A Crazy Solar-Energy Idea

The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics around the investing world.

The solar industry is going through some tough times right now, and solar stocks like FirstSolar and Canadian Solar have gotten crushed as a result. With that in mind, David wonders whether he's a bit crazy to be considering a solar stock in this environment. The company in question is Enphase Energy, which just had its IPO. It makes inverters, which are devices that turn DC electricity from solar cells into AC electricity that we can all use. David thinks the company possesses compelling economics and has added it to the top of his Watchlist.

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David Meier and John Reeves have no positions in the stocks mentioned above. The Motley Fool owns shares of Power-One. Motley Fool newsletter services recommend First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (5)

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  • Report this Comment On April 25, 2012, at 3:21 PM, CarlAccord wrote:

    http://www.greentechmedia.com/articles/read/Enphase-PV-Micro...

    "Net revenues were $20.2 million, $61.7 million and $149.5 million for the years ended December 31, 2009, 2010, and 2011, respectively.

    Net losses were $16.9 million, $21.8 million and $32.3 million for the years ended December 31, 2009, 2010 and 2011, respectively.

    The firm expects to incur a net loss in 2012."

    http://community.enphaseenergy.com/enphase_energy_community/...

    "Within 2 months, a third M175 failed with the same AC Frequency Out of Range errors. "

    http://www.greentechmedia.com/articles/read/smas-microinvert...

    http://files.sma.de/dl/9524/SUNNYBOYHFUS-DUS120425.pdf

    "Peak efficiency 96.6 - 97%

    CEC efficiency 96.5 - 97%"

    http://enphase.com/wp-uploads/enphase.com/2011/10/Enphase-Da...

    "Peak efficiency 96.3%

    CEC efficiency 96 %"

    A relatively young company that has yet to turn a profit (6 years old, with competition over 30+ years experience), higher failure rates, higher upfront cost, LOWER efficiency, AND boasting a 25 year warranty. Is this the "low risk" company you are trying to stand behind? Especially when other Manufacturers are coming to the market soon. It will be interesting to see who is still in business in six months.

    Who you should be promoting are bankable companies. What I don't understand is how can a 6 year old company offer a 25 year warranty. Do they at least have a separate fund for consumer protection? With over a million inverters in the field, who knows if the company will be around for 25 years to cover all of those warranties.

    I would not like to see the whole solar industry get another black eye from just one company. I would feel better if they show the financial data showing they set aside money to show good faith to honor these warranties for 25 years.

  • Report this Comment On April 26, 2012, at 5:41 PM, ersandeen wrote:

    Carl, a couple things. Cherry picking one user who encountered problems and extrapolating to "higher failure rates" for a product which has over a million in the field is probably not good science.

    And while I agree that the 25 year warranty sounds quite impressive, accelerated lifetime testing of electronics is fairly established practice, so it's not necessarily unreasonable. (FWIW, that's on newer product; older product was warrantied for15 years, I believe).

    And you are citing lower efficiency (by what, less than 1%) compared to a very different beast, a central inverter. There is something called MPPT (you can look it up) which microinverters can do on a per-panel basis instead of for the whole string, which can increase yield from the array.

    I'm no financial guru, but it's worth understanding how microinverter technology differs from the older central inverter technology when looking at the potential of the product & company.

    I know an installer in my metropolitan area, and they are using Enphase on almost all of their residential installs these days.

    Disclaimer: I have the product on my roof, I've done business w/ Enphase in the past, and I bought a few shares. But what I've said above is just the facts.

  • Report this Comment On May 18, 2012, at 6:35 PM, CarlAccord wrote:

    Hi Ersandeen,

    Of course, cherry picking specific examples is not representative of the entire group, I'm well aware of that. It just isn't sound engineering, making claims on outliers. I'm just saying that these cases are out there. And they are more abundant than just a handful here and there.

    But I have yet had anyone show me an exact side by side identical comparison of central inverter and a microinverter. With and without shading scenarios. Only then will there be indisputable proof that the microinverter system produces more, and I'm assuming they won't outperform in an non-shaded environment. I may be wrong, but then again I may be right.

    You would think that Enphase themselves would do this with EVERY genuine competitor out there to backup and justify their claims, and publish the data publicly. And also rank the products accordingly. That would be a HUGE selling point. Then you will have proof and studies to validate the claim of "increase yield from the array". Until then, it's only a claim.

    Even a simple mind can understand, you don't install solar modules in the shade. They need sun, give them sun to expect realistic, valuable production. If an installer recommends a system that has shading up to 10-25%, I would personally go with another installer. Granted some sites are just not good candidates, or require excessive removal of shade (which they don't do) and the customer wants to proceed anyway. That is their choice, as long as they are informed of the consequences. Education and honesty are traits that can truly make or break a company.

    Also the Maximum Point Power Tracking (MPPT) at each module is beneficial, but is most beneficial in certain scenarios. Consequently, it also introduces many more points of failure (up to ratios of 25:1). Also show me studies of how the excess heat from the microinverter affects module performance. When modules get warm they derate from their STC nameplate rating. Simply put, using a microinverter forces the modules to produce less power, nominally but still it is a loss of production that I feel is never taken into account. Tracking a lower MPP that is due to the microinverter isn't very logical is it? As an Engineer, theoretical values are great but empirical data is indisputable (most of the time).

    Also in order to gain maximize microinverter output, you need to oversize the DC input (modules virtually never produce STC nameplate values). Then at optimum conditions when the modules produce more than 215 watts, you have clipping, which is often also neglected in production numbers from microinverters.

    Talking with dozens of installers, and monitoring many sites that are publicly available from Enphase, you very seldom see a 215 watt inverter maxed out at 215 watts. They often hang around 190-210 during peak times, but seldom hit or stay at 215 watts. I see no peak clipping on their 7 day production scale. To their defense this may be due to module size, location temperatures, azimuths, shading, time of year or inclination. None of this data is readily available, so I'm giving them the benefit of the doubt. Their product performs as it should, and these factors vary from site to site and are expected in the real world.

    However, upon further investigation this was interesting. Do you know why their communication only has a warranty of 1 year? Because I don't. Logically, I would think that they could match their monitoring system with inverters warranty time frame, or at least great than 1 year. I wonder how expensive it is to replace that piece of equipment out of warranty? You also often need to dedicate a separate breaker/outlet from the Main Panel and send signal via wireless bridge to router, just to get reliable communications anyway. Power Line Communication has been known to be unreliable and troublesome, ask anyone installing them.

    My understanding is that microinverters have their place in the market. Specific jobs, locations, orientations, and shading require the use of microinverters. Where they do increase yield compared to conventional methods. But you cannot have a blanket statement saying that they are across the board better than central inverters. Which sounds exactly like what they are saying.

    Furthermore, with failure rates you have to look at the big picture. *Failure rate/kW installed*. Say a house has a 5kw system, very reasonable. For 100 houses, let's say 1 central inverter per house. There are a total of 100 central inverters and (rounding down 23 microinverters/house) a total of 2325 microinverters. For equal failure rates (1%/kW), you will visit 1 home for centrals as opposed to 23 (possibly different) homes for microinverters. How much does it cost sending a worker out to the same job? Because you will have to pay it 22 times more with microinverters, regardless if it's under warranty or not. And I have seen companies go out of business because of faulty equipment. Spending more time replacing than installing new jobs. How many solar installation companies have those kind of resources?

    I think that is why they make you purchase the monitoring solution, because you have no way of knowing if an inverter/module is not producing otherwise. You could look at your utility statement for net energy produced/consumed, but one bad inverter would be hard to distinguish. Alternatively you also can have the same monitoring capabilities and warning system with a central inverter about module or inverter failure. It will indicate if the entire system is down or a specific string if you have that option.

    And if you plan on spending more money for optimum production, why not go with a DC-DC optimizer? They accomplish the MPPT at the module as well, without the power inversion losses and associated heat dissipation. Sure they are a cost adder, but if you're spending as much, if not more, for microinverters then you're not too concerned about cost anyway, right? ;)

    It is an interesting industry and I love the innovation. It may sound like I'm bashing Enphase, but I highly respect them. They are doing wonders for the industry, I just hope they are able to back up their business plan with results.

    I just want more people to be educated and use the right tool for the job, that's all. And I hope this company does well, because more solar installed is better for the industry as a whole. I would rather have the Sun power my blender than some old dinosaurs.

    Cheers,

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