Are Solar Thermal Markets Set for Rapid Growth?
California recently approved the decision of a state-wide solar heating program consisting of almost $360 million financial incentives and market development funding by 2018. This initiative will soon be followed by rest of the country that lagged behind the world in installing solar thermal systems.
Global statistics show that the solar thermal industry is taking large steps in fulfilling heating and cooling demand in the world. Most of the countries around the world have adopted incentive programs for both solar water heating and space heating. Whereas in some countries, solar thermal systems have been widely utilized for so many years even without incentives.
The most important decision criteria for a household to install a solar thermal system is basically the payback times of their investment. The main driving factors of the investment payback time are the total cost of the systems and the cost of alternatives heating systems.
I tried to create a simple table* in order to exhibit the differences in incentives, costs and payback times in the three cities where I have resided. According to the table, state incentives seem to be necessary for enabling market growth in the United States, where primary energy costs are lower, or in Austria where the irradiation factor is comparatively low.
Austria has been a pioneer in European solar thermal industry since the 1970s due to gas scarcity; solar thermal companies were developing their technologies while the state was creating public awareness and incentive programs for domestic solar heating systems.
Solar water heating systems have been widespread in Turkey because most of the southern cities did not have access to gas pipelines until recently. 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 heating demand 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 installed capacity dramatically.
In order to have a wider view on the issue, I drew a chart that exhibits the global installed solar thermal capacity. I have used the data from European Solar Thermal Industry Federation and Renewable Energy Policy Network for the 21st Century (REN21).
I was not surprised that China, Turkey, Japan and Israel are leading the industry since those are the countries who have been historically strong players in the solar thermal business. All these countries have substantial irradiation; however, Europeans succeeded in a rapid growth during the last five years. Despite their cloudy and cold climate, Germany is the market locomotive in Europe. The fluctuating price of foreign natural gas is one of the main reasons of European success.
According to the Potential of Solar Thermal in Europe study published by ESTIF, Europe can deploy solar thermal systems covering 47 percent of its total heating and cooling demand by 2050, in the case where substantial financial and political support mechanisms together with energy efficiency measures and research activities are activated.
That requires an annual growth of 26 percent in the industry every year until 2020, which seems to be achievable given that the European solar thermal market grew by over 60 percent in just 2008. In the modest scenario, which foresees moderate advancement in policy and support mechanisms, Europe would cover 11 percent of its total heating and cooling demand by solar thermal systems by 2050.
China, on the other side of the world, is taking serious steps in order to reduce its carbon emissions. According to Renewables Global Status Report, China installed three quarters of the global added capacity in 2008 and remained the world leader in the solar thermal industry, with more than 65 percent of existing world capacity. Due to the low production costs and traditional use of cheap and compact systems, solar water heating systems have existed for a number of decades in China.
(I was unable to gather any data from the Chinese market due to a language barrier. I would be happy to receive more information and comments through this website or emails.)
*Basic assumptions on drawing of the table:
1) Market tendencies in three different cities were used as the basis for the size selection of collectors and storage tanks.
2) Natural gas was assumed to be the primary heating source and the prices were gathered from utility companies of Vienna, Istanbul and Northern California.
3) The costs of solar systems are gathered through a short telephone survey with contractors in the countries. Moreover, the examples given in 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 the following 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.
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