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Challenges and innovations drive the solar inverter and energy storage industry in 2025. After a challenging 2024 marked by high inventory levels and declining residential demand, the inverter market is set to rebound in 2025. Global inverter shipments are expected to increase 7% to reach 570 gigawatts of alternating current (GWac), with inverter shipments to the European market picking up as inventory levels slowly rebalance, according to the latest global inverter market forecast from S&P Global Commodity Insights, the leading independent provider of information, data, analytics, benchmark pricing and workflow solutions for the commodities and energy transition markets. Competition will remain intense as more players enter the sector, pushing vendors to innovate and upgrade their portfolios. See below for highlights from S&P Global Commodity Insights’ forecasts: 1. Global inverter market revenue will grow by 8% in 2025 Following a difficult 2024, the global inverter market is expected to return to revenue growth, with total revenues estimated at just under $20 billion in 2025. A key driver of this revenue growth will be the recovery of the European residential market in 2025, which is typically a profit centre for both Western and Chinese inverter manufacturers. Revenues in Europe are forecast to increase by 27% in 2025, driven by increased shipments to the residential segment, which suffered from consistently high inventory and reduced residential installations in 2024. However, European inverter revenues in 2025 will remain below 2023 levels as high levels of competition force pricing down in the market. Elsewhere, US revenue is forecast to rise 16% in 2025 as the residential market recovers from slowing demand and oversupply. However, this will be offset by a 13% revenue decline in China as installations struggle to grow and high levels of competition push prices and revenues down in 2025. Weak grid markets are expected to be a growing revenue stream for inverter manufacturers in 2025. Spurred by success in South Africa in 2023 and Pakistan in 2024, more manufacturers are looking to emerging markets and launching cost-competitive products to meet local demand. Fast-growing markets are expected to emerge in regions such as Africa, the Middle East and Southeast Asia in 2025, as manufacturers have refined their products for weak grid markets in recent years. 2. New suppliers exacerbate overcapacity Manufacturers rushed to expand capacity through 2022 and 2023 as semiconductor shortages and booming solar demand fueled market exuberance. New entrants, particularly from China, flocked to the market, attracted by rising revenues and strong profit margins, while established players expanded their manufacturing base. However, by the end of 2023, the market had shifted from a tight to an oversupplied market, with several expansion plans stranded. S&P Global Commodity Insights estimates that global inverter manufacturing capacity will exceed 1 TW by early 2025, well ahead of 2025 demand forecasts of 538 GWac. Overcapacity issues are exacerbated by the emergence of new competitors in adjacent sectors such as home appliances and portable electronics. New entrants and structural oversupply will force manufacturers to compete heavily on price and continue to upgrade their inverter portfolio. According to S&P Global Commodity Insights, global solar installations are projected to grow at a CAGR (2024-27) of just 3.4% over the next 3 years, so manufacturers can expect tough market conditions to continue into 2025, with gradual price declines and pressure on “normal” profit margins. 3. Cybersecurity concerns will increase pressure on manufacturers Cybersecurity announcements and requirements in several countries and regions increased in 2024, and this trend is expected to intensify in 2025. Last year, Lithuania adopted legislation to ban Chinese manufacturers from remotely accessing inverters at sites larger than 100 kW, while in Germany, the Federal Office for Information Security has recently warned that the risk of foreign powers taking control of parts of the country’s electricity system is increasing. The growing demands stem from the consequences of cybersecurity attacks. These can be significant: operational disruptions for consumers, loss of trust in manufacturers, penalties from grid operators and even grid blackouts if the breach affects a large enough installed base. Ongoing geopolitical tensions increase the risk of cybersecurity bursting onto the scene in 2025. Manufacturers are expected to face increased scrutiny from regulators over the next 12 months as record levels of solar power continue to be connected to the grid, with the likelihood of barriers or even bans being imposed on certain foreign investors due to growing national security concerns. This may have the secondary benefit of helping local manufacturers compete in their domestic market, given stiff global competition. 4. Sophisticated customer needs drive product evolution and digitalization in the behind-the-counter segment 2025 will be a record year for hybrid inverters in terms of shipments. With declining financial incentives for exporting solar energy to the grid and growing awareness of self-consumption in key residential markets such as Europe, California and Australia, hybrid inverters, which combine solar conversion and energy storage, are becoming the standard for residential solar PV systems in many markets. In areas with weak grids, the ability to couple with lead-acid batteries and switch between off-grid and grid-tied modes in a matter of seconds will allow low-voltage hybrid inverters to continue to gain traction. In addition, more manufacturers are expected to launch hybrid inverters with higher power ratings in 2025 to address commercial and industrial (C&I) scenarios. Speed ??and ease of installation will be a key theme for the residential segment in 2025, especially in Europe. Any effort to lighten installation time will reduce labor and total installation costs and will likely contribute to increased installation volumes. Integrated solutions that have batteries and power conversion systems (PCS) or, as we call it at S&P Global Commodity Insights, “energy storage inverter” combined as a complete device simplify installation to less than 30 minutes and are expected to gain market share in 2025. By 2025, with dynamic tariffs being introduced in more markets and virtual power plant (VPP) business models maturing, behind-the-meter consumers will increasingly demand that their energy assets respond to electricity rates to minimise bills and participate in electricity market trading and grid service provision for additional revenue. Inverter manufacturers are expected to step up their efforts in the software arena to meet customer needs and remain competitive, either by improving their own software offering or by partnering with third-party software providers. The use of AI, both to aid consumer understanding and to act as an optimisation agent, will also be a key differentiator for inverter providers. 5. Continue innovation in front-of-the-meter products to reduce costs, increase efficiency and support grid stability Inverter manufacturers are expected to launch new products in 2025 to further reduce costs. Single-phase inverters with power ratings above 400 kW are likely to be showcased at major trade shows in 2025. With higher power ratings, these string inverters will offer a lower price per watt and will save on the bottom line of solar systems through reduced wiring, installation, and operation and maintenance (O&M) costs due to fewer inverters used. The other technology to watch in 2025 is 2,000 volts (V). Moving from 1,500 V to 2,000 V allows for longer module strings, which translates into fewer strings for solar systems, helping to reduce the system’s balance of power expenditure by 10-15%. The transition to 2,000 V in 2025 will focus on central inverters, as string inverters require additional cooling techniques and subcomponents to move to 2,000 V. In terms of energy storage, the share of PCS in front-of-meter applications is expected to grow in 2025, as the rack-level control it offers will provide higher efficiency and lifetime, easier maintenance, and increased uptime. AC block configurations, which integrate battery racks and string PCS in a container, will continue to gain popularity, due to their greater ease of installation and land savings. In 2025, PCS manufacturers will continue to focus on network-forming capabilities, which are increasingly valuable to grid operators as renewable assets penetrate the grid. Additional specifications are expected to be published, along with regulatory and financial initiatives to drive the development of network-forming technology. S&P Global Commodity Insights provides comprehensive market data, benchmarks and insights for the global energy and commodities markets, supported by a global team of specialists dedicated to providing essential market intelligence. 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