TL;DR · 30-second read

The Short Version

Every solar panel and battery farm needs a box called an inverter, which turns its power into the kind your sockets use. Many are connected to the internet, so a hacker could in theory take control of them.

China has the factories to make about four in every five of the world’s inverters. Europe plans to stop funding big solar and battery farms that use inverters from countries it considers risky, including China.

The International Energy Agency found switching adds only about 2% to a large solar farm’s cost. The harder part is time, as factories retool while artificial intelligence data centers need ever more power.

In a commentary published July 29, 2026, the International Energy Agency (IEA) reported that China accounted for around 80% of global manufacturing capacity for the inverters used in solar and battery installations in 2025, and assessed the cost of moving away from suppliers that governments now classify as security risks. The analysis follows a European Commission decision to restrict EU funding, including through the European Investment Bank and European Investment Fund, for solar, wind and storage projects that use inverters from “high-risk” countries: China, Russia, Iran and North Korea.

The IEA estimates that buying a utility-scale inverter from a manufacturer headquartered in the EU or another non-high-risk country costs about USD 13/kW more, roughly 75% above Chinese pricing, but adds just under 2% to total project cost. Europe’s inverter factories, at around 95 GW a year, already exceed its roughly 90 GW of annual shipments, though the IEA warns the models built locally may not match the models in demand.

Executive Summary

Inverters are the control layer of modern renewable power: the electronics that convert direct current from solar panels, batteries and many wind turbines into grid-ready alternating current, and that manage power flow, monitoring and grid safety. Because most are networked and remotely controllable, governments increasingly treat them as a cybersecurity exposure, with risks ranging from compromised passwords to back doors planted during manufacturing or malicious software updates.

The policy response is spreading. Beyond the new EU funding restrictions, the US National Defense Authorization Act passed in December 2025 bars its funds from buying inverters from designated Foreign Countries of Concern, including China; Lithuania restricts remote control of inverters and now applies those rules to existing installations; and India requires inverters in a subsidised rooftop scheme to send data only to servers in India.

The IEA’s central finding is that the price of de-risking is modest at the project level. That matters for anyone financing or buying power from new solar and storage, including the large electricity buyers behind AI data center growth: the binding constraint looks less like cost and more like whether the right inverter models can be produced in time.

The Premium Is Real, but It Shrinks at Project Scale

On a per-unit basis, the gap between Chinese and non-Chinese inverters is large. The IEA puts the average global inverter shipment price at around USD 28/kW, with high-power three-phase units near USD 25/kW and microinverters near USD 180/kW. For the systems typically used in utility-scale projects, shipments in key EU markets carried a premium of about USD 13/kW (EUR 12/kW) over Chinese prices, roughly 75% higher. The IEA attributes China’s lower prices to economies of scale, higher automation and intense price competition.

Measured against the whole project, though, that premium is small. Utility-scale solar in the EU cost around USD 760/kW in 2024, so a USD 13/kW inverter premium works out to just under 2%. Small residential and commercial systems are more exposed: at around USD 1,000/kW installed, the IEA estimates a 3-4% premium for string inverters and about 20% for hybrid inverters and microinverters. In other words, the cost burden of the security push falls most heavily on rooftop segments the EU rules are not expected to cover, and least heavily on the utility-scale projects they are.

Why the Constraint for AI-Era Power Is Timing, Not Price

The headline aggregate looks comfortable: Europe could make around 95 GW of inverters a year in 2025, against total shipments of about 90 GW. Inverters are the one step of Europe’s solar supply chain where capacity exceeds demand, compared with just 33 GW of module capacity, 10 GW of cells and 1.5 GW of wafers against roughly 70 GW of module demand. Even adding around 17 GW of stationary battery deployment, which needs bidirectional power conversion, the IEA judges domestic capacity to be in excess of demand.

The catch is fit. The IEA expects a likely mismatch between the models Europe produces and the models its market wants, noting that string and microinverters are often imported from China, and that retooling production lines to close those gaps is possible but would take some time. It says the mismatch could lead to project delays and cost increases. For utility-scale solar and storage developers, that is the operational risk: a sub-2% cost line is easy to absorb in a financial model, but a procurement delay on a power-conversion package can push back energisation dates.

That sequencing matters to the buyers of that power. Data center operators expanding capacity for AI workloads are among the largest contracted buyers of new utility-scale solar and battery output, and utility-scale projects are expected to make up around half of global capacity additions over the coming decade in the IEA’s exploratory scenario projections. Where those projects rely on EU financing, the practical question for a data center’s power team is not whether compliant inverters cost more, but whether suppliers can deliver the specific models on schedule. The IEA points to partial relief: redistributing European output between exports and domestic demand, and higher imports from non-high-risk producers, notably in Southeast Asia.

Security Rules Are Landing Where Controls Are Already Strongest

The IEA describes how an attacker who gains access to an inverter could control and alter the equipment connected to it, with consequences ranging from localised disruption to lengthy blackouts. The threat can come through weak online connections and passwords, through back doors built in at the factory, or through malicious software updates from the manufacturer.

The anticipated scope of the EU rules raises a fair question about fit between risk and remedy. Based on currently available information, the restrictions are widely expected to apply directly only to EU-funded utility-scale projects, which the IEA notes are professionally operated under stringent cybersecurity protocols. Most smaller rooftop installations in homes and businesses are not expected to be covered. Existing EU instruments, including the NIS2 directive, the Cyber Resilience Act and the Network Code on Cybersecurity, already address equipment security; how the new funding rule adds to them will depend on details the Commission has yet to publish.

A Trade Dispute Layered on an Engineering Problem

China is the only major inverter supplier among the four countries the EU designates as high-risk, and on May 8, 2026, China’s Ministry of Commerce criticised the restrictions, warning they could damage trade relations, supply chain security and Europe’s energy transition. Other markets face sharper exposure than Europe: Korean inverter manufacturers have raised concerns about the country’s more than 90% dependence on Chinese suppliers.

The policy tools differ. The US approach restricts federally funded procurement, the EU’s restricts funding eligibility, Lithuania’s governs remote control and requires retrofits of some existing installations, and India’s targets where data is stored. For developers and equipment buyers operating across several markets, the likely outcome is not one standard but a patchwork of compliance regimes, each with its own implications for vendor selection and project timelines.

Background

Solar power has become one of the largest sources of new electricity worldwide: the IEA counts almost 3 TW of installed solar capacity supplying nearly 9% of global electricity, none of which could function without inverters. Battery storage and many modern wind turbines depend on the same power-conversion electronics, and inverters increasingly coordinate with connected loads such as electric car chargers, heat pumps and air conditioners.

Chinese manufacturers have come to dominate inverter production through scale, automation and price competition, offering what the IEA describes as typically the lowest-cost option in most major markets with high performance and reliability. Europe is the second-largest producer, with about 8% of global capacity, and inverters are the one stage of its solar supply chain where domestic manufacturing exceeds demand.

Sources

Source: Inverter supply chains and cybersecurity – Analysis (International Energy Agency), an IEA commentary on inverter supply concentration, new EU sourcing restrictions and the cost of switching suppliers.