Solar Water Heaters Sprouting on Rooftops Worldwide

Tax Incentives, Rebates and Financing Plans Pique U.S. Interest


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On a recent visit to Yunnan Province in southwest China, I was pleasantly surprised to see solar water heaters on countless home and building rooftops, even in remote rural villages. These installations, featuring an array of tubes and a storage tank, use the sun’s rays to produce hot water.

Today, China is the world leader in solar water heater (SWH) production and installation, but SWH is now catching on in the U.S., too.

The California Public Utilities Commission in January launched the California Solar Initiative Thermal (CSI-Thermal), a $350 million incentive program for solar water heaters. The goal of CSI-Thermal, which begins in May and runs through 2017, is to install 300,000 additional solar water heater systems by 2018. It is expected to eliminate 100,000 tons of greenhouse gas emissions each year.

U.S. Sen. Bernie Sanders (I-Vt.) followed California’s lead in February by introducing the 10 Million Solar Roofs and 10 Million Gallons of Solar Hot Water Act. Modeled after CSI-Thermal, the bill would provide rebates to cover up to half the cost of 10 million new solar power systems and 200,000 solar water heater systems.

With water heating the third largest energy expense in most homes, solar water heating is a green and cost effective way to produce hot water and can cut annual hot water bills in half.

How SWH Systems Work

Solar water heater systems have solar collectors and a storage system; active systems have circulating pumps and controls, while passive systems depend on convection to move the water from the collectors to the storage tank as it heats up.

For residences, there are three types: Flat-plate collectors, which are insulated boxes with a dark absorber plate made of metal or polymer under glass; integral collector-storage systems (ICS) or batch systems, which consist of one or more black tanks or tubes in an insulated, glazed box; and evacuated-tube solar collectors (the type I saw in China) feature rows of glass tubes with metal absorber tubes attached to a fin whose coating absorbs solar energy.

Active solar water systems can be either direct circulation systems, which use a pump to push water through the collectors then into the home, or indirect circulation systems, which use pumps to circulate a nonfreezing heat transfer fluid through the collectors and heat exchangers, which heats the water. The latter is better for areas where freezing temperatures occur.

Passive systems are simpler, less expensive and may last longer, but are not as efficient. There are two types: ICS and thermosyphon systems that position the solar collectors below the storage tank, allowing warmed water to rise into the tank. Solar water heaters are used with a conventional storage water heater, usually natural gas or electric powered, as a backup for cloudy days or in case of increased demand.

SWH Incentives

The U.S. Department of Energy estimates that installing a solar water heater can reduce a home’s water heating bills between 50 and 80 percent, while reducing CO2 emissions by 4,000 pounds each year.

The payoff can be significant.

Monique Hanis, a spokesperson for the Solar Energy Industries Association (SEIA), estimates that the SWH system she installed at her Arlington, Va., home handles 25 percent of her water use and saves her $400 a year. “And even though my kids are now teenagers and are taking more and longer showers, my bills have gone down,” Hanis said.

With the variety of federal, state, city and utility incentives now available, and the savings on water heating bills, solar water heater systems can pay back their investment fairly quickly.

The American Recovery and Reinvestment Act (ARRA) offers a 30 percent tax credit for residences on the cost and installation of solar water heaters. The credit, available through 2016, does not apply to swimming pools or hot tubs, and requires that the system be certified by the Solar Rating and Certification Corporation.

Through the Department of Energy, ARRA is also funneling $3.1 billion to State Energy Programs. Some states, like Tennessee, are using that money to finance projects like a solar array and research center, while others are funding grants or incentives.

California’s Rebate Program

CSI-Thermal takes a different approach — it is funded by utility ratepayers.

The program covers customers from San Diego Gas and Electric, Pacific Gas and Electric, Southern California Gas and Southern California Edison, about 90 percent of Californians in all. Of the $350 million being set aside for CSI-Thermal, $250 million is being allocated to replace natural gas water heaters, and $100.8 million to replace electric water heaters. Natural gas users get a rebate of up to $1,875 for residences, and up to $500,000 for commercial buildings and multifamily dwellings. Electricity users will get up to $1,250 for homes and $250,000 for commercial and multifamily buildings. The incentives will decrease as the years wind down.

CSI-Thermal was based on the experiences of the Solar Water Heating Pilot Program begun in 2007 by the California Center for Sustainable Energy (CCSE), which tested solar water heaters’ cost effectiveness, and identified barriers to the public’s acceptance of them.

Katrina Phruksukarn, manager of the Solar Water Heating Pilot Program for CCSE, and now manager of the Solar Water Heating Program, explained that the pilot program identified four barriers to market penetration of solar water heaters that CSI-Thermal has addressed. First, consumer education was insufficient, so CSI-Thermal has a large marketing and PR budget to educate the public. Second, there are very few highly skilled solar water heater installers, so marketing outreach funds will also go for training; CCSE is partnering with community colleges to develop solar thermal curricula, as well. Third, since all solar water heater projects must be up to code, CCSE is developing educational opportunities for building inspectors so they understand solar water heater permitting requirements. And fourth, up-front solar water heater costs were a deterrent, so the rebate program was instituted.

The average solar water heater system costs $6,000-$7,000, but with the federal tax credit and the rebate, the cost can be cut almost in half. To determine payback time, CCSE made rough calculations based on the average pilot program solar water heater price, average pilot program incentive (the average pilot rebate was $1,250 with a maximum of $1,500), average energy savings per solar water heater system installed in the pilot program, the federal tax credit and the cost of energy.

“Based on these estimates, we found that the payback would be about seven to eight years when installing a SWH system with an electric backup water heater and about 13 to 14 years when installing a SWH system with a natural gas backup water heater," Phruksukarn said.

“Our goals are to offset 585 million therms by 2018 — which would mean installing SWH in 200,000 single-family residences that use natural gas, which is 90 percent of Californians; and to offset 275 million kWh which would require installing SWH in 100,000 homes that use electricity.”

If CSI-Thermal meets its targets, the implications for the California job market are significant, with many new jobs created for specialized solar water heater installers and contractors.

“We’ve had interest from manufacturing companies in Germany and Australia that want to enter the California market and set up shop here,” Phruksukarn noted.

Other States and SWH

Currently, 42 states, Puerto Rico and the U.S. Virgin Islands offer incentives for solar water heaters, including direct cash incentives, tax credits, tax deductions, utility direct cash incentives, and sales and property tax incentives, according to the Database of State Incentives for Renewables & Efficiency.

Based on 2007 data, Hawaii leads the states in installations, accounting for one quarter of U.S. installations. Between 2005 and 2008, Hawaii’s installed capacity tripled, and it is primed to grow even more quickly with the 2008 passing of a law requiring all new homes to use solar water heaters starting this year.

Florida, the second largest solar water heater market in the U.S., has a $500 state rebate program and a number of utility rebate programs. Lakeland Electric in central Florida is the first utility in the country to offer SWH heated water on a “pay for energy basis.” The utility installs the solar water heater systems on customers’ homes at no cost. Residents are then billed for their hot water use and can lock in lower electric rates since a portion of their bill is exempt from fuel charge increases.

Connecticut’s Clean Energy Fund has a solar water heater incentive program funded by ARRA with maximum incentives pegged to the size of homes starting at $2,400 for one- to two-person households. New York offers a 100 percent sales tax exemption on residential solar water heater systems and a 25 percent tax credit up to $5,000. And Louisiana boasts one of the most generous incentive programs, with its 50 percent tax credit on residential solar water heater systems up to a maximum of $12,500.

Between 2005 and 2008, solar water heater installations outside of Hawaii increased five and a half times, according to the Interstate Renewable Energy Council’s 2009 annual report. And the SEIA Year in Review reports that 20,500 SWH systems were installed in 2008, a 50 percent increase. SEIA’s 2009 SWH figures will be out at the end of March, but Hanis predicts they will remain flat due to the economy.

While the public’s awareness of solar water heaters is growing, more education and outreach is still needed. A 2009 poll found that 92 percent of Americans think the U.S. should develop and use solar energy, and although 49 percent say they are currently considering solar power options for their home or business, a whopping 74 percent wish they knew more about solar power options.

SWH Around the World

Because of a fuel shortage, Israel began using solar water heater systems in the 1950s and became the first country to pass a law requiring all new homes to install SWH in 1980.

Today, with 90 percent of homes using solar water heaters, Israel saves 1.6 billion kWh each year, 21 percent of its domestic electricity use.

Spain became the second country to require the installation of solar water heating systems in new buildings in 2006. A number of other countries, such as Australia, Austria, France, and Italy offer SWH financial incentives, and Germany recently instituted a new minimum requirement for hot water and space heating from renewables.

By the end of 2008, China was the world leader in SWH existing capacity, due to financial incentives and mandates to promote solar and other renewable energy sources, according to the Renewables Global Status Report of 2009. The China Greentech Report 2009 found that 95 percent of core solar water heater technology is held by China and that 600,000 related jobs were generated in 2006 alone. Numerous cities have mandated solar water heater systems on new or rebuilt buildings including Shenzhen, eastern Nanjing, Zhengzhou, Xiamen and Shijiazhuang, and the government has ambitious installation goals for the future.

With a total installed capacity of 90 million square meters, equal to 60 percent of the world’s total capacity, China’s annual solar water heater production is twice that of Europe and four times that of the U.S.

As a result of federal tax credits and state and local solar water heater incentives, the U.S. is making progress in the sector, but it trails China, Turkey, Germany, Japan and Israel in installed capacity. The country still has a lot of catching up to do.


See also:

Solar Power: Finally, Coming to South Africa

US Confirms Plans to ‘Fast-Track’ Solar on Federal Lands in 3 Western States

Solar Could Generate 15% of Power by 2020, If US Ends Fossil Fuel Subsidies


(Photo: An evacuated-tube solar water heater in Yunnan Province, China, by Renee Cho)