Microinverter Pioneer Enphase Energy Goes IPO – Disrupting Solar!

Apr52012

The solar market has grown far beyond what most analysts had predicted even 5-10 years ago, and Applied Materials has played a key role in driving down the costs of solar modules by helping to improve efficiencies and through advances in solar cell manufacturing technology.

However, while falling module prices have made solar somewhat more affordable, the net system installed cost is still very high, especially in the residential and commercial markets. As anyone who has tried installing a solar system on their rooftop knows, the final, installed price is still high, largely because of the balance of system (BOS) – all the upfront costs associated with a photovoltaic system except the module* – hasn’t declined at the same rate as the modules prices. If we could lower the BOS cost, we believe a great deal of pent-up demand could be unleashed.

In 2007, Applied Ventures, the venture capital team at Applied Materials, examined the overall solar landscape to look for areas we could invest that would help reduce the overall net systems cost. We looked at startup companies that could disrupt the current status quo and bring down the BOS cost. One of the key areas ripe for improvement was the existing centralized inverter system which converts the DC power from the various modules (which are connected in series) and converts it into AC, ready to be fed into the grid. This centralized inverter architecture has a number of shortcomings that reduces the cost-per-watt and drives a lot of the design and installation choices.

First, if one module in the string is shaded, even by something small such as a tree branch, the output of the entire string would fall. Second, it’s challenging to mix and match the modules with different power specifications on the same string and string balancing required training and made it harder for the user to add new modules. Third, the use of DC cabling from the module to the centralized inverter created cost and safety issues: DC cable is much more expensive and because of live DC wires, highly skilled professionals are required to supervise each installation to ensure against safety hazards. Lastly, the expected lifespan of a central inverter is considerably shorter than the modules themselves, forcing operators to consider the expense and inconvenience of periodic inverter replacement.

In 2007, we identified Enphase Energy as a company that could disrupt the existing BOS model. Their key idea was to eliminate the big central inverter by attaching a “microinverter” to every module. The modules could thus be connected up in series – curing the shading problem – and allowing the use of ordinary, cheap, safe domestic AC wiring. To increase energy harvest even more, Enphase microinverters feature an innovative “burst mode” that can capture more power during low-light conditions. As a bonus, their microinverters were intended to last as long as the modules. It’s worth a detour to their website, which explains their innovations in much greater detail than I can in this blog post.

Clearly, Enphase had great technology, but a number of additional factors drove us to invest in Enphase. The Enphase team, many of whom had previously worked on developing reliable system solutions for the telecom market, was highly focused on providing a reliable, end-to-end solution. Their software monitoring allows system owners to scrutinize their system performance at the module level – a much higher level of granularity than is possible with central inverters. And most importantly they also made sure that the design and architecture lent themselves towards making permitting, labor and installation cheaper and faster. Enphase has shipped more than 1.5 million micro-inverters to date and has gained significant traction in the US and a growing presence in European markets.

As one of the early investors in Enphase, I was very pleased to watch the company grow and see the Enphase team ring the bell on the NASDAQ as they went IPO. Looking back at what Enphase has been able to accomplish, it has been very gratifying to have been able to support Enphase beyond just the investment. Enphase has been able to draw upon the resources of Applied Materials to help the company and the founders pursue their vision: to provide a solution that enables renewables to connect to the grid much more effectively than ever before.

At Applied Ventures we continue to be bullish on the long term prospects for solar energy and indeed the whole cleantech sector. We are actively looking at opportunities across the cleantech sector globally. If you are a cleantech entrepreneur or start-up I would love to talk to you and encourage you to leave a comment in the section below.

 


* I should mention that although the Department of Energy’s glossary defines BOS this way, some prefer to break out installation costs separately. So, sometimes you’ll see the phrase “BOS installation costs” used instead.

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