“We cannot compete:” Why global inverter giant quit Australia’s home solar market

The head of global inverter giant SMA Group says it is no longer able to compete with Chinese rivals in the home and commercial market in Australia, although the country remains one of its biggest market based on the large scale utility business alone.

Chief executive Jürgen Reinert says the decision to close down its operations in the Australian domestic market, along with other countries, was driven by its inability to match Chinese competitors on costs.

“We cannot compete, to be honest, on any good, reasonable scale,” Reinart says in an interview in the latest episode of Renew Economy’s weekly Energy Insiders podcast.

“We said we would exit some markets, and as Australia had become a smaller market for us on the home and business application, we decided to exit that market, and a few other countries around the world.”

SMA was a pioneer in the industry and once the dominant player in the global inverter market, having a 50 per cent share before Chinese PV manufacturers started to dominate production – and undercut costs – in both solar modules and then inverters.

That led to a strategic retreat and a rethink of its business – leading to the forced sacking of 40 per cent of its engineers more than a decade ago as its revenues shrank by 60 per cent.

But Reinart says SMA, even after two years of losses due to more restructuring, now faces a more positive future, based around its focus on the utility-scale inverter market – and Australia is its third biggest – and moves by some countries to move away from a complete dependence on Chinese inverters.

Reinart says 80 per cent of the company’s revenue is now in utility applications, with just 20 per cent in residential and commercial market. Around 40-45 per cent of its revenues from the US, 35 per cent from Europe, and 15-20 per cent from Australia.

The utility scale, particularly in Australia, is based around large solar-battery hybrids that are becoming the go-to technology for many developers – because of its lower costs and modularity – and from the emergence of grid forming inverters as an essential tool for the grid.

Reinart says grid forming inverters can deliver all the grid functionality delivered to date by coal and gas fired generators and their spinning machines. And their success on micro, mini and islanded grids is proof of this.

“We are very well position to form the grid, to stabilise the frequency and to have all the grid functionality that a normal power station would have, or even beyond that.

“That’s because … we are inverter-based resources, meaning we have a lot of intelligence in the system, we are decentralised, and therefore have the possibility to form a very stable grid with these inverters.

“It is possible to fully drive the entire grid on photovoltaics, together with wind, and storage of course, with a clever energy management and grid functionality.

“This is hard to believe for people that were used to the central form of power generation and having rotating masses in order to keep the inertia, but that is possible with power electronics.”

Other battery and inverter technology companies such as Tesla and Fluence have been arguing the same thing – see our recent Energy Insiders episode with Tesla Energy Australia boss Josef Tadich.

But grid authorities in Australia have been baulking over the issue of fault current ride-throughs, and although they see a role for grid forming inverters, transmission companies have put in orders for dozens of large synchronous condensers costing billions of dollars.

Reinart says inverters can do it all. “Fault current ride-through is fully available in inverter based resources. it is not correct any more to say that one cannot do that with power electronics.”

SMA is banking on protection in some key markets as governments become way of banking too much on China-made inverters, for fear that these key assets can be nefariously “remote controlled. In the EU, European funded projects may now not use inverters from China, Iran, Russia and North Korea, although China is the key one.

Reinart notes that one senior energy CEO (former RWE boss Jürgen Großmann), once quipped a decade ago that solar will be about as useful and likely as growing pineapples in Alaska.

Australia has seen similar silly claims about battery storage, in its case from former prime minister Scott Morrison, who compared the Tesla big battery at Hornsdale to the Big Banana in Coffs Harbour. (Is there a link between fruit and fossil fuel promoters).

But Reinart says the solar game has a long way to play out, and it will become even more irresistible in coming years.

“Prices of modules and of batteries have fallen tremendously,” he tells Energy Insiders. “We are now down to under two cents per kilowatt hour in PV, if you add storage, you’re still way below nuclear and way below coal.

“This trend will continue. It will not be as steep, but we will see a continued decline in module prices and battery prices over the coming years. And then this race will just be getting clearer. It will not be stoppable.”

See also: Solar is already creating the fastest shift in electricity generation in history – and it is still accelerating

To hear the full interview with SMA CEO Jürgen Reinart, please go to: Energy Insiders Podcast: “The grid doesn’t need rotating mass”

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