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Commentary —
IEA (2026), Inverter supply chains and cybersecurity, IEA, Paris https://www.iea.org/commentaries/inverter-supply-chains-and-cybersecurity, Licence: CC BY 4.0
Recent announcements from several countries, including a significant shift in EU policy, have refocused attention on the security implications of inverter supply chains. This reflects a broader challenge facing governments as they design their industrial strategies for energy technology supply chains: how to balance energy security, supply chain resilience, economic competitiveness and other matters of national security – including cybersecurity – while keeping costs manageable and maintaining the pace and scale of deployment they wish to achieve in the Age of Electricity.
An inverter is an electronic device used to convert the direct current (DC) produced by devices like solar panels, batteries and many modern wind turbines to alternating current (AC), such that it can be used to power the electrical circuits in homes, businesses, factories and the wider electricity grid. None of the solar PV capacity installed globally today – almost 3 TW, supplying nearly 9% of the world’s electricity – could function without inverters.
The inverter is a control point – the “brain” – in a solar PV, wind or battery energy storage system (BESS) installation. Inverters optimise power flow, monitor performance, ensure grid safety and co-ordinate with the batteries and loads that are connected to them, like electric car chargers, air conditioners and heat pumps. Modern inverters are usually connected to the internet and other networks, making them controllable remotely and therefore potentially vulnerable to cyber-attacks.
If a cyber-attacker gains access, they can potentially control and alter the operation of the equipment the inverter is connected to. Cyber-attacks can either target an asset directly by exploiting weak points in its online connection, password protection or remote-control system; or they can arise from threats in the supply chain if “back doors” (unauthorised access channels built into devices) are established during the manufacturing process. Malicious software can also be included in software updates provided by the manufacturer. The potential consequences of such attacks could range from localised disruptions to lengthy blackouts.
The European Commission has recently announced restrictions on EU funding, including through the European Investment Bank and European Investment Fund, for solar, wind, and energy storage projects using inverters from countries it deems “high-risk” with respect to potential cybersecurity threats. The countries currently included in this category are China, Russia, Iran and North Korea, of which China is the only country that is a major supplier in the global inverter market. On 8 May 2026, China’s Ministry of Commerce issued strong criticism of the new restrictions, warning it could damage trade relations, supply chain security and Europe’s energy transition.
There are already regulations in place in the European Union to mitigate the cybersecurity risks posed to inverters and other equipment, including the Network and Information Security 2 directive, the Cyber Resilience Act and the Network code on cybersecurity. At the EU member state level, Lithuania has implemented restrictions and safeguards on the remote control of inverters since May 2025; these rules have applied to existing installations from May 2026, some of which will need to be retrofitted in order to comply.
Details on the exact scope of the new EU restrictions are yet to be published, but it is widely anticipated that they will directly apply only to utility-scale projects that receive EU funding. These installations, which are operated and maintained professionally with stringent cybersecurity protocols, will account for around half of global capacity additions over the coming decade, according to the IEA’s exploratory scenario projections. By contrast, most smaller installations in residential and commercial settings, often on rooftops, will not be covered by these restrictions, based on currently available information.
While the European Union’s restrictions constitute a significant increase in efforts to re-configure domestic inverter supply chains, the bloc is not alone in its pursuit of such measures. In the United States, the National Defense Authorization Act, passed in December 2025, prohibits the use of its funds for procurement of inverters and a range of other equipment from those it designates Foreign Countries of Concern, among which China is included. Korean inverter manufacturers have raised concerns about the >90% dependence the country has on Chinese inverter suppliers. In 2025, India introduced the requirement that inverters benefiting from a support scheme for rooftop solar PV can only transmit data to servers hosted in India.
In 2025, China accounted for around 80% of the world’s capacity for manufacturing the inverters used in solar PV and battery installations. This is slightly higher than its share of global solar PV module manufacturing capacity, but lower than its share for upstream solar PV supply chain steps like wafer production (95%). Chinese inverters are typically the lowest-cost option in most major markets, offering high performance, regular product updates and high reliability.
Europe accounts for the second-largest share of inverter manufacturing capacity globally, at around 8% (95 GW). This compares to around 33 GW of domestic manufacturing capacity for solar PV modules, 10 GW for solar PV cells, 1.5 GW for wafers and 27 GW for polysilicon. Inverter manufacturing is the one step in Europe’s solar PV supply chain where manufacturing capacity exceeds today’s demand for solar PV modules (around 70 GW). Even when including Europe’s stationary battery energy storage system (BESS) deployment (around 17 GW), which usually require bidirectional power conversion systems (DC-AC and AC-DC) or hybrid inverters when deployed in conjunction with solar PV modules in a residential setting, domestic manufacturing capacity still appears to be in excess of demand, as of the end of 2025. There are other markets for inverters and similar converters in the wind turbine and electrolyser industries – as well as those used in electric cars – but these are much smaller and somewhat separate markets.
BESS = battery energy storage systems. ‘Demand’ refers to shipments for inverters and deployment for solar PV modules and BESS. BESS manufacturing capacity refers to the production capacity of battery cells for stationary energy storage systems.
IEA analysis based on S&P Global PV Inverter Market Tracker and Energy Storage Inverter PCS Report, Infolink and Benchmark Mineral Intelligence.
Europe had capacity to manufacture around 95 GW of inverters per year in 2025, compared with total shipments – equivalent to demand – across all inverter categories of around 90 GW. In theory, therefore, Europe’s inverter manufacturing base could satisfy domestic demand in the medium term, with minimal additional investment in facilities producing specific models where there are shortfalls in capacity relative to domestic demand. In practice, there is likely to be a mismatch between the models produced in Europe and those in demand in the region, which could lead to project delays and cost increases. Europe also exports inverters to other regions, including North America, and imports units from abroad. String and microinverters – specific subsets that typically cost more than central units and offer performance advantages to certain solar PV installation arrangements – are often imported to Europe from China.
It is, yet, unclear as to how much domestic capacity will be needed to respond to demand changes resulting from the recently announced EU restrictions on inverter sourcing requirements and associated funding restrictions. The exact scope of the policy has not yet been announced – only a fraction of solar PV installations in the region receive EU funding. There may also be some capacity to redistribute existing supply between domestic demand and exports, and between those receiving EU funding and those not. Retooling production lines to address mismatches between supply and demand of specific models or sizes of inverters is possible but would take some time. Countries not identified by the European Union as “high-risk”, notably those in Southeast Asia, could also potentially boost exports to the European Union, thereby further alleviating pressure on domestic manufacturing capacity.
BESS = battery energy storage systems. “Demand” refers to shipments for inverters and deployment for solar PV modules and BESS. BESS manufacturing capacity refers to the production capacity of battery cells for stationary energy storage systems. Inverter demand excludes “off-grid” installations which, at a global level, account for around 3% of total demand.
IEA analysis based on S&P Global PV Inverter Market Tracker and Energy Storage Inverter PCS Report, Infolink and Benchmark Mineral Intelligence.
New IEA analysis on inverter prices suggests the impact on final installation costs resulting from a shift in inverter supplier from a manufacturer headquartered in China to one headquartered elsewhere would be small, even if the inverter units themselves would be significantly more expensive.1
The global average price of inverter shipments is around USD 28/kW. Prices vary substantially depending on the inverter category and power class, with shipments of high-power, three-phase systems averaging around USD 25/kW and microinverters averaging around USD 180/kW in 2025. Inverter shipment prices also vary significantly between countries. The average price premium for inverter shipments in key markets within the European Union relative to those in China was around USD 13/kW (EUR 12/kW) on average for the systems typically used in utility-scale projects, or around 75% higher. The much lower prices in China reflect lower manufacturing costs, which stem from the greater economies of scale associated with the domestic market, higher levels of automation and intense price competition among suppliers.
Data on consumer prices for equivalent residential-scale models from manufacturers headquartered in China and elsewhere reveal similar price premiums, albeit with significant variation across inverter types. Premiums for comparable units in this category manufactured by companies headquartered in the European Union – or in other countries that the European Union does not consider to be high-risk – are around 30-115% on average (EUR 35-190/kW).
These price premiums constitute a relatively small fraction of the total costs for solar PV installations in the European Union. Typical costs for utility-scale projects were around USD 760/kW (around EUR 675/kW) in 2024, which would imply a project cost premium of just under 2% for an inverter manufactured by a company headquartered in the European Union or in another country that the bloc does not designate as high-risk. In small-scale residential and commercial settings, installation costs tend to be higher, at around USD 1 000/kW (around EUR 890/kW) in the European Union. This would imply a premium of around 3-4% for string inverters manufactured by a company not headquartered in a high-risk country, and around 20% for hybrid and microinverters. Many factors will influence these costs – and the resulting premiums – at the individual project level, including labour, land and other component prices, but these estimates suggest that the average premium is relatively small.
IEA analysis based on a survey of retail prices for residential-scale inverters available from online EU-based retailers in May 2026.
Sales taxes are excluded.
String inverter: One central inverter converts electricity from a series (“string”) of solar panels. Hybrid inverter: Combines a solar inverter with battery storage management. Microinverter: A small inverter installed on each solar panel, enabling panel-level optimisation.
IEA analysis based on a survey of retail prices for residential-scale inverters available from online EU-based retailers in May 2026.
These considerations around inverter procurement and cybersecurity are illustrative of those faced by governments when designing their broader industrial strategies. An effective strategy is one that is targeted, goal-oriented and open to course-correction. In a world where energy technologies manufactured in China are often the lowest-cost and highest-performing options, efforts to reduce exposure to risks will require minimising unnecessary trade-offs, especially regarding cost and the speed of deployment.
Governments will make different choices depending on their national circumstances, balancing energy security, supply chain resilience, economic competitiveness and national security risks, including cybersecurity. While the IEA does not prescribe a particular level of risk appetite for a given country, or recommend a specific course of action, it can provide data and analysis that can help governments weigh these choices clearly, calibrate measures carefully and adjust them as evidence and circumstances evolve. This is a theme we will continue to explore in the forthcoming 2027 edition of Energy Technology Perspectives.
The IEA’s Leonardo Collina, Teo Lombardo and Maëlys Nainville also contributed to this article
Two datasets on inverter prices – one from S&P Global on average shipment prices derived from shipment volumes and company revenue, and one generated from a survey of retail prices in the European Union – shed light on the approximate uplift in cost.
Two datasets on inverter prices – one from S&P Global on average shipment prices derived from shipment volumes and company revenue, and one generated from a survey of retail prices in the European Union – shed light on the approximate uplift in cost.
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