The Apple of Solar Energy? Enphase Applies Silicon Valley Smarts to Solar’s Neglected Plumbing

When the sun shines, free electrons pour out of rooftop solar panels in the form of direct current (DC). But every light bulb, fan, and appliance in a house needs alternating current (AC), which reverses direction 60 times per second. And therein lies a huge headache for installers and owners of photovoltaic systems. The central “inverters” that turn solar DC into grid-compatible AC are among the most finicky and failure-prone parts of any solar installation. When they burn out, they put entire solar installations out of commission until they can be replaced, usually at a cost of several thousand dollars. Yet while solar panel manufacturers continue to invest in R&D to make photovoltaic cells more efficient, the old inverter box hasn’t changed much in decades.

Until recently, that is. Befitting the Silicon Valley spirit, there’s a Bay Area startup that’s out to replace the big, dumb inverters attached to most solar energy systems with small, sleek, smart “microinverters.” It’s called Enphase Energy, and under its approach, each panel or module gets its own inverter. It’s sort of like putting out lots of small bowls to catch the water from a leaky ceiling rather than running around with a single big pail.

Enphase’s microinverters are full of custom microelectronics, so they cost more than traditional inverters. But the five-year-old startup in Petaluma, CA, which has raised about $100 million in venture capital, says the devices are more reliable than central inverters and can help harvest more energy from solar installations. Plus, they’re easier for installers to work with, and they emit a constant stream of data that lets owners track performance down to the level of an individual panel. That gives the company an advantage that can be likened to Apple’s emerging lead in the mobile computing market. And, as in the Apple case, Enphase’s systems thinking and marketing savvy could end up helping it grab a huge share of a market that nobody else thought was ripe for disruption.

Enphase Energy CEO Paul Nahi, with a rack of microinverters undergoing testing.

Traditionally, says Enphase CEO Paul Nahi, the larger the inverter, the less power is lost during conversion from DC to AC, which long pushed solar installers toward wiring panels in series and converting all the power at once—an average of 4.5 kilowatts per residential installation. “When you’re dealing with that much wattage, you stress components,” Nahi told me when I visited the company’s headquarters a few weeks ago. “You generate a lot of heat in the central inverter, and heat is the single biggest enemy of reliability. But it had been drilled into [solar installers] that this is the way solar works. It never occurred to anybody that you didn’t have to have that problem. And the technological leap required to solve that problem was so dramatic that it was never even discussed.”

Enphase’s achievement has been figuring out how to use sophisticated electronics to efficiently convert as little as 200 watts at a time—-the output of a single panel. That might mean using 20 or more microinverters in the place of a single central inverter, but the payoff comes in the form of productivity. If you wire panels the old-fashioned way—in series, like Christmas tree lights—it means that an entire array’s output can only be as high as the lowest-performing panel. If one panel is dirty or shaded by trees, the whole array’s output is lowered to the level of that panel. With microinverters, by contrast, each panel feeds power into the system independently, at maximum efficiency for its light conditions. “Greater energy harvest is the essential benefit,” Nahi says.

But even more importantly, from a practical perspective, any general contractor can wire up a 200-watt microinverter, whereas a central inverter can only be installed by specialist electricians trained to work with high power and high voltages. “Now a handyman can put panels on the roof,” Nahi says.

And many of them are: Enphase has already sold half a million units in North America, where it controls 20 percent of the residential and light-commercial inverter market.

“Microinverters are simply a better way of doing residential solar, and small commercial, and in the future, likely large commercial and utility-scale solar,” says Ben Kortlang, a partner at venture firm Kleiner Perkins Caufield & Byers, which invested in Enphase last year. “What I like about Enphase is that they are the clear leader in the microinverter space. They already have demonstrated a successful product, and they are growing share rapidly. It’s a technology-intensive business, but it’s not a capital- or manufacturing-intensive business.”

And the easier it gets to install and maintain solar panels, the faster solar energy will spread as a way to power homes, Kortlang and others argue. “Inverter companies are focusing innovation on residential solar because they recognize the high growth potential in this area,” says Lynn Jurich, co-founder and president of San Francisco-based SunRun, which installs solar arrays on homes and then charges homeowners for the power. “In fact, 2011 may be the year in which total installed megawatts of residential photovoltaics surpasses the total of the utility and non-residential sectors combined.” In its own installations SunRun uses both Enphase’s microinverters and equipment from other companies like Tigo, depending on each customer’s needs, Jurich says.

It’s a sign of Enphase’s high-tech orientation that the company was started by two telecommunications experts: Martin Fornage, formerly a fiber optic engineer for Advanced Fiber Communications, and Raghu Belur, a former designer of high-speed optical communications equipment for Petaluma-based Cerent, which was acquired by Cisco in 1999 for $7 billion. Nahi says Fornage became interested in inverter technology after installing solar panels on one of his own homes. “He saw the challenges associated with traditional inverters, and being an engineer, he figured he could solve that problem by developing a microinverter,” Nahi says.

Fornage and Belur started Enphase in March 2006 and invited Nahi, formerly the head of telecom semiconductor designer Crimson Microsystems, to join as CEO at the end of that year. There wasn’t much market data on inverters at the time, Nahi says. Because inverters account for only about 10 percent of the cost of a solar installation, they were seen as part of the plumbing. The whole focus in the solar industry was on the panels themselves and how to make them cheaper and more efficient. “Certainly nobody had applied a Silicon Valley mentality to inverters before,” Nahi says. “So I convinced myself that this was a very exciting opportunity.”

But to build a microinverter, “You can’t just take a regular inverter and shrink it,” Nahi says. To convert as little as 200 watts of DC to AC efficiently, Enphase developed a custom mixed-signal chip that manages the other electronics inside each microinverter. It constantly analyzes the current and voltage of the electricity coming in from the panels and turns the other elements inside the Enphase box on and off to ensure that there’s as much AC power coming out as possible, and that it matches the 60-hertz frequency of grid power. (That’s a necessity, since residential solar arrays essentially mesh with the larger utility grid and sometimes feed power back into it.)

Enphase spent more than a year testing the first version of its product. The company had to be sure its microinverters—which live on rooftops, bolted to the same rails that hold solar panels in place—would be safe and reliable even under conditions like extreme heat and cold, rain, lightning, and most importantly, power grid fluctuations.

“The grid is a very harsh, unpredictable environment; it’s far more variable than we thought,” says Nahi. “There are changes in voltage, frequency, and amperage due to a million reasons, from high winds slapping power lines to poor wiring. It’s not like networking and communications. It’s very non-deterministic.” The company placed thousands of test units around the country and recorded the waveforms coming in from the grid. It then devised quality-assurance procedures to make sure no unit leaves the factory until it’s been tested against all of these waveforms, in amplified form. “That’s why the beta testing took a year,” says Nahi.

Enphase shipped its first microinverter in 2008, and the product “very, very quickly became incredibly popular with installers,” says Nahi. There are a couple of reasons for that, and they’re worth sizing up separately, since they point to lessons the larger cleantech industry is probably going to have to learn to achieve widespread uptake of unfamiliar new technologies.

The first reason is that microinverters make life easier for solar installers, whose recommendations strongly influence which type of inverter system a homeowner chooses. With central inverters, designing a solar array can turn into a huge math challenge. In fact, it’s a subspecialty within the electrical trade, with installers trained to use “string calculators” that determine how many modules can be placed on a roof depending on factors like roof pitch and shading.

“The calculator might say you can put up three strings of four modules each,” says Nahi. “But then you superimpose that on the roof and you figure out there is no room. Then you go back and see if you can do two rows of five, and that fits, but then there’s a chimney that will shade one module for three hours a day, which you can’t have, because of hypersensitivity to shade. The process iterates. It’s all very unique to solar, and the calculations and the high voltages are the only reasons installers need to be specialists.”

With microinverters, all of those problems go away. Installers can put as few or as many modules on a roof as they want. If one module is partially shaded, that’s okay, since it won’t affect the others. “The traditional installers benefit because their job is now easier and faster, and there is an entire class of electricians and general contractors who can now participate in solar without hiring huge design teams and specialty electricians,” says Nahi.

Ben Kortlang says his firm wanted to fund Enphase mainly because the startup’s technology squares with Kleiner Perkins’ emphasis on easing deployment in cleantech. “Our thesis has been that rather than investing in the panel itself, we should invest in cheaper ways of getting systems in place to allow higher energy generation,” Kortlang says. “We think that the solar installer community needs to expand, and for that to happen, it needs to be easier for electricians and roofers and general contractors to become solar installers.”

But there’s a second feature to Enphase’s technology that gives its microinverters a lot more sex appeal than central inverters. It’s that each microinverter is also a tiny computer, churning out data that shows homeowners how their solar arrays are performing.

The Enphase Envoy home data hub

Using powerline communications, meaning there are no separate data cables or wireless connections, Enphase’s microinverters send data to a small white box the company calls the Envoy. It resembles an electronic thermostat and has a display showing an array’s energy output in watts and kilowatt-hours. The Envoy plugs into a home’s existing broadband router, and every five minutes, it sends a burst of data over the Internet to Enphase’s network operations center in Virginia. There, the company analyzes the data and prepares reports on the health of the modules, the inverters, and the surrounding grid at each installation site. Installers and customers can access these personalized reports at a website that Enphase calls Enlighten (the startup is big on the “En” prefix). Graphics and animations at the Enlighten site illustrate an array’s output over time, down to the level of individual modules—as the video below illustrates. If the Enlighten system diagnoses a problem, it sends customers or installers an alert by e-mail.

With a central inverter, there wouldn’t be much point in collecting and visualizing all this data. “It wouldn’t tell you anything—the sun comes up, the sun goes down, and if the output should be higher or lower you wouldn’t know,” says Nahi. “With us, every module is a data point.”

Now, while there’s real utility in this setup, there’s also a certain amount of eye candy. In my interview with Nahi, I compared Enlighten to the energy monitor display in the dashboard of the hybrid Toyota Prius, which shows how much power is coming from the vehicle’s batteries and how much is coming from the gasoline engine. While the display is slick and helps to sell the car, I pointed out, very few Prius owners actually use the data to drive more efficiently.

Nahi admits that the Enlighten data might be overkill. “Do you need to watch the pretty pictures all day long? No, but it’s kind of fun,” he says But installers like the Enlighten technology, he says. It helps sell Enphase’s microinverter systems, yes, but it also helps them stay in touch with customers after installation.

In fact, unprompted by me, Kortlang also brought up the Prius comparison, in a way that better underscores the data’s role. “Imagine you’re driving along and you notice that the mileage has gone down from 40 miles per gallon to 37,” he says. “You might think, ‘Oh, that’s weird,’ but a mechanic remotely monitoring your Prius could say, ‘Hey, piston number 7 is down and we’re sending someone out to fix it’—which is what Enphase does. With a central inverter, there’s no way you could ever know that there’s a satellite dish shading part of your system and reducing your output, whereas with Enphase, they monitor that.” So the second cleantech lesson from Enphase is about customers, or, more broadly, communication: data from smart inverters, smart meters, and other IT-enhanced components can foster conversations that ultimately lead to more energy savings.

Because Enphase’s microinverters are mostly just circuit boards and are produced at higher volumes than central inverters, their cost will come down over time, to the point that they may eventually be cheaper, Nahi says. “We have significant semiconductor content, so we can R&D our way to lower costs,” he says. “Scale will benefit us far more than any central inverter manufacturer. I would be surprised if we weren’t the number one seller of inverters within a few years.”

Enphase recently opened European sales offices in Paris and Milan. But its biggest challenge is meeting demand right here in North America, Nahi says. “Most [installers] will tell you that it’s easier, faster, better—the question was whether they could trust it. I think we’ve got enough data now to support it. And we are tripling our production capacity this year to keep up with demand.”

Nahi says he likes to think of Enphase as the Apple of solar energy. The comparison isn’t fatuous: if you had to look for another example of a Silicon Valley company that came out of nowhere, disrupted a decades-old industry, and grabbed 20 percent market share over the course of just three years, the obvious one would be Apple’s entry into the smartphone and tablet market.

But Nahi also has a different point in mind. “What we have is a microinverter system,” he says. “If your MacBook was running Windows, it wouldn’t be as exciting, and if Apple were just selling OS X, it would not be as exciting. What makes [Apple products] brilliant is that they’re a system of hardware and software that works together. It’s beautiful, it’s simple, and it just works. For us, it’s exactly the same.”

Here’s a video produced by Enphase showing the Enlighten user interface. In this example, the output of a 24-panel solar array is tracked over the course of seven days. The effect of shadows and clouds passing over the array is clearly visible.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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