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Amid uncertain US solar market, SMA bets on China and storage


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Amid uncertain US solar market, SMA bets on China and storage

Germany's SMA Solar Technology, a top global supplier of solar and storage inverters, saw steep declines in sales and income in the first half of 2017, largely in its utility-focused business in the United States. But the company boosted its business forecast for the year, and its near-term solar market outlook, despite the shadow of a major U.S. trade case that is "already starting to have an impact on the U.S. market," CEO Pierre-Pascal Urbon said in an Aug. 10 earnings call.

"We see that a number of utility projects in North America have already been delayed, pending the trade case decision," Urbon said. Some project developers and installers, he added, are building up inventories to avoid potential penalties ahead of the U.S. International Trade Commission proceeding, which begins hearings next week. "As a result, average selling prices for solar modules increased and impacted the financial attractiveness of solar projects in North America," the CEO said, adding that SMA has also expanded its inventory of solar photovoltaic, or PV, inverters in the U.S.

SMA's inverters, which Urbon called "the brain of the entire PV system," convert DC electricity produced by solar panels into AC power for homes, businesses and the grid. Sales to utility-scale solar projects tumbled 47% in the first six months of 2017 to €107.8 million, or $126.6 million, compared to last year's first half, as its utility business in the Americas — made up mostly of U.S. sales — fell to a 44% share from 75% in the first half of 2016.

Overall, SMA's sales in the first half of 2017 declined 21% to €381.1 million ($447.6 million), on nearly flat sales of 3,830 MW of PV inverters. Net income in this year's first half dropped 55% to €8.8 million ($10.3 million), or 25 euro cents per share.

Buoyed by what Hadding called "pull-forward effects" for U.S. residential and commercial PV installations seeking to beat any potential trade tariffs, however, SMA lifted its sales and earnings forecast for the year. The company now expects 900 million to 950 million ($1.06 billion to $1.1 billion) in 2017 sales, comparable to 946.7 million ($1.1 billion) last year. Previously, SMA had forecast sales of €830 million to €900 million ($974.8 million to $1.06 billion) this year.

Bullish on storage, China

Thanks to the Chinese government's recently increased installation targets for PV and rising demand for energy storage, which SMA believes can expand the grid's hosting capacity for solar, the company accelerated its forecast for global annual PV additions to 100,000 MW by 2019, up from an estimated 78,000 MW in 2016 and 84,000 MW in 2017. SMA sees the Americas relatively stagnant between 2016 and 2018 at 16,000 MW to 17,000 MW, before jumping to 20,000 MW in 2019.

SMA anticipates worldwide revenues for PV inverter technology of €6 billion ($7 billion) by 2019 "in the best case," Urbon said, an estimated 20% increase from 2017. "SMA's management expects the storage segment to become the sales growth driver in the coming years," he added, driven primarily by large-scale utility projects. "With battery storage, it is possible to manage the volatility of renewable energy and to stabilize the electricity grid," the CEO said.

Urbon also voiced optimism for distributed solar installations backed by batteries. "With the PV system, battery storage and automated energy management software, it is possible to increase the level of self-consumption and thus reduce the energy bill of these customer groups," he said. The company is eyeing revenues "north of €100 million" next year in its storage and off-grid division, Hadding added.