The inverter used to be beneath notice: a box that turned direct current into alternating current, reliable, unobtrusive, interchangeable. Not any more. Today it is a connected node within a complex energy system, remotely controllable, updatable by software, wired into energy markets and capable of holding up the grid itself. As the industry is now learning, at times the hard way, these capabilities make it part of the critical infrastructure holding up Europe's grid.
A market finding its footing
The European inverter market has endured a turbulent few years. The boom of 2021 to 2023 gave way to a sharp downturn, as excess inventories, falling demand and aggressive price pressure from Chinese manufacturers took their toll. European suppliers such as Fronius, SMA and SolarEdge had to reduce capacity and cut jobs. The picture looks brighter now. "Business is performing well again. We made a profit in 2025 and are gaining market share once more," says Harald Scherleitner, Chief Sales Officer at Fronius International, whose company is now on a stable footing again following a restructuring programme that eliminated around 1,000 jobs, and is bringing new products to market.
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SolarEdge, the Israeli-American manufacturer with a strong presence in Europe, has weathered a difficult stretch of its own. Pascal de Boer, who has been General Manager for Europe for a year, points to three priorities driving the recovery: financial stability, regaining market share and introducing new products such as the Nexis platform. SolarEdge employs around 350 people in Europe, where the region has historically delivered roughly a third of the company's total revenue. Sungrow, China's market leader, ranks Europe among its most important markets worldwide, "probably in the top three," says Andrea Polini, Team Leader Technical Sales at Sungrow Europe. The company has its sights on the commercial and industrial (C&I) segment, where it says it ranks among the leading suppliers in most European countries, as well as on the Eastern European market's rapid growth.
Technology: more than hardware
What distinguishes a modern inverter from its predecessors is not primarily conversion efficiency, which has largely converged across the industry in recent years, but system integration. Inverters communicate with battery storage systems, charging points, energy-management systems and electricity exchanges. They regulate frequency and reactive power, manage dynamic tariffs and enable direct energy trading. Sungrow has developed two product lines for this purpose: PowerStack, an AC-coupled cabinet-based storage system, and PowerKeeper, a DC-stackable battery system that, according to the company, is particularly well suited to installers moving from the residential market into the C&I segment. Both systems can provide grid services, including frequency regulation and reactive-power support. The portfolio is complemented by an AI-supported logger that decides autonomously when to buy or sell energy under dynamic tariff conditions.
Pascal de Boer: "The most interesting driver is cybersecurity itself"
SolarEdge is pursuing a different approach. The company relies on module-level power optimisers, enabling granular monitoring and control of every individual module. "The SolarEdge system is, by design, more intelligent than most alternatives," says de Boer. This architecture provides the data foundation for AI-driven optimisation, from maximising energy yield to system maintenance. With its forthcoming product, Sera, SolarEdge plans to introduce an AI assistant for consumption optimisation and tariff management that, according to the company, can generate up to €1,000 in additional annual value per system. Fronius, meanwhile, is positioning itself with European-made battery storage systems, including Reserva Pro, and a focus on system resilience. Its inverters are manufactured entirely in Europe, with components produced in the Czech Republic and final assembly carried out in Upper Austria.
Grid integration an underestimated challenge
As the share of variable renewable energy grows, grid integration is becoming the central challenge for inverter manufacturers. Modern devices must do more than feed electricity into the grid: they must actively contribute to grid stability through reactive-power control, frequency support, controllable feed-in and the ability to communicate with grid operators. This requirement is particularly pronounced in the C&I segment. Companies want to use their grid connections not only for feed-in, but also for load management, energy trading and the provision of ancillary services. Polini describes this as the key motivation behind Sungrow's system development: "How can companies use their grid connection not only to produce energy, but also to control their load, buy and sell energy, or provide reactive power and frequency control services?"
Regulation remains a structural obstacle. In Italy, for example, an AC-coupled combination of a PV inverter and battery storage system requires both components to be registered separately with the grid operator, resulting in duplicate connection fees. This encourages installers to opt for DC-coupled hybrid inverters instead. Such regulatory differences between EU member states make it harder to scale system solutions across Europe.
Cybersecurity goes from niche to policy
No issue has transformed the inverter sector more in recent months than the cybersecurity debate. What was long considered a technical niche topic has become a central question of industrial policy. The starting point is technical. Every connected inverter can be remotely controlled by its manufacturer, receive software updates and, in an extreme scenario, be shut down. "In a geopolitical crisis, that creates a real vulnerability," says Scherleitner. Master access, he notes, always remains with the manufacturer, regardless of where the servers are physically located. A common misconception is that European cloud servers solve the problem: "The physical location of a cloud does not determine who holds the access rights."
"A reasonable price for European security" – Fronius CSO on Made-in-Europe rules
SolarEdge's de Boer puts it more bluntly: "If someone asked me to shut down inverters in Europe, I could simply say no. In a Chinese company, refusing government instructions would be unlawful." That, he says, is precisely the European Commission's concern. The regulatory response is taking shape on several levels. The Cyber Resilience Act and the NIS2 Directive define minimum technical requirements for connected products. In addition, the European Commission has classified four countries, widely understood to include China, as high-risk. Products originating from these countries are expected to become ineligible for EU funding in EU-financed projects from 1 November 2026. For EU-funded projects outside Europe, the deadline is 15 April 2027.
Scherleitner stresses that this does not amount to a ban, but rather a restriction on public funding. "In practice, this currently affects utility-scale projects above all, and therefore around 15 percent of the European market." He is critical, however, of the lack of transparency. So far, the details have primarily been communicated to financing banks, without formal written guidance. "Written clarity would be very helpful for the entire industry." Sungrow is responding to the debate with a Europeanisation strategy. Server operations, software development, release management and hosting are to take place entirely in Europe. "Our software, servers and software signing are all handled in Europe by European entities," says Polini. The latest version of the iSolarCloud platform will run exclusively on EU-based servers.
Value creation: what remains in Europe?
The question of European value creation is more complex than it may initially appear. According to S&P Global and data from the European Solar Manufacturing Council, Europe has more than 100 GW of inverter manufacturing capacity, more than the entire annual European market, estimated at around 60 GW. Industry-wide capacity utilisation remains well below potential. Fronius manufactures entirely in Europe and says it could increase its capacity from the current 10 GW to 17 GW within one year. SolarEdge relies on US manufacturing and has no plans for production sites in Europe. Sungrow is currently building a plant in Poland, which is expected to start operations in the first or second quarter, initially producing smaller products for the distribution business.
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Scherleitner cautions against equating final assembly with genuine value creation. "Final assembly accounts for less than five percent of total value creation," he says. If Chinese manufacturers establish assembly lines in Europe without relocating upstream production stages, this is "often just a fig leaf." Austria has therefore introduced a Made-in-Europe bonus that explicitly requires printed circuit board assembly to take place in Europe as well. The origin of the inverter plays a smaller role in overall system costs than is often assumed. According to Scherleitner, independent analyses show that European-made inverters increase total system costs by only two to four percent for smaller installations, and by even less for utility-scale projects, even though the price difference at component level can be as much as 50 percent.
Looking across the Atlantic
US regulation is casting a shadow over Europe. Washington has introduced new import restrictions for inverters not manufactured in the United States, not only Chinese ones. These require detailed disclosure of ownership structures, supply chains, software control and remote-access capabilities. Manufacturers must also submit plans for future US production. The consequence is that global overcapacity is being redirected increasingly towards the European market. "Europe must therefore act quickly with further measures to safeguard its industry and energy security," Scherleitner warns.
De Boer sees the security debate as a structural shift comparable to earlier developments in the semiconductor industry. "I saw this before during my 30 years in semiconductors; it led to the CHIPS Act in the US." The current EU process around inverters, he argues, resembles the early stages of restrictions on Chinese 5G suppliers: from initial statements and formal Commission proposals to implementation by individual member states.
Clear rules a prerequisite
Europe’s inverter industry is at a crossroads. The technological and industrial foundations for strong European manufacturing are in place. What is missing are reliable regulatory conditions that justify investment in capacity and automation. “The industry is ready. What we need now are clear and reliable framework conditions from European policymakers so that we can fully realise this strength,” Scherleitner concludes. In his view, such clarity would not only unlock economies of scale, but would also make European products increasingly competitive on price.
Sungrow's Andrea Polini: "Bankability counts more than price"
For Sungrow, however, Europe remains a long-term investment regardless of any regulatory uncertainty. "Since we opened our first offices in Europe in 2011, we have grown our local presence significantly," says Polini. Production in Poland is "a logical next step" in an evolution that has moved from sales and service to warehousing, research and development, and now manufacturing. The debate around inverters is no longer purely technical. It is a debate about energy sovereignty, industrial resilience and the question of who retains control in a connected energy system. Europe's answer will shape the industry for years to come. (hcn)
