Inverter Sizing-Determining The Perfect DC:AC Ratio!

Why does my proposed system have an alternating current (AC) inverter capacity that is lower than the solar panel capacity in direct current (DC)? This is one of our absolute favorite questions to answer- 1) because we love working with educated customers that dig into details, and 2) because it gives us the chance to show off how much time we spend researching to make sure that we are giving homeowners the most bang for their buck.

The starting point for answering this question should always be that the Standard Test Conditions (STC) that modules are tested under are laboratory conditions that they are unlikely to encounter in the real world. Much like an old Honda Civic with 160mph speedometer that probably tops out at around 100, a 400-watt solar panel in our region will seldom produce much more than 260 watts.

The second part of the answer is to explain how a proper DC:AC ratio is determined. It is also the third reason we love this question because unlike debates around which solar panel manufacturer is the best, whether to use a national installer or a local one and so on; this one has a definitive answer.

To understand why, imagine a farmer that is trying to increase her crop yield. She could spend money on getting more seed or she could spend it on getting more fertilizer. One increases the number of plants and the other increases the output per plant. But there is only one perfect combination of seed and fertilizer that will result in the most crops per dollar spent, one optimal ratio.

Solar is no different. Money can be spent towards getting more solar panels (increasing units) or it can be spent towards upsizing inverters (output per unit), but there is only one ratio that maximizes the use of a customer’s money. A properly designed system should aim for that ratio while also considering the various other factors that go into a solar design. The three pieces of information needed to determine the optimal balance are 1) the relationship between production output and the DC:AC ratio, 2) the cost of adding solar panel capacity, and 3) the cost of adding inverter capacity.

Two great places to determine the first detail are the National Renewable Energy Laboratory’s (NREL) PVWatts Calculator and System Advisor Model (SAM). Both are free tools that can provide a production estimate based on a system’s location, orientation, tilt, and size, among other variables. PVWatts is easier to access and more user friendly, but SAM is generally considered more accurate. For this analysis, I used both models to estimate the production of systems with DC:AC ratios from 0.4 – 2.0 that are otherwise identical. Both models show similar curve patterns where production increases initially due to efficiency gains that occur when inverters operate near capacity but decrease thereafter due to the panels producing more electricity than the inverter can throughput, what’s referred to as clipping.

To test the accuracy of each model, we gathered data from a set of projects installed over the last couple of years where we randomly upsized inverters within an array. This enabled us to measure the real-world production differences between identical panels that have been installed side-by-side with different inverters. Specifically, we looked at what the actual production premium for using an upsized inverter was compared to what the models predicted it would be. Both models were impressively accurate, with SAM outperforming PVWatts in 7 of 11 observation groups (See Figures 2 & 3).

On average, the PVWatts model underestimated clipping from using an upsized inverter by 2.4%. SAM was much more accurate overall, overestimating the inverter’s effect on production by 0.5%. Based on our empirical data, an analysis relying on PVWatts production curve will skew towards using smaller-than-optimal inverters and one using SAM will slightly favor using larger-than-optimal inverters.

Having established the relationship between the DC:AC ratio and production, the next step was to gather the marginal cost of inverter capacity and solar capacity. According to NREL’s 2022 Report, the average cost for one watt of DC capacity for residential PV systems is $0.48 while the average cost of one watt of AC capacity is $0.36.

Both the figures above only represent the hardware cost of modules and inverters. There are situations where the relative price will be altered by knockout-on effects from adding DC such as additional racking or from adding AC capacity such as additional electrical balance of system (BOS) equipment. According to the NREL, electrical BOS slightly outweighs racking costs, which would cause the optimal inverter size to be slightly smaller when accounting for these effects.

The production curves can be combined with the hardware costs by calculating the per dollar benefit of moving to a different inverter ratio. For example, a 10kW system with a 1.3 DC:AC ratio would have a 7.692kW inverter (10,000/1.3). Moving to a 1.2 inverter ratio would require an additional 641w of inverter capacity, which would cost ~$231 (641*.36) and result in an extra 98kWh/year in production, or 426 watt hours per dollar spent (Wh/year/$).

Alternatively, that same $231 could be spent to increase the DC capacity of the system. That would result in an extra 481w of DC capacity, resulting in a new DC:AC ratio of 1.36 and providing an additional 618kWh/year or 3,105Wh/year/$. Plotting the marginal benefit of equipment upsizing across the different AC/DC ratios shows the point where the benefit of inverter upsizing exceeds the benefit module upsizing. PVWatts production data shows this crossover happens at a DC:AC ratio of 1.8 whereas SAM shows the optimal ratio to be 1.6. Our empirical data suggest that it is somewhere in between, although much closer to the SAM estimate.

These figures may come as a surprise to a casual researcher who will find that most quotes have DC:AC ratios from 1.15-1.25. However, commercial and utility-scale designers have long maintained that residential installers tend to use suboptimal inverter sizing.

There are a few reasons for the discrepancy. One is that commercial and utility-scale designers go into more detail on their designs. The PhD engineers that design utility-scale solar are maximizing production at an entirely different level than residential bidders who are sending out multiple quotes an hour. A related reason is that using a higher ratio may necessitate checking the manufacturer’s current limits, DC voltage limits, and maximum DC:AC ratios, which are set low to reduce the possibility of early failure from being overworked. Finally, selling a system with comparably named equipment lessens or eliminates the amount of time spent educating customers on the topic. Thus, throwing a few hundred extra dollars on a quote and using oversized inverters is easier than running simulations on PVWatts, digging through inverter specification sheets, or discussing Standard Test Conditions with prospective customers.

That’s one of the reasons we conducted this research. We believe solar education is one of the key differences between everyday solar shoppers and the know-all solar advocates we aspire for our customers to be. DC:AC ratios have been trending up in recent years, which is good news for average homeowners who still tend to have a good bit of production left on the table from excessively sized inverters.

Of course, there are lots of factors that go into solar designs so homeowners should not assume they are getting short changed based solely on the fact the DC:AC ratio is not between 1.6 and 1.8. It is a question worth asking though and could even result in a revised quote that both saves you money and increases the output of your system!