Enphase Energy (ENPH)

Company website 2020 Financial Report Stock Analysis 2020 ESG Report

Million Microinverters

have been shipped as of 2020 to approximately 1.4 million Enphase residential and commercial solar PV systems in more than 130 countries

20.8

Million Metric Tons

of greenhouse gas emissions have been avoided since Enphase’s founding

90^%

Recycled

ENPH recycles 90% of total electronic waste every year

View Our Analysis

The Path to Drawdown: Wind Manufacturing

To fight climate change and remain below 1.5ºC of global warming, we need to switch from generating power from fossil fuels to using 100% emissions-free sources.

The most powerful source of this clean energy is the sun (barring advances in nuclear fusion). Photovoltaic or PV solar panels (the kind you see on rooftops) have emerged as the predominant way of capturing the sun's energy and converting it into electricity.

The industry has been growing fast and. As of 2020, solar panels are now the cheapest source of electricity in most places on earth.

Solar produces ~2% of global electricity today. According to Project Drawdown, to be on a path to remain under 1.5ºC of warming, rooftop solar will need to be generating between 13.5% and 14.24% of global electricity by 2050.

To get there, the rooftop solar industry needs to continue massively scaling over the few next decades:

<::marker> 183 TWh of solar electricity generated in 2018
<::marker> 10,341 TWh needed by 2050
<::marker> CAGR of 13.4% from 2018 - 2050

Analysis from the IEA also predicts that in order to reach a 100% clean electricity grid by 2050, annual addition to the solar panel manufacturing capacity will need to increase from 134 GWs in 2020 to 630 GWs in 2030 (p. 74).

About

Enphase Energy (stock ticker: ENPH) is an energy technology company headquartered in Fremont, CA. Enphase is the leading manufacturer of microinverters for rooftop PV solar systems, software-driven home energy storage and web-based monitoring systems. Enphase is also expanding into the battery storage system market outside of the United States.

ENPH's Role in Drawdown

ENPH’s main products are microinverters, which are a critical component in making rooftop solar panels an efficient source of renewable energy.

Harvesting the energy from solar panels requires converting the variable direct current (DC) that the panels generate into a utility frequency alternating current (AC). AC can then be fed into a commercial electrical grid or used by local, off-grid electrical networks. The piece of machinery that converts DC into AC is the inverter.

In solar panels systems with conventional central inverters, there is one or two inverters for an entire roof full of solar panels. In these systems, a central converter can only perform as well as the lowest-performing solar panel. This means that if a few solar panels are in the shade or covered debris while all other panels are in direct sunlight, the system can only produce as much electricity as what the suboptimal panels produce.

In contrast, microinverters convert DC output directly from each panel into AC. In other words, a microinverter system will have the same number of microinverters as there are solar panels.

Microinverters have several advantages over conventional inverters. They enhance productivity by allowing greater energy generation even when shade or debris covers some panels. They lower the risk of an electrical fire because, by converting currents at the level of individual panels, the current on the roof remains low-voltage. Monitoring the performance of each panel is easier. Last but not least, the modular nature of microinverters makes it easy to expand a rooftop solar system after its initial installation.

ENPH: What We Like

ENPH has been steadily increasing their global microinverter sales over the last few years and expanding into other, adjacent markets:

<::marker> ENPH has shipped 9 GW worth (p. 8) of microinverters in 2020 - enough to power more than 3 million homes. That was up from 7 GW (p. 8) in 2019.
<::marker> In July 2020 (p. 8) ENPH introduced a new grid-agnostic microinverter-based storage system for home and commercial rooftop solar systems.
<::marker> ENPH is partnering with Transdev Australia to power the first public transport depot in Australia to feature a fully solar-powered bus

Looking forward, ENPH plans (pp. 18-19) to expand and launch new products in the near future:

<::marker> Plans to incorporate additional features to their storage systems
<::marker> Plans to introduce microinverters in Italy, Philippines, South African, and Thailand
<::marker> Introduction of the world’s first grid-independent solar microinverter

What We Want to See Improve

Track GHG Emissions

ENPH says (p. 11) that they’re reducing their energy footprint while adhering to the strongest environmental standards, but they do not provide evidence to back this claim. ENPH needs to track and publish their GHG emissions (scope 1, 2 and 3) so that investors can evaluate their overall impact on climate change, not merely the CO2e that ENPH offsets through their products.

Set Clear Goals

While we like the fact that ENPH sets out clear and bold business goals for the future, they need equally clear and bold climate-related goals. When can investors expect ENPH to cut emissions by a specific level? These should be spelled out in their ESG reports.

Clean the Supply Chain

ENPH highlights that one of their primary contract manufacturers in China has taken strides in reducing their environmental footprint in late 2019. We applaud these efforts, and want to see their other manufacturing sites in China, India and Mexico do the same. We particularly want them to eliminate all GHG emissions in their production and transportation.

Related Solar Energy Stocks in the Climate Index

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Allocated	Company	Description
2.00%	Enphase Energy (ENPH)	Enphase makes micro-inverters, which are critical components in making rooftop solar more efficient. It's a key solution to expanding rooftop solar
1.18%	SolarEdge Technologies (SEDG)	SolarEdge makes power optimizer, solar inverter and monitoring systems for rooftop solar. These are key equipment in making solar power more efficient
0.82%	First Solar (FSLR)	First Solar makes innovative solar panels from a single glass substrate, making it possible to make panels in one factory in 4.5 hours
0.76%	Sunrun (RUN)	Sunrun makes and installs residential solar energy systems. Solar is a crucial centerpiece of electrifying everything
0.36%	Daqo New Energy (DQ)	Daqo makes high-purity silicon that goes into solar panel. This is a critical ingredient in converting sunlight into electricity
0.36%	Sunpower (SPWR)	Sunpower offers residential and commercial solar power systems and solar storage. Rooftop solar PV is one of the keys to an emissions-free energy system
0.33%	Shoals Technologies Group, Inc. (SHLS)	Shoals makes all of the components necessary for solar PV systems to connect to the grid. They’re helping expand solar energy
0.31%	Sunnova (NOVA)	Sunnova provides residential solar and energy storage systems in the United States. Both are critical for electrifying the energy system
0.17%	Array Technologies, Inc. (ARRY)	Array Technologies offers machine learning-based solutions that track the sun so that solar PV systems can generate more electricity
0.17%	Jinko Solar (JKS)	Jinko Solar is the largest solar panel maker in the world and heavy investor in solar R&D. They’re a key player in expanding solar energy
0.16%	Canadian Solar (CSIQ)	Canadian Solar makes and ships solar panels all over the world. This is critical for electrifying everything
0.14%	Gibraltar Industries, Inc. (ROCK)	Gibraltar Industries makes the mounting racks for solar panels that are tailor-made for the buildings and fields where solar systems will be placed
0.07%	Azure Power (AZRE)	Azure Power develops solar power for central and state government utilities in India. Solar power is a key centerpiece of a zero-emissions energy system
0.07%	Maxeon Solar Technologies, Ltd. (MAXN)	Maxeon Solar Technologies makes solar panels and related solar system components worldwide - a critical piece in a zero-emissions energy mix of the future
0.05%	FTC Solar, Inc. (FTCI)	FTC Solar offers solar tracker systems so that solar PV systems can produce more electricity. Expanding solar energy is key to a decarbonized world
0.03%	Renesola Power (SOL)	Renesola Power develops utility-scale solar projects in over 10 countries. This is the type of effort needed to scale solar power to electrify the grid
0.02%	iSun, Inc. (ISUN)	iSun is one of the biggest commercial solar developers in the US. They’re a valuable contributor to expanding solar power
0.02%	Orbital Energy Group, Inc. (OEG)	Orbital Energy offers engineering, construction, and maintenance for utility-scale solar systems. They help expand solar power
0.02%	SPI Energy Co., Ltd. (SPI)	SPI Energy develops solar PV solutions for businesses, residential, government and utility customers. Expanding solar is key to a clean energy system
0.02%	Sunworks (SUNW)	Sunworks makes solar power systems for a wide range of markets. Solar is a key zero-carbon energy source