen central inverters, which are cheaper upfront overall, at a higher rate than string inverters compared to the rest of the world.
In China, nearly half of utility-scale projects used string inverters in 2016, according to GTM Research, yet less than 5 percent of utility-scale projects in the U.S. chose string inverters last year. European rates of string inverter adoption for large-scale projects are much higher than the U.S., although not as high as China.
The importance of considering “all-in capex”
But that paradigm is beginning to shift. By 2022, GTM Research expects more than 20 percent of U.S. utility-scale projects to choose string inverters now that high-powered 1,500-volt products have proliferated in the market. Prices dropped by 26 percent in 2016 for three-phase string inverters, according to GTM Research. Globally, prices for all inverters, central and string, are expected to decline in the next five years.
As prices come down across the board, Huawei says its three-phase 1,500-volt string inverter has an "all-in capex" advantage today of $0.02 per watt over central inverters, which it expects to see widen to $0.04 in 2018.
Huawei considers all-in capex as both the price of the string inverter and all of the balance-of-system (BOS) costs, a critical consideration for how parity is defined. “When we talk about capex parity, we are careful to talk about the all-in capex parity. It’s the entire plant,” said Marshall. “The fact is the BOS costs for a utility plant designed around string inverters is considerably lower cost than the BOS costs for a central inverter based plant.”
Huawei uses its size to drive down costs by both focusing on producing just one inverter. Last year, it shipped nearly 20 gigawatts of its three-phase string inverter, making it the global leader for inverter shipments.
It can also leverage other areas of its business to get cost efficiencies in its inverter business. “Our company has provided energy solutions for telecoms for 30 years,” Marshall said. “That means the basic technologies of power conversion -- DC to DC, DC to AC -- have been core competencies of the company for three decades.”
Inverter design can push costs even lower
Huawei’s design eliminates the need for fuses on the DC side of the inverter. The company’s string inverters have just two strings of modules attached to each multiple power point tracker. The result: each string can withstand reverse current from the other string, eliminating the code requirement for DC fuses.
While Huawei believes it already has a $0.02 per watt all-in capex advantage today, it expects to expand that advantage with products set for release in 2018. One is the release of a 95 kVa inverter, substantially larger than its current 50 kVa inverter.
“By going to a larger footprint, we reduce the labor and BOS components required,” he said. “By moving to the 95 kVa device, we expect another $0.01 reduction in the all-in capex.” In addition, Marshall says Huawei is planning to deliver innovation on the AC combining side of the inverter that will bring another $0.01 to $0.02 savings.
“I was on a panel at a utility-scale event earlier this year, and one CEO said that it’s not even controversial that string inverters are the future,” said Marshall. “I laughed, because six months previous, nobody would have said that, and now it appears to be common knowledge.”
Source: www.greentechmedia.comBack to blog