As power systems evolve from synchronous-machine dominance to grids driven largely by renewable sources (solar, wind, storage), the ability for inverters to “form the grid” – i.e. maintain voltage and frequency – becomes indispensable. Grid-forming inverters represent a frontier of power electronics: they allow inverter-based generation to take on roles traditionally held by synchronous machines.
From an investor’s perspective, stocks or companies with capabilities in grid-forming inverter technology are part of the underlying “infrastructure of the energy transition.” They offer exposure to the convergence of utility scale renewables, storage, microgrid deployment, and grid resilience themes.
This article explores how the space is evolving, which players are best positioned, what to watch, and what risks investors should keep in mind.
Quick Summary
- Grid-forming inverters are critical for future low-inertia grids: they actively regulate voltage and frequency in systems dominated by inverter-based resources.
- The grid-forming inverter market is projected to grow at ~8–9 % CAGR from 2025 to 2030.
- Key companies engaged include SMA Solar (Germany), General Electric (GE Vernova, U.S.), Enphase Energy (U.S.), Huawei, FIMER, and Gamesa Electric / Siemens Gamesa.
- A notable corporate move: ABB is acquiring Gamesa Electric’s power electronics business to strengthen its inverter/conversion portfolio.
- Risks remain: regulatory / grid code variation, high capital cost, and technology execution challenges.
What Is a Grid-Forming Inverter & Why It Matters
Grid-Forming vs Grid-Following
- Grid-following inverters assume the grid voltage and frequency are being held stable by large synchronous generators; they synchronize to the grid, injecting power.
- Grid-forming inverters can actively regulate voltage and frequency, allowing them to operate in islanded or weak-grid conditions. They can behave like virtual synchronous machines.
- This becomes critical as power systems increasingly lack rotational inertia (less fossil, more inverter-based).
Market Size & Growth Trajectory
- The global grid-forming inverter market is projected to grow from an estimated USD 680 million in 2023 to USD ~1,042 million by 2028.
- Another forecast pegs the 2025 size around USD 858 million, growing at ~9.1 % CAGR until 2032.
- Some reports suggest the market could reach USD 1.2 billion by 2030.
Key Public & Private Players to Watch
Here are some of the most relevant companies already involved or pivoting toward grid-forming inverter technologies. Some are pure inverter / power electronics firms; others are broader industrials expanding into the space.
| Company | Ticker / Status | Region | Relevance in Grid-Forming / Power Electronics | Notes & Differentiators |
|---|---|---|---|---|
| SMA Solar Technology | S92 (Frankfurt) | Germany / EU | Longtime inverter / solar systems supplier; active in grid-support functions | Well established in inverters, energy management; would be a natural player in grid-forming evolution. |
| General Electric (GE Vernova / GE Grid Solutions) | GE (NYSE) | U.S. / Global | GE’s grid / power conversion arms are developing grid-forming inverter solutions (including HVDC converters) | Strong balance sheet and grid infrastructure relationships |
| Enphase Energy | ENPH (NASDAQ) | U.S. | Develops microinverters; recently introduced IQ8 series which claims grid-forming microinverter capabilities. | More in residential / distributed scale; may be early in scaling to utility side |
| Huawei Technologies | Private | China | Huawei is cited as one of the “major players” in grid-forming inverter market reports. | Deep R&D and scale capabilities in power electronics |
| FIMER Group | Public (Italy, Borsa Italiana) | Europe | Active in inverter manufacturing and grid-support products; cited in grid-forming markets. | Has European base to benefit from EU grid codes push |
| Gamesa Electric / Siemens Gamesa | Subsidiary / corporate unit | Spain / Europe | Known inverter / power electronics business; to be folded into ABB via acquisition. | ABB will integrate that unit to bolster its renewable conversion offerings |
| ABB | ABB (SIX / ADR) | Switzerland / Global | ABB acquiring Gamesa Electric’s power electronics business to strengthen its inverter / converter portfolio. | This move may position ABB more centrally in grid-forming tech |
| Tesla / GPTech / Dynapower / Hitachi / EPC Power | Various / Private / Public | U.S. / Global | Cited in IEEE and technical sources as offering grid-forming inverter or converter systems (particularly for battery / storage systems). | Some are niche or in early stages |
Investment Themes & What to Watch
Backlog, Design Wins & Customer Contracts
- Because power infrastructure projects are long lifecycle, contract visibility and design wins are crucial.
- For inverter / converter players, partnerships with utilities, EPC (engineering, procurement, construction) firms, and grid operators will be key differentiators.
Technology & IP Moats
- Advanced control algorithms, firmware, fault tolerance, harmonic mitigation, and virtual inertia capabilities provide differentiation.
- Patents and R&D in control topologies and switching hardware (e.g. SiC / GaN) are important.
Markets & Regulatory Tailwinds
- Regions pushing for high renewable penetration and grid code updates (Europe, USA, Australia) are prime markets.
- Incentives or mandates for grid resilience, microgrids, islanded operations, and battery + inverter systems enable deployment.
Risk from Grid Codes & Standardization
- Grid codes differ across countries and evolve. A system appropriate in one jurisdiction may need adaptation elsewhere.
- Early entrants may face rework or software upgrades to satisfy evolving grid standards.
Capital Intensity & Scale
- Manufacturing power electronics and converters is capital intensive; scale and volume efficiency matter.
- The difference between pilot / small-scale systems and large utility deployment is nontrivial.
Integration Risk & Project Execution
- Projects combining electronics, software, and switching hardware tend to be complex. Execution issues, cost overruns, or coordination errors may weigh on performance.
- Delays in regulatory approval or interconnection agreements are possible.
Outlook & Catalysts (2025–2030)
- Grid decarbonization and inertia replacement: As more fossil plants retire, inverter-based sources must increasingly take over grid-stabilization roles.
- Storage + renewables deployment: Battery systems combined with grid-forming inverters will be key in microgrids and utility-scale installations.
- Regulation & mandates: Grid codes in Europe, North America, and Australia may start mandating grid-forming behavior in inverter systems.
- M&A consolidation: Large incumbents (ABB, Siemens, GE) may acquire niche inverter or power electronics firms to integrate control and grid services. (See ABB acquisition of Gamesa Electric’s unit)
- R&D breakthroughs: Improvements in switching speed, thermal performance, and control fidelity will reduce cost and increase adoption.
- Export growth & standardization: As more regions adopt renewable-heavy grids, export opportunities expand for players with globally adaptable inverter systems.
Risks & Red Flags
- Premature scaling: Moving from prototype to grid-scale deployment is risky.
- Technology obsolescence: A superior control or semiconductor innovation could leapfrog current players.
- Regulation risk: A region may delay or block inverter-centric grid architectures, slowing adoption.
- Supply chain constraints: Specialized components (IGBTs, SiC / GaN switches) may face supply bottlenecks.
- Cyclicality: Power electronics demand may be linked to broader capex cycles in energy and grid sectors.
FAQ
Q: What is a grid-forming inverter?
A grid-forming inverter is a power electronic device that actively regulates voltage and frequency, allowing inverter-based systems to operate autonomously and stabilize grids, rather than merely following grid conditions.
Q: Why are grid-forming inverters important for renewables?
As power systems shift toward inverter-based generation (solar, wind, storage), grid-forming inverters replace roles of synchronous machines by providing stability, frequency control, and support in weak or islanded grids.
Q: Which public stocks are most relevant in this sector?
Prominent relevant names include SMA Solar Technology (S92), GE / GE Vernova, Enphase Energy (ENPH), and FIMER. ABB’s acquisition of Gamesa Electric’s inverter business is also a strategic play.
Q: What major risks do investors face?
Risks include execution challenges, evolving grid codes, scaling from pilot to utility size, supply chain bottlenecks, and potential technology disruption.