Inverter demand is completely dependent on the dynamics of the end-user markets. The current upsurge in the installations of the renewable energy market especially solar has translated into a proportionate increase in the consumption of inverters. In 2004 as the Germany upgraded its feed-in tariffs it grew by an astounding 162 percent. Such surge in the demand suddenly caught the vendors to the solar market off guard and there was a shortage of solar cells. On the other hand, there is a strong shift towards the adoption of grid tied systems as the governments have been introducing incentives such as net metering and feed-in tariff based on the power fed back to the utility. In addition to these developments, the emergence of the solar systems as a distributed power generation system has lead to the installation of very high power systems in the 100 to 200 kW ranges. With the propagation of these high power systems the vendors are developing similar inverter capacities in the form of central inverters. With a ll these changes happening at a very rapid pace due to the extraordinary growth in the market the vendors need to prepare themselves both on the technical aspect and the manufacturing capability aspect. While the sales incentive programs such as rebates and low interest loans provide the initial spark to trigger off the interest and awareness about renewable energy, the performance based net metering and feed-in tariffs act as steroid that create rapid growth for the inverter demand in renewable energy systems. The renewable energy systems have always been supported through rebates that reduced the initial cost of installation. Production tax credits on the other hand are meant to encourage the vendors to promote the renewable systems. These incentives managed to trigger off the basic interest in end-users to try out the systems or at least enquire about its capabilities. As the awareness spread to more end-users, the consumption of the inverters also increased. With the advent of superior grid tied inverter technologies, many governments have adopted it to develop performance-based incentives of net metering and feed-in tariffs. As these incentives provided the end-users a constant benefit over a longer period, it was easier to promote and it attracted a larger customer base. Reduction of electricity bills and constant income through these incentive triggers a strong demand for renewable energy systems leading to an equally high demand for inverters used in them. Performance based incentive programs reward end-users based on the amount of power fed back to the grid increasing the demand for the grid tied inverters. Grid tied systems continue to contribute a majority of the inverter demand for the renewable energy market. This high contribution from the grid tied inverters is the outcome of the popular net metering and feed-in tariff incentives that require grid connectivity. Out of the three segments in the study the solar market for inverters contributed the highest revenue portion to the extent of 95 percent in the total inverter market for renewable energy in 2004. As the inverter consumption in the wind energy market is restricted to the small scale (below 100 kilowatts) systems, the revenues generated are very low. In the case of the inverters used in fuel cell systems the consumption is very low, as fuel cells are not yet commercialized. However fuel cells are expected to contribute more in terms of inverter consumption once they are commercialized in Japan dur ing 2005.