Category
Author Penny Liao
Updated August 10, 2022

A power conversion system (PCS) accounts for 5-20% of ESS production costs. The percentage varies in accordance with system capacity and storage duration. A PCS is a bidirectional AC/DC converter that functions during charging and discharging of an ESS. Centralized PCS and string PCS are the two most common types of PCS. String PCS is smaller in size, with lower conversion rate and greater power density, and thus higher costs. String PCS is widely adopted by residential, C&I, and utility-scale power stations, with unit power rising in recent years. Centralized PCS has higher conversion rate and costs less, for it consists of fewer components. Yet, larger size makes centralized PCS more difficult to transport and install; it is usually deployed at utility-scale power stations.

The threshold is low for PV inverter makers to take part in the energy storage industry, as PCS for ESS and PV inverters work similarly. It only takes a few weeks to modify a PV inverter production line to produce PCS of ESS. Additionally, customer bases of PV and ESS industries overlap heavily, and clients tend to choose the same manufacturer for more convenient after-sales service. Against this backdrop, inverter makers benefit from growing PV demand and the ensuing development of the energy storage industry. 

Among the world’s ten biggest PCS makers, InfoLink focuses on three Chinese manufacturers involving in both PV and energy storage business, shedding light on the current market trend of PCS for ESS.
 

Product and shipment volume

Goodwe and Ginlong target at small-scale residential market. According to InfoLink database, in 2020 and 2021, Goodwe shipped 113 MW and 202 MW, namely 61,000 sets of PCS, a 78% YoY increase. Ginlong shipped 8.6 GW of PV inverters and PCS for ESS in 2020, and 11.5 GW in 2021, a 33% YoY increase. Sungrow, on the other hand, focuses on utility-scale energy storage projects, having shipped 0.8 GW in 2020, and 3 GW in 2021. 

Table 1. PCS comparison
20220810_china power conversion system_en_1

Sales performance

With capacity and regional advantages, Chinese PCS makers offer cheaper products. For example, PCS of Sungrow and Ginlong are priced at USD 0.05-0.065/W for the C&I sector, whilst that of overseas manufacturers, such as SMA and SolarRdge, come in at USD 0.075-0.09/W. As shown in Figure 1, Chinese manufacturers secure fair market share overseas, for their products are highly competitive thanks to price advantage. Their biggest customer bases are in the Americas, India, and Australia. 

Figure 2 shows manufacturers yielding much higher gross margin overseas than in China, for inverter markets overseas are more mature, in which customers care not only about prices but product reliability, safety standards, brand, and services. In China, several PCS makers emerged as energy storage comes to the limelight, escalating competition in the Chinese market, thus affect manufacturers’ profits.

Table 2 compiles business performance data of the three PCS manufacturers. All of them see marked increase in revenues. It is worthy of note that the gross margin of Goodwe’s energy storage products is far higher than Sungrow and Ginlong. This can be attributed to the company’s focus on small-scale residential products, of which gross margin is higher than large-scale ones, and brand premium in overseas markets, where more than 50% of its clients are from.

20220810_china power conversion system_en_2
PCS sales in China and the rest

20220810_china power conversion system_en_3
PCS gross margin in China and the rest

Table 2. Business performance of PCS makers
20220810_china power conversion system_en_4

The latest development of the PCS market shows that many PV inverter makers span their business to the energy storage industry amid prosperous PV market and supportive energy storage policies. This intensifies the competition in China’s PCS market. In mature markets, customers put into consideration not only prices, but product performance, safety, and after-sales services. Established overseas solar business of the three manufacturers has laid a solid foundation for them to enter the energy storage market and their advantages in prices, quality, and local services enable them to secure a firm foothold in the global energy storage market, with their market share increasing year over year.