The transcription of the video is below.

Jason’s background, the founding story of APsystems and their evolution

Kerim: Hi, everyone. This is Kerim, Kerim Baran with SolarAcademy. Today, I have, with me, Jason Higginson, of APsystems. Jason, welcome. And thank you for being with us.

Jason: Thanks, Kerim. Thanks for having me.

Kerim: Great. Today, we’re going to talk about APsystems, its history, its positioning in the inverter market, in the resi and commercial space in the US and beyond. And then we’ll dive into some of the unique advantages of using APsystems as a microinverter in various different applications.

But before we go there, Jason, I want to talk to you a little bit about your personal background and your history. How did you end up at APsystems? Can you tell us a little bit about that?

Jason: Oh, absolutely. Yeah. So I had started, I got a business degree, and started looking for work, right when the dot-com bubble had burst. So we’re talking 2000, 2001, 2002. I landed with a company that was in the telecom industry, and I started off helping them with some marketing. It was a startup. There were like 11 people there, and we blew it up into just, you know, went gangbusters, on the telecom side, to about 100 million dollars, and I was still the only person in marketing. I was doing all of it, doing everything.

And then, I moved over to another company that was based down in Dallas, Texas that was also in the telecom industry, but also data com and industrial power systems, and was moving into the solar industry. And here we’re talking about 2010. It was exciting moving a company into a new industry. It’s a great marketing problem and a good challenge. And I had a lot of fun learning about the solar industry and how to differentiate there. And we actually launched a string inverter in the U.S. market.

And I was able to leverage a lot of the experience and kind of growing something from nothing, especially on trying to get sales off the ground with a new product in a new industry. And I’ve been in love with the solar industry ever since.

With APsystems, and I did some rebranding along the way. The telecom company that I started with rebranded that company. The other company out in Dallas, some rebranding there. And so this was another opportunity with APsystems. That was APS at the time and APS down in Arizona, Arizona Public Service. They’ve had that name for 100 years. So APS had to, you know, the solar company, based out of Seattle, had to change its name. So they brought me in to do the rebrand, and we rebranded it to APsystems. And we’ve been going gangbusters ever since.

Kerim: So this is around, what years are we talking about? If we go into APsystems’ story, I believe APsystems was founded around 2000 –

Jason: 2010.

Kerim: Oh, 2010 era. Okay. So you joined shortly, thereafter, I assume?

Jason: I joined in 2014. And the company, we rebranded it early 2015. But yeah, it had been APS. In the US, we’re APS America that whole time. And yeah, when we rebranded to APsystems, it wasn’t like, you know, we’re just drawing a new name out of a hat. We really had to create the marketing foundation for the company. What is the identity of this company? And that was a lot of fun meeting with all of our leadership team, and you know, deciding how is this business going to differentiate from everybody else that’s in the space?

And it really came down to things like innovation and value and really trying to bring that innovation of value to installers all over the world. Because invariably, they’re the ones that are helping these homeowners and business owners go solar and give them the best options. But they also need to be able to do it in a way where they can still stay in business.

Kerim:  And I do remember from our previous conversations, you sharing with me that the founding team of APsystems was essentially Silicon Valley entrepreneurs based in Silicon Valley. But then they expanded the operations beyond Silicon Valley as well, over the years. And the history of it is such that it is one of the earliest microinverters that has been around for a long time.

Can we talk a little bit about how that evolution has happened like, I know you guys compete big time with Enphase. So can you tell us a little bit about the timeline of when they came out with the products, and when you came out with the products? And how did that all evolve?

Jason: Yeah, sure. No, it’s a great story. When the company first started in 2010, you had like said, yeah, was it 2007 or 2008, the ideas that started back then. So when Enphase had created their microinverter they, at some point, had the majority of the residential PV market in the US. And all of their competitors were string inverter companies.

And so our founders, yeah, two brilliant engineers working for semiconductor companies in the Silicon Valley, they saw what Enphase was doing, and they said, “You know what? They got no competitors in that space, and we think we can build a better mousetrap.”

And so they set out to do exactly that. And they actually were getting a product tested, UL tested, in one of the many third party testing houses. And I think this one’s based in California.

And they connected with someone in the lobby, a guy named Kelly Sampson, who was also testing a solar product, and he was based in Seattle, Washington, technically on Bainbridge Island, which is a 30-minute ferry ride out from the Seattle port.

And they were talking about how it was tough to get a product off the ground, and Kelly was informing one of our founders, Dr. Yuhao Luo. And he was talking about how it’s hard to get a product off the ground here, sell the product, and break into that market and they’re looking at getting some manufacturing done, trying to get some low-cost manufacturing done overseas. And Kelly Sampson had informed him that “Yeah, well, there’s this made-in-Washington opportunity that if we’re able to make product over there, then Washington State residents are incentivized through tax rebates incentives to buy made-in-Washington. Have you guys ever looked at that?” And they’re like, “We don’t even know how to get that started. We don’t have a presence there.” And he said, “Well, let me help you.” And both he and another a serial entrepreneur that he knew named Andrew Lonseth, they both helped APS get started in Washington State, in the US, in general.

And we’re also investors in the company. So they saw the opportunity and bought in. And that’s really how our U.S. presence got started. It was out of Washington State.

APsystems global footprint and reach today

Kerim: Got it. What’s the state of the global reach of APsystems today?

Jason: Yeah. So we grew from operating in Washington State in manufacturing. Technically, it was assembled in Washington. We bring in parts from all over the world where they were created and assembled in Washington, and that also qualified for the made-in-Washington play.

Kerim: So designed in Washington, certain parts manufactured elsewhere around the world, assembled in Washington, that’s been –

Jason: Technically designed out of California. So yeah, we had San Jose, so Cupertino, I think, actually. So we started expanding our operation because the volume was getting pretty serious.

Kerim: Yeah.

Jason: And we had one of our other founders, currently our global CEO, Dr. Zhi-min Ling. And he had some connections overseas, and he was able to connect with a large scale manufacturer in Jiaxing, which is just a couple of hours outside of Shanghai, which is their financial center.

And so they were able to get some manufacturing started overseas and then looked at expanding. We had an opportunity in Australia. So we were breaking into that market. We had some interest in Europe. We made contacts with some folks that could help us get that off the ground.

And before we knew it, we were up on our way on trying to establish a global footprint and get enough volume to justify the overseas manufacturing.

And as soon as that made-in-Washington opportunity kind of faded away, it was really a requirement that we had to really push out business outside of just the Northwest. Because we had already started moving outside of Washington, looking at opportunities in Oregon, Idaho, California, just trying to get some more West Coast business started.

And then some of the markets that were really blowing obviously, you know, California is – yeah, about 30% of all solar in the US comes out of California, or at least, before NEM 3.

And now, we’re looking at big opportunities in States like New York. And then Texas started blowing up. Minnesota started blowing up, even Utah. We’re like, wow, there’s a lot of opportunity out there to get our product in the hands of some really talented and driven installers that are looking for an alternative.

Kerim: Yeah.

Jason: And we were at the time just looking to produce a quality product with the same power. But because we’re manufacturing these multi module microinverters, you know, which are these microinverters that could connect to more than one PV module at a time, we’re able to produce them even when we were just starting out at a lower price point than what our competitors in the space were doing.

And so in trying to convince, I mean, Enphase had already convinced a lot of the industry that microinverters had tremendous value and had a better LCOE over the life of the system.

But you know, now we’re taking that a step further and saying, “You know, hey, this installation can go faster, and you could save some money.” And for a while, that was really our only fastball like that was it. That was our only pitch.  

Kerim: Yeah. Before we go into those products, so I want to cover one more thing. So today, you guys are, I mean, obviously, you compete with Enphase on the microinverter space, and generally, string inverters for resi and commercial use, but you do have a pretty large global footprint with 4H headquarters around the world.

Jason: That’s right.

Kerim: And serving 100 countries or so.

Jason: Yes, so that’s actually grown up to 130 countries. So yeah, we’re based in Europe. Yeah, we’re based out of Amsterdam and Lyon, France. In Latin America, we’re based out of Guadalajara and in São Paulo, Brazil. In the US, we actually moved our HQ from Seattle to Austin, Texas, a little more centrally located in the heart of middle America.

And then we have for our APAC business unit, we’re based out of Jiaxing, Shanghai, and Sydney, Australia. And yeah, we’ve grown to now we’ve sold probably 5 million solar power devices and connected to approximately 13 million different PV modules around the world, and probably about 5 GW of solar installed.

So yeah, it’s been a tremendous ramp up over the years.

Kerim: And where’s the core manufacturing facilities right now? And I know you used to have a U.S. plant, but can you tell us a little bit about that, as well?

Jason: Yeah, we had the U. S. plant from 2013 to about 2018. It’s kind of when that opportunity went away and so our overseas manufacturing, so we manufacture out of Jiaxing, where we first started with our manufacturing partner there and have grown to, now we’re in manufacturing out of Taiwan and Vietnam, and we’re looking at getting Thailand, online, as well. And also looking at opportunities in the US, thanks to the IRA legislation, we’re manufacturing something right here at home.

Kerim: Nice. Nice.

Jason: We’d love to get back to it.

Kerim: Yeah. That’s great.

Jason: We were one of the first manufacturers to produce a product here in the US, in solar inverters.

What makes APsystems microinverters unique: innovation and value to everyone in chain

Kerim: So going back to those early days and talking about how, you know, what was the initial differentiation of APsystems? And how has it evolved since? Can we talk a little bit about that?

Jason: Oh, I’d love to. Yeah. So like I said, that first differentiator was, you know, let’s make it easier on the installers, so we can produce the same product and they just, you know, they have to install half as much.

Kerim: Half as much because the key differentiation being for APsystems versus Enphase, start with a 2-to-1 ratio of 1 microinverter like for 2 panels, as opposed to per panel.

Jason: Exactly. And if at that time Enphase had just come out with a dual module microinverter, they probably would have wiped APsystems off of the face of the earth. Because we would have had no other differentiator, right? And then it’s a good problem to have. It’s like, you know, “Hey, if they do do that, what are we going to do? We have to have more than just that in our wheelhouse. There’s got to be more that we can bring to the table.”

Kerim: But before you go move in there, like there’s still quite a bit of benefits to 2-to-1, just doing that.

Jason: Oh, absolutely.

Kerim: It’s being like less BOS, less labor, less moving cost.

Jason: Yeah, the faster installation time. Yeah. So yeah, you hit the nail on the head. So less installation time. You’re also, yeah, because of the shared componentry in there, so you can share about 30% of the components.

So if we think about that, you know, 2 individual microinverters versus 1 microinverter serves 2 PV modules that has 30% fewer components than the 2 separate microinverters.

I mean, essentially, 30% less in cost to produce. So just by the nature of that, you have an opportunity to provide a better value. But yeah, you add the installation time on top of it, you add the increased reliability on top of that, yeah, all of that just really helps to contribute to that argument. And still with the dual MPPT, so you’re not losing anything in terms of being able to support individual modules.

Kerim: Yeah. Got it. Okay. Please move on.

Jason: Yeah. So we had to try to figure out a better way to differentiate. We wanted to keep what we had in that multimodule feature. But we really wanted to augment that. And so I told you earlier, when I got all the leadership in the room, and we’re trying to figure out how we’re going to create the marketing foundation and what makes APsystems unique, one of the big ones was innovation.

And it’s not just, you know, when you are creating a company and you say, “These are our core values in our mission statement, et cetera”, many people can approach that like that’s a good marketing. It’s all fluff. That’s what they think.

But when you really set your sights on a core value, like innovation, and you really try to differentiate based on that, at a leadership level, that’s where you invest your time, your energy, your focus, your money. And so APsystems, the leadership decided that we’re going to set up, put our money where our mouth is, we’re really going to try to be the most innovative product in the industry, and really set ourselves apart as a global inverter manufacturer.

So they invested millions into R&D and to take these dual module microinverters, what they produced in 2016-2017, was the YC600, and at that time, it was the most powerful microinverter, most advanced microinverter in the world.

So we looked at every single data point, you know, looking at spec sheets side by side us versus others in the industry, including Enphase. And how can we beat them in each of these different categories in terms of power output, in terms of capability, in terms of reliability on the roof and installation time, all these things?

And that’s how we came out with the YC600. And we also came out with our 3-phase microinverter, which was actually a 4 in 1. So it connects to 4 PV modules. We came out with a 4 in 1, residential microinverter called the QS1. And essentially, we continue to endeavor to better ourselves in terms of innovation.

We didn’t want to be seen as a me-too product. We didn’t want to be seen as, because we’re providing it at better value, it’s really easy to perceive APsystems as, you know, a lower quality product. If I offered you two Blu-ray players, one is $80 and one’s, you know, $50, you make assumptions about what the $50, you know, one, what the quality is.

But we really endeavored to do, okay, same technology, same high capacity/capability, same efficiency, reliability, et cetera. And, you know, here’s a better price, just because by the nature of how we’re able to make these things. So, yeah. So that is how we really tried to step away and step forward and differentiate.

Kerim: Yeah. So talking about that differentiation, can we dive a little into what is the key differentiation? So the wider operating range, the wider voltage MPPT, and also, we talked about how perhaps, I know you’ve done some presentations showing a slide of the wider shoulders of the APsystems inverter performance versus a traditional or another microinverter like Enphase. I don’t know if this is a time to pull up those slides and show what that looks like. I think it might be useful to talk a little bit about how that extra benefit comes about.

Jason: Sure. So there are a couple of different slides that I can show you on that.

Kerim: Yeah.

Jason: But it really starts, the conversation rally starts with you know, in trying to differentiate, are you trying to bring value to everyone in the chain, the distributor, installer, end-user? Or you’re really just focused on the end-user? And we know there are some other good competitors in the industry that are just, you know, lots of big flash marketing, really just trying to drive branding to the end-user.

And in some cases, you have solar installers that are, you know, pushed and carried along because that’s what’s being demanded, even if it isn’t a great product, or even if they’re tough to work with.

Kerim: And their market is getting squeezed –

Jason. Yes.

Kerim: – because of that.

Jason: And we set out to be the installers’ microinverter. Because invariably, they are the ones who are the backbone of success in our solar industry, in the US.

So when we were introducing our most recent product, we had a good product evolution leading up to that point of dual and quad microinverters, really trying to separate ourselves and add value. And this is one where we really went, you know, down to brass tacks, down to the chalkboard and went, “Okay, what are the things that installers really care about?” What are the things that end-users really care about? And let’s really figure out how we as, you know, just an inverter manufacturer can help to impact those things in a meaningful way.”

Top advantages of APsystems microinverters: Less units, More power, Less cost & points of failure

So how part of that conversation started was, you know, really looking at some technical detail. Let’s take the residential space, for example. When we were looking at developing our next generation, it was why I mentioned the YC600, which was the most advanced microinverter at the time.

Its successor is the DS3, which stands for dual input, single phase, third generation. And in really looking closely at the details of the industry and with most homes that our installers are looking to put solar on, you had typically, about 40 amps of available service on some of these older panels before they would have to upgrade. Now, an upgrade is an expensive cost. It can cost you anywhere from $3,000-$5,000. I had somebody recently that was quoted almost $8,000 on a panel upgrade. So no fun.

Okay. Let’s try to squeeze as much space as we can out of your existing service. So sometimes it’s 20, sometimes it’s 60, but our average was about 40.

And so for, whether you’re us or Enphase or somebody else, you typically are putting two circuits on there. So basically, you’re running cable on the roof, and you’re landing it on a 20-amp breaker. So each one of those we’d call a string or a circuit.

And the most you can load on a 20-amp breaker, due to NEC code is 80%. So you got 16 amps that you can load on that 20-amp breaker. With us, we wanted to be able to maximize that 16 amps.

So no matter how much DC that you have on the roof, you could have 10 kW of DC, you could have 20. It doesn’t matter how much, because you’re still only going to get 16 amps through there. Otherwise, your breaker trips, right? Or if you’re doing 17 amps, you have, an inspector is going to look at, “You got too much load on that circuit. You have to fix it.” So they’d fail your system. So we were looking at putting 5 microinverters on each string.

Okay. How many amps does that come out to? And compare that to the 16 that Enphase is doing as an example. They’re doing exactly 16 amps with their IQ7 or IQ8 because each is a one-amp unit. Okay? We wanted to go higher capacity than that because the PV modules kept pushing into the 400’s and then 500’s.

So, okay. How can we accommodate those higher capacity panels? We have to make this more powerful, which means we need to use fewer of them on each circuit. For us, that meant we were going to try six, five, and four units on each string, which then dictated the output of the inverter. In the case of our DS3, it’s 768 watts.

And so then you do an AC to DC panel sizing for it, 1.25 and that meant that we could do up to 480 watts on that specific model. So just, I really quickly want to talk about the volts and the amps. Because that’s the great equalizer between all inverter companies, right?

Kerim: Yeah.

Jason: So if you have 16 amps on each 20-amp circuit, you multiply that by 240 volts, your output on that circuit, AC is 3,840.

Kerim: Yeah.

Jason: So if you have two circuits, that’s 7,680 watts. That’s us. That’s Enphase. That’s anybody. It’s essentially your promise to the homeowner. “We’re going to put enough DC on the roof to produce this for your home and for the grid.”

So at a 1.25 AC/DC ratio, you’re putting about 9,600 to 10K solar on the roof in terms of PV modules. So we compared the first two models that we had put out, the DS3L and the DS3S to the standards in the industry, which is Enphase. So they’re 7, 7 plus, 8, 8 plus. And we took a close look at, you know, can we produce more energy than their product?

Can we pair with higher capacity panels than their product? Can we put fewer units on a string to reduce the amount of equipment that has to go in, the installation time, the labor? And can we still produce that same output?

So fewer inverters, fewer PV modules, producing the same output. But it really helped us to show this visually. So we have 10 of our DS3L units can produce that 7,680 watts of output. With 20 panels, about 480 watts each. With the IQ7 and IQ8 plus, that was about 26 of those units and 26 PV modules. So you’re looking at maxing out actually with the output on those at 7,500.

So in order to actually get to the 7,680, you have to use the IQ7and IQ8 models because as I said earlier, those microinverters are exactly one amp each. So they can actually get exactly 16 amps out of it.

Kerim: And this is essentially to just match the maximum output –

Jason: Yes.

Kerim: – which is not, we’re not even talking about the total kilowatt-hours produced out of that system at this point.

Jason: Right.

Kerim: Just to match the maximum output.

Jason: Exactly. So just to match what APsystems had done, you actually have to go with the 7 or the 8 and do 32 of their microinverters, 32 of their 32 PV modules.

Kerim: 32 panels. Yeah.

Jason: Yeah. So you have three times the microinverters, 10 versus 32 and 60% more PV modules.

Kerim: Yeah.

Jason: And so we’re like, “Okay, we have a great opportunity here for solar installers and for homeowners”, especially when you have homeowners that are like, “I don’t have room for 32 PV modules on my roof. It’s a smaller home, but I still want to have a great output.” And so we’re able to help provide a solution for that because 20 of these PV modules versus 32 of these PV modules, there’s a big difference.

So I’ll walk you through that too. So 32 versus 20, the 20 480-watt PV modules, they’re larger panels, but they’re actually 100 square feet less overall than 32 of say the 365-watt PV modules that you might pair there. And in terms of cost, the 20 larger panels actually cost $500 to $2,000 less than the 32 smaller PV modules.

Kerim: Less wattage you’ll buy. Yeah.

Jason: right. So this is what we set out to do really with the differentiation. Kind of over the course of APsystems’ history is to try to provide more value. So we want to produce the same energy with less equipment. We want to stay at the forefront of technology. We want to pair with these higher capacity PV modules, than competing solutions.

We want to install faster. That helps the installers get off the roof and onto another project faster, give them fewer units to have to stock and then haul up onto the roof, and then fewer turns of the wrench.

And we also have a wireless communication technology that we employ. It’s because the PLC that most everyone else in the industry uses, it stops dead when it hits an arc fault breaker GFI outlet in the home. So less headaches with that wireless.

Solar installers, thanks to what APsystems has brought to the table, they’re able to win bids for the same system energy output. Or they could even lower their bid if they have a competing bid that they’re bidding against, and they can make more money on that.

So they save money on inverters, they save money on install time, they save money on panels, and we are really helping them create a sustainable competitive advantage in their business.

And I think that’s how we’ve grown to really step away from just being a multimodule microinverter to really being the installers’ microinverter to help them differentiate in a way that we did.

Understanding the PV module pairing and clipping advantages realized with APsystems microinverters

Kerim: This is amazing stuff that you shared. I think it makes the APsystems value proposition very clear. But seeing that production graph and the advantages that you mentioned about, you know, the system is actually turning on earlier in the day and shutting down later in the day that also creates some –

Jason: Yeah, let me pull that up. So the conversation on our PV module pairing and essentially that daily curve really starts with a conversation on STC versus PTC on the PV modules. Now, we’re not a PV module manufacturer. We are an inverter manufacturer. So we really just have to deal with, you know, the output of those PV modules.

And of course, what we notice is that the output isn’t always what the brand says on the, you know, if it says it’s a 400-watt panel, you’re not getting 400 watts. Or if it’s somewhere in the model number, because if it says 400, that’s really the STC. That’s perfect lab test conditions, perfect irradiance, perfect pitch, perfect temperature, all of that. And that’s also not over the life of the product.

So a couple of things you need to know is you may have an STC of 400, but the PTC on the product, you can actually go on the CEC website and you can actually just do a Google search because that’s a long URL. And you can see what the STC and the PTC rating for each of these PV modules is. And even though it says, you know, 370, what is the output of that panel going to be like? If it’s warranted for 25 years, what’s it going to be like on that 24th year?

So your performance is going to degrade over time. So this is why every solar installer and the panel manufacturers, they recommend you oversize when you’re trying to pair this up with an inverter. So if you have a 400-watt inverter, you don’t want to put a 400-watt panel on it. So again, the oversizing, you need to account for degradation in your PV module over time.

You also want to harness the energy that’s available in the shoulders of this curve. Now, what do we mean by that? So let’s say you have an inverter output like our DS3S. Each channel outputs 320 watts AC. So when you’re looking at the input, if you were to put a 300-watt PV module on that, that is going to be performing below 320 watts.

What you’re missing out on there, it’s a pretty lackluster performance out of this, especially when you compare that to, let’s take that same 300-watt PV module. Let’s overlay on over the top of it, a 400-watt PV module, paired with that same inverter at 320 watts output. So your input is this new 400-watt PV module and a lot of critics of this would say, “Yeah. See there? That’s where you clip and you’re losing all of that energy.”

Kerim: Right.

Jason: But what we like to point out is look what you’re gaining in the shoulders of the curve.

Kerim: Yeah.

Jason: So I guarantee you that the production that’s gained here, dwarfs what you’re losing here in the clipping. So that’s why that oversizing is important. You may have some clipping. But especially under lower light conditions, you definitely want to make sure that you have a –

Kerim: And obviously, this is a perfectly sunny, beautiful day.

Jason: Yes.

Kerim: And your midday hour’s for an hour or an hour and a half. You’re losing that clipping portion, but you’re producing so much more on the edges.

Jason: Yeah.

Kerim: And if it’s a cloudy day, then you’re probably producing almost all the time, you know, more than what you would have with a lower wattage.

Jason: Yeah, when we were first talking about this to customers, like it was the science was solid. The ratio was typically about one 1.2 and then it went to 1.3 and now there’s even, you know, proven cases where – sorry 1. 2, then 1. 25 and now 1. 3. There are some cases of which going even higher than that could be helpful. You’re picking up even more.

You really want to feed those inverters as much as possible because overfeeding them, it’s not going to hurt the inverter. We’re not worried about putting a 500-watt PV module on a 320-watt inverter. You’re not going to harm the thing. You are going to have, be feeding it as much energy as possible. You’re going to have more clipping, but you’re also going to be picking up a lot more energy on the shoulders.

Kerim: And so essentially, this is just another, one of those advantages of APsystems against Enphase. Just because of the fact that your solutions tend to be higher wattage. Even though the inverter output might be the same throughout the day, you’re producing at a higher wattage because you are coupling it with higher wattage panels and 2 panels at a time, as well, I guess. Would that be correct to summarize it as such?

Jason: I would say our advantage is in being able to do more with less. As I showed you earlier, you do 2 strings with us, you do 2 strings with them, but with their solution, you might run out of roof space. So you could potentially add even more PV modules with APsystems. If you have more room, get a couple more PV modules on there with our high output inverters, and then you have a more powerful system, if you have the roof space for it. So that’s a huge advantage with APsystems, doing more with less, but, yeah. Regardless of the inverter type, I think this still holds true.

You put enough DC on the roof to feed your inverters, that you may have clipping, but you’re going to produce more energy over time, especially when you get toward the later years in that warranty when, you know, your panels, maybe you have only 50% efficacy now in those panels, you’re going to wish you had gotten more, higher powered.

Because now you’re not feeding your inverters enough and your output is like, wow, those panels, they sure didn’t last as long as I wish they did.

Kerim: That makes sense. Thank you for sharing this.

APsystems’ market share vs. Enphase

I want to go back to another key question that I had in my mind, which is, having been in this space with panels, inverters, all sorts of solar equipment for the past decade and a half, I’ve always heard great things about APsystems.

But I’ve also observed that you guys don’t have the same strong market share that your key competitor, Enphase, enjoys. So I’ve always wondered, how come?

Jason: That’s a good question.

Kerim: So what have been some of the challenges to growth for APsystems versus Enphase, I guess, is one way to put it?

Jason: Yeah. We actually get that question quite a bit. Because, you know, there are people that say “Your product’s clearly superior. Like, how come nobody knows about this?”

So there are really three parts to that, the first part being, when we were first trying to get off the ground, trying to break into distribution is tough for a new manufacturer because the distributors, especially national distributors, they don’t want to take a risk on somebody new, especially when nobody’s asking for the product.

So most of the distributors we talked to, they said, “If installers start asking for your product, then I’ll start selling it.” So you really had to do a grassroots effort. And so when Enphase encountered that, they’re like, “Okay, big, massive branding campaign.” You know, they went public very early, giant fundraising campaign, and they pushed a lot of brand, a lot of product out there. They were sponsoring every event. They were big. They were all over the place.

What you’ll see now is their presence at trade shows, very minimal, if any. They’re not sponsoring events anymore. Like their target is now, they don’t target installers anymore. They target end-users. That they did that very early on is really trying to push to installers so that they could get their product adopted by a lot of distributors.

And so APsystems, we faced that same challenge. And we really tried to focus on growing organically and growing profitably. So we’ve been profitable every year for the past 12 years because we didn’t grow, we didn’t do debt growth. We did organic growth. So we didn’t – we only went public two years ago, and and not 10 years ago.  Or I don’t remember when Enphase went public, but it was a while back. And not taking on that debt, not taking on high-risk loans, not taking on those challenges to – or that actually inhibit our finances, but improve our market share.

So breaking into distributors was harder for us. It was a while in APsystems. It was like, we’ll sell to anybody with a pulse, you know, just trying to keep product moving. But as we continue to produce quality product and continue to differentiate, over time, we were able to get these national distributors to adopt our product.

Jason: Sometimes it started, you know, half a pallet at a time, not even a full pallet. We’ll take half a pallet and then yeah, full pallet. I mean, and now, it’s the opposite. Now we are selling, you know, container loads by the dozen. And now we’re having to knock off other distributors with a bat. And so good problems to have.

And another issue was trying to pair with third party, so TPO financiers, to be on their AVLs, you know. To get them on board has been a challenge. And Enphase have been pretty clever over the years of, you know, with some customers when they get an inkling that somebody is, a customer is either shopping around, or that a competitor is looking to break in. Like they have done their best to really try to preserve that business, you know, sometimes at cost. And just, we’re just going to offer that product with no margin, just so we can keep that business. Or we are going to try to go for exclusivity. So they’ll do exclusivity with distributors. They would do exclusivity with some of these financiers.

So if a customer liked the product or installer liked the product, they couldn’t even get financing on an APsystems, you know, for a long time because of that exclusivity. So they were very clever about really trying to be the only option in the microinverter space.

And I would argue that the industry probably suffered more from that, not having that competition and that kind of free market, you know, and fewer options than it probably should have. But those dominoes have fallen away since then. And so APsystems is offered on a wide variety of TPO AVLs.

And we have probably 25 distributors, most of them, national distributors where we are offered on their line cards and yeah, the growth problem is not so much a problem anymore.

Kerim: Were there any advantages along the way from a policy regulation perspective that benefited Enphase over others, as well?

Jason: Yeah, we actually ran into that with the IRA legislation, most recently. When they were writing the legislation for IRA, they actually went so far as to, Enphase had some good connections with lobbyists, and they were able to actually influence to have the definition of a microinverter be very specific to their product, which is pretty clever.

If it was just us and Enphase, it’d be like, wow, good move. Okay. You thought of that. That’s, you know, a way to keep other people blocked out.

However, when you look at the other dozen microinverter manufacturers, they’re all multimodule micro manufacturers. And Enphase was able to influence the legislation to be written as one microinverter to one panel. And no microinverter can be greater than 650 watts, AC. And with most of our products, you know, most of our products exceed that.  And the other multimodule microinverters, as well.

Kerim: And so that disqualifies certain credit, certain rebates or certain credits.

Jason: Exactly. And that also meant that we couldn’t build here in the US. There was no benefit to us or to our customers for buying a made-in-the- US APsystems product because it wouldn’t qualify under the terms of the definition.

So we actually pulled together. Every other microinverter manufacturer in the industry, pulled together, so except for Enphase, because we are all multi module microinverter or M3 manufacturers, and we decided, you know what? We want to give the American solar industry more choices than just Enphase, and because they’re looking at exclusivity on, you know, probably a 2-billion-dollar a year solar opportunity, that installers and homeowners would have no choice, but Enphase, for microinverters.

So we looked at okay, how can we – can’t change the legislation at this point. But perhaps, we can change the interpretation. We can help Congress. We could help the Department of Energy. We could help the IRS. We can help all of them change how that legislation is interpreted to broaden that interpretation to include multimodule microinverters.

And so we spent a year of lobbying to congressional leaders, to, as I mentioned, Department of Energy, to the Treasury. And for how that language could be interpreted. And we were fortunately successful that now the interpretation is going to include specifics about, you know, that applies to each channel, as opposed to each microinverter.

So now you can have a multimodule microinverter, and it’s specific to the MPPT of each of those. So if you have a dual channel, dual MPPT that that qualifies now under the legislation. So then that opens up the door for APsystems to continue offering that product to customers here and have them get that benefit.

Kerim: Thank you for that background.  

APsystems’ value proposition in the C&I sector

Let’s dive into a little bit of the commercial space. You know, you guys have been traditionally known in the residential, but also for small commercial. So can you tell us a little bit about how active are you guys in the C&I sector of solar? And are you positioned? And what are your key advantages there?

Jason: Sure. So in 2014, we were taking a look at the commercial business opportunity. Most of our installers did residential, but also a little bit of, you know, it’s kind of small scale commercial. I’d say 75% of our installers also do a little commercial, and we kind of wondered a lot. Like, can we apply the same benefits that we are bringing to residential to the commercial side?

And does that also resonate there with the value proposition? Does it work? And so we kind of went out on a limb. We applied, you know, that R&D once again, trying to be innovative, coming up with something. It’s a risk in trying to move a microinverter in the commercial space.

And I’ll talk a little bit too about what some of those paradigms that we ran into where a lot of installers are like, “Wait. What? That doesn’t make sense. You know, that’s a residential product.”

But so when we first entered that space, it was with a product called the YC1000. It was a 4-in-1 3-phase microinverter, that launched 2014, 2015, early 2015.

And we started getting some traction with that. One of the benefits of that product was it was a single MPPT for the whole inverter, which meant that you could do, you know, four 300-watt PV modules. Or you could do three, 400, 450 watt PV modules, kind of a shared pool of DC input to get your output.

But it quickly, because it was at the time we called it YC1000, it was actually only 900 watts. So they were reaching a little bit when they called it YC1000, that was not a branding decision I was a part of. But we quickly discovered that as the panel sizes kept increasing, especially in commercial, I’m like, “Yeah, no. We’re using these 450-watt, 480.”

And then it kept going up and then we’re like, our product is quickly outmoded. So within the few years that we were selling that product, it became the bestselling three phase. It was first, the first 3-phase microinverter on the market. But then others introduced theirs, but ours was the bestselling 3-phase microinverter in the world.

But it quickly became, within a few years, just outmoded. Just by the capacity of these inverters are these PV modules that were hitting the market and being used in commercial solar.

So we came out with two years ago, the QT2, which is actually twice the power of that YC1000 that came out, and about the same footprint. But now we can pair that with PV modules up to like 600 Watts. So we’ve bought ourselves a couple of years with our product. But yeah, that’s again, that’s a challenge with the solar industry is trying to continue to innovate and stay ahead of that curve.

But it was interesting. The pushback that we got with our more recent QT2 was actually even greater than the pushback we originally got with the YC1000. When we first introduced that 3-phase microinverter, it was more of a novel thing. It’s like, “Oh, that’s interesting. Let’s see how that works.”

And there was some, you know, interest in adopting. And with the QT2, it was because more installers had heard about APsystems, more installers had tried our product, they were very familiar with us in the residential space now and with our residential microinverters. And here we are coming out with a microinverter for commercial projects that the first thing was well, I know what we’re paying on the residential side. And it’s too expensive to apply that for a commercial product.

Microinverters are too expensive. It’s not going to work. It’s never going to pencil out. And so another concern that we had is it’s not going to be powerful enough. And we had specifically designed it for that industry. And we knew that there were going to be these challenges.

And so my marketing challenge was really to go out and kind of change that paradigm of what they thought a commercial microinverter was. Like, “Look, no. With these larger arrays up to a megawatt, it’s penciling out within 1% to 3% of string inverters plus rapid shutdown.

So we’re staying very competitive on price. We showed them the new architecture. Look, it’s pairing with PV modules up to 600 Watts and getting a lot of raised eyebrows. It’s like, “Oh, oh, oh, that’s interesting.” And getting a lot more, “Okay, send me the data sheet on that. Let me take a look at it.”

And then, “Yeah, we’re going to see how this pencils out. And it’s kind of pushing the rock uphill a little bit, but man, once they’ve tried it out, they see how simple it is to design these systems, they don’t need to get rapid shutdown device connected to each PV module.

It’s one for every four, higher reliability. There are some tremendous benefits of using that. And we’ve kind of been winning them over one by one. You know, these guys that have been using string inverters for commercial for over a decade, and it’s like, “Yeah. There’s other technology out there.”

Kerim: Well, I see a future conversation going deeper into the C&I product line that you guys offer and talking more in depth.

APsystems’ energy storage solution

Coming close to the end of our time here, I want to talk a little bit about batteries because solar plus storage sales are going up the roof. Big percentage of solar installations, whether residential or commercial are now including, battery and storage in their solutions.

So are you guys addressing this demand? Do you guys have your own battery? Do you work with other batteries? Can you tell us a little bit about that?

Jason: Oh, yeah. Absolutely. So once the energy storage fever started on in the solar industry, APsystems like everyone else, we’re like, “Well, we need a solution. We have demand for that.” Our customers are asking us about it and our existing customers are like, “Hey, I got you guys on my roof. When are you coming out with an energy storage product?” So there was a lot of opportunity there, so we had to figure something else out.

But in our typical APsystems fashion, our focus as I continue to hit on is focusing on being the installers’ microinverter or the installers’ solution provider for solar. And what are some of their challenges?

So we talked to customers in the space. What do they like about existing systems? What do they not like about them? And one of the things that they didn’t like was kind of being, you know, if they had somebody on the roof, one particular brand is, in some cases, like them. We need to use their system and their battery, for energy storage or like essentially kind of being chained to a particular brand or product.

And even with that, it’s like, “Well, wait. I don’t mind doing that, but, we only have one choice of battery with that solution.” And so we tried to come to the market with something that was going to be a little bit more flexible to give not only installers, but end-users more choices. So we developed an energy storage solution that’s comprised of a battery inverter and a battery.

So the battery inverter charges and discharges this battery. And the battery inverter is something we make. We’re experts in power conversion devices. So that’s really our expertise. So, you know, we can absolutely manage that.

But we’ve never made a battery before. And we are not a battery manufacturer. That’s not our expertise. So we knew right away that, you know, that would be a big lift for us to really bring that expertise in-house, especially when there are so many tremendous solutions available out there on the market.

So we did two things. We’re like, “Okay, we have some customers who are going to want a branded solution.” And so we found a high quality battery out there that we could private-label. And we would own the warranty so that, you know, all of that would be ran and managed through APsystems – one system, one solution, one interface. But we also wanted our battery inverter because it was a great solution to be able to pair with a variety of batteries that were available out there.

HomeGrid had a fantastic Stack’d Series, that could go in in 30 minutes. And we’re like, “How do we compete with that?” And, you know, we can go back to the drawing board. Or we could say, “You know, Hey, our product now works with HomeGrid.” And so we worked that out with them to make sure that the communication worked between our two products.

Then we did the same thing with Fortress. We did the same thing with Dyness, some of these other battery manufacturers. Now we have a list of at least a dozen different battery manufacturers that’s located on our website that we have full compatibility with. And so that’s giving the customers more choices.

Like, you can use this great battery as an option, or you can pick your own if you have a favorite. But it can be our product charging and discharging it and our product on the roof, as well.

And our storage solution offers, three different modes. So there’s a self-consumption mode, there’s a time-of-use mode for that peak shaving, and a battery backup mode where you can actually run your loads directly off of solar power.

That mode is only available when APsystems is the microinverter on the roof. But a great thing about our battery solution as well, our energy storage solution, it doesn’t have to be us on the roof. You could still do self-consumption, time-of-use, even if we’re not the solar system on the roof. So that, you know, again, that flexibility in being a little bit more agnostic than competing solution is part of what we’re all about.

Key distributors working with APsystems in the US

Kerim: Great. And let’s talk a little bit about supply chain. How do installers buy your product? Where, who did I get in touch with? Who are the key distributors you’re working with in the US? Beyond the US?

Jason: So, yeah. We have a lot of fantastic distribution partners, national distribution partners, that we enjoy working with. We have tremendous partners that know our product, that really do right by their installers to make sure that they’re offering them the latest and greatest products.

If you want to find that list, you can actually go to our website, usa.apsystems.com and under success stories, there’s a list of our partners. You can actually click on distributors, and it will pull up all of our distributors in the market. So you can see, we’ve got a variety from OSW, City Electric, Greentech, Fortune, Agilix, Krannich. Yeah, Solar Wholesale, Soligent, Sonepar. So you know, most of these distributors serve a wide area, and you can find someone in your neck of the woods.

Another thing you can look at is under our professional installer list, we have this link that says, how to order. So installers can click on that, and it’ll actually take them to a distributor map where they can plug in their address.

You see, I’m in Seattle, so it’s kind of automatically defaulting to where I’m at. And so I can pop in 90210 for those of you that lived in the nineties. And we can pull up some results on some distributors that are located in that region.

So as I pull up this list, it’s going to look within a certain radius, but each of these locations is a physical location where if you’re trying to find something nearby, if an installer wants to actually pick up at a warehouse, as opposed to having it shipped, it’s convenient for them to look for the one that’s located closest to their location. So anyway, a wide variety of distributors to choose from.

Kerim: And this is active live inventory in pretty much all of these locations with close to zero lead times?

Jason: Yeah. So that’s one thing our distributors love about APsystems is most of our distributors that purchase from other manufacturers will, have typically extended lead times. You’ve heard typical 6 to 8 weeks.

In some cases, especially when there was the chip shortage, some of those timelines moved out to 15 to 18 weeks or more. But because we have some really good partnerships overseas, it never impeded our ability to be able to provide products.

So we were able to still ship out of our warehouse to distributors within 48 hours and container loads were shipping. And I mean, anything on the water is going to have like a three-week lead time, but we were able to send it out in a week.

So distributors love that about our availability, our quick turnaround. That means they have to stock less in the warehouse because they don’t have to write out these long periods of time when they might not have products.

So definitely a benefit with APsystems. And so if a distributor doesn’t have it, they can quickly get it from APSystems in just a few days, to be able to supply installers with the materials they need for a job.

Kerim: Right. Well, Jason, that ends our solar conversation for this time. Thank you very much for this depth of information you shared with us and the history and the evolution and the key benefits and advantages to using APsystems. And we’ll continue with more topics, soon.

Jason: Awesome. Thanks, Kerim. I appreciate your time.

Kerim: Thank you.