Are Solar Thermal Markets Set for Rapid Growth?

solarthermalCalifornia recently approved the decisionof a state-wide solar heating program consisting of almost $360 million financialincentives and market development funding by 2018. This initiative willsoon be followed by rest of the country that lagged behind the world ininstalling solar thermal systems.

Global statistics show that the solar thermal industry is taking large steps in fulfilling heating andcooling demand in the world. Most of the countries around the world have adopted incentive programs for both solar water heating and spaceheating. Whereas in some countries, solar thermal systems have beenwidely utilized for so many years even without incentives.

The most important decision criteria for a household to install a solar thermal system isbasically the payback times of their investment. The main drivingfactors of the investment payback time are the total cost of the systems and the cost of alternatives heating systems.

Solar thermal payback times in 3 citiesI tried to create a simple table* in order to exhibit the differences inincentives, costs and payback times in the three cities where I haveresided. According to the table, state incentives seem to be necessaryfor enabling market growth in the United States, where primary energycosts are lower, or in Austria where the irradiation factor iscomparatively low.

Austria has been a pioneer in European solar thermal industry sincethe 1970s due to gas scarcity; solar thermal companies were developingtheir technologies while the state was creating public awareness andincentive programs for domestic solar heating systems.

Solar water heating systems have been widespread in Turkey becausemost of the southern cities did not have access to gas pipelines untilrecently. Turkey has a big climatic advantage for solar systems;however, the jump into domestic space heating has not been realized yet.

Israel and Cyprus are two countries with no solar incentives at all,but all new buildings must be able to supply a portion of their heatingdemand via solar thermal systems. Spain adopted a building law in 2006,very similar to that of Israel, and became the second largest for solar thermal in Europe while increasing its installedcapacity dramatically.

In order to have a wider view on the issue, I drew a chart thatexhibits the global installed solar thermal capacity. I have used thedata from EuropeanSolar Thermal Industry Federation and Renewable Energy Policy Network for the21st Century (REN21).

I was not surprised that China, Turkey, Japan and Israel are leadingthe industry since those are the countries who have been historicallystrong players in the solar thermal business. All these countries havesubstantial irradiation; however, Europeans succeeded in a rapid growthduring the last five years. Despite their cloudy and cold climate,Germany is the market locomotive in Europe. The fluctuating price offoreign natural gas is one of the main reasons of European success.

World Solar Thermal Capacity 2007According to the Potential of Solar Thermal in Europe study  published by ESTIF, Europecan deploy solar thermal systems covering 47 percent of its totalheating and cooling demand by 2050, in the case where substantialfinancial and political support mechanisms together with energyefficiency measures and research activities are activated.

That requires an annual growth of 26 percent in the industry everyyear until 2020, which seems to be achievable given that the Europeansolar thermal market grew by over 60 percent in just 2008. In the modest scenario, which foresees moderate advancement in policy and supportmechanisms, Europe would cover 11 percent of its total heating andcooling demand by solar thermal systems by 2050.

China, on the other side of the world, is taking serious steps inorder to reduce its carbon emissions. According to Renewables Global Status Report, China installed three quarters of the global addedcapacity in 2008 and remained the world leader in the solar thermalindustry, with more than 65 percent of existing world capacity. Due tothe low production costs and traditional use of cheap and compactsystems, solar water heating systems have existed for a number ofdecades in China.

(I was unable to gather any data from the Chinese market due to alanguage barrier. I would be happy to receive more information andcomments through this website or emails.)

*Basic assumptions on drawing of the table:

1) Market tendencies in threedifferent cities were used as the basis for the size selection ofcollectors and storage tanks.
2) Natural gas was assumed to be the primary heating source and theprices were gathered from utility companies of
Vienna, Istanbul and Northern California.
3) The costs of solar systems are gathered through a short telephonesurvey with contractors in the countries. Moreover, the examples givenin the website of
Austrian Solar Thermal Association and Solar Map of San Francisco were used as a resource.
4) All values are converted from national currency to USD with thefollowing rates in March 2010: USD/EUR= 0,731 ; USD/TL= 1,5345
5) CO2 emissions for natural gas were assumed to be 6,1 kg/therm.

photo: julian

data sources: ESTIF and REN21; chart and table by author



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