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Solar has grown immensely, as both an industry and a technology category in the last decade. At the end of 2024, global solar installations “reached a record 2 terawatts (TW) of capacity, with more added in the last 2 years than the previous 68 combined.” (Reuters)
The pace and scale of this exponential growth is illustrated in Figure 1, depicting a more than 10x increase in solar installed capacity over the last 10 years. (Nat Bullard 2024)
With rapid growth and higher solar penetration levels on grids, new technologies as well as new needs have emerged.
Of the many changes in the industry, three major trends now affect the preferred technology stack for residential solar. They are:
These trends are changing the solar landscape, exposing inefficiencies in microinverter-based systems that are becoming more and more costly compared to systems built around DC architecture.
Each trend exacerbates the inefficiencies of microinverter-based systems.
Solar modules are getting more powerful. Figure 2 shows the average wattage of a residential module installed in the United States. In 2015, the average module was 267W. In 2024, the average hit 400W, a nearly 50% increase (Lawrence Berkeley Lab, 2024).
The march toward higher wattage modules also shows few signs of slowing down. In its October 2024 Marketplace report, EnergySage, the leading residential solar quote platform in the United States, remarked that “…higher-wattage solar modules continue to skyrocket in popularity.” And in the first half of 2024, “97% of all quotes included solar modules rated to 400 watts or more.”
As an additional data point, solar modules listed in new residential systems on the Tigo monitoring platform now regularly exceed 450W.
The challenge? Most microinverters available for residential systems are rated for 300-350W, and those with higher capacities demand a significant price premium. Any energy the module could generate above the microinverter’s capacity is wasted via ‘clipping.’ Over time, those losses add up, especially as module wattages continue to increase.
The impacts of clipping are detailed in Chapter 3 (Clipping Tax: Leaving energy on the table)
Batteries have become mainstream components in the residential solar market. Whether for backup power or maximizing savings under time-of-use rates, battery attach rates are soaring.
October 2024 EnergySage data shows a 40% battery attach rate for residential solar quotes in the first half of 2024, up from just 10% a year prior in the United States – see Figure 3.
With AC-coupled batteries, which are required by microinverters, electricity undergoes three conversions: DC → AC → DC → AC
In DC architecture, it undergoes just one conversion: DC → AC
In each conversion step, energy is wasted.
Bottom Line: AC architecture is less efficient than DC architecture for energy storage applications. And those incremental conversion losses have a tangible financial impact over time. The impact of energy storage conversion efficiency is detailed in Chapter 4 (Conversion Tax: The hidden cost of AC-coupled batteries)
Utility rates are climbing, driven by grid upgrades, resiliency measures, and demand increases. For the United States, electric rates have risen 5% per year for the last 4 years – this can be seen in Figure 4, which shows average residential electricity rates accelerating upward in 2021 (US Energy Information Administration).
This trend currently shows no sign of slowing down. “In 2023, state utility regulators signed off on nearly $10 billion in rate increases, more than doubling the $4.4 billion approved in 2022” according to the EIA (Reuters). Those increased costs will continue to be passed on to consumers.
As a result of rate increases, homeowners pay more for every kilowatt-hour (kWh) of energy consumed. By extension, every kWh clipped, lost to unnecessary conversions, or not produced at all is also increasingly costly. Higher utility rates amplify every watt-hour of lost energy, making the Microinverter Tax progressively more severe over time.
To summarize the trends and their impact on microinverter based residential solar installations
Together, these factors are turning what used to be minor, individual inefficiencies into significant, compounding losses with real financial impact. As a result, installers are shifting from microinverter-based platforms to ones based on string inverters. As further identified in a recent Roth research report:
“One distributor said there are two types of installers moving away from ENPH. The first is those that are focused on selling based on price and are moving to string inverters. The second group is selling more batteries, but ones that are paired with string inverters.” – Phil Shen (Roth Industry Note | October 26, 2024). Note: ENPH = Enphase, the leading microinverter supplier in the world.
The next three sections provide detailed analyses of the financial impact of the trends and how they relate to the forms of the Microinverter Taxes outlined at the beginning, starting with the Clipping Tax: Leaving energy on the table (to be released 3/25)
Webinar: On April 15 (Tax day in the US), we're hosting a webinar that will dive into the details of the Microinverter Tax series. Sign up for the webinar here.
Below is a full list of chapters included in this series (links will be added as chapters are published):
