The U.S. solar domestic hot water (SDHW) industry is in a state of dissolution due to historic trends and self-inflicted wounds.
Two historic trends and associated events have severely damaged the SDHW industry; the rapid fall in natural gas (NG) prices since 2008 and the parallel fall in photovoltaic system prices have all but pushed SDHW out of the market.
Before the drop in NG prices in 2008 – and even with the 30% federal investment tax credit (ITC) – SDHW could not compete with NG water heaters. The lucrative California rebate program combined with ITC incentives have not allowed SDHW to gain even a tiny foothold against NG water heaters. An annual NG water heating bill of $275 provides few logical incentives to change to solar.
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Concurrently, residential PV systems have dropped from $8.50/W in 2008 to less than $3.50/W in 2015. PV module prices have dropped from $2.25/W to $0.75/W and will probably reach $0.50/W in 2018. Most residential PV systems are selling today from $15,000 to $38,000 for 3 kW to 12 kW systems.
An installed SDHW system commonly costs between $7,000 and $14,000, with prices going up each year because copper, aluminum and steel prices go up about 5% per year. The same SDHW system in 1985 cost between $3,500 and $7,000 – half of today's prices. The trends for PV are moving in opposite directions. Today, if a contractor is selling a 6 kW grid-tied PV system for $20,000, it makes more sense to take the $9,000 to be spent on an SDHW system and increase the size of the system by 3 kW to offset the cost of electric water heating.
An even better choice in hot and humid southern climates that heat water is to use a water heater heat pump (WHHP) that can be installed for $2,200 to $3,000. Testing in Florida by the Florida Solar Energy Center revealed that such pumps are significantly outperforming solar water heating systems.
In the example above, if you subtract $2,700 for a WHHP, you would still have $6,300 (that would have been used for an SDHW system) and could still add 2.1 kW of PV modules to a grid-connected electric power system.
SDHW will completely die if the 30% ITC expires. There is a future for thermal system applications that involve commercial and industrial uses of hot water. However, commercial solar thermal air conditioning has long gone the way of the Tasmanian tiger due to low-cost PV systems and efficient commercial air conditioning systems.
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The one bright spot in the solar heating sector is solar pool heating. Solar pool heating with low-temperature collectors has had a long history of success without tax credits. The solar pool-heating industry has always continued to grow since the 1970s with only small dips during economic slumps. Because people are building smaller swimming pools compared to the 1980s, solar pool heating has become even more competitive.
However, I do not recommend – or even like – PV systems using modules dedicated to only heating domestic electric water heaters. Although this option is closely competitive with SDHW systems, even a small PV system of 2 kW is better being grid-connected than used for water heaters that will cut off the PV power when the heater's thermostat is satisfied, exactly like an SDHW system.
Self-inflicted wounds
It has often been said that the solar thermal industry is its own worst enemy. A raft of bad articles in the industry media has not helped. A major problem has been the failure of collector manufacturers to treat the collectors as commodities and provide systems training like manufacturers did in the 1980s.
Excellent training had been provided by SDHW collector manufacturers in the 1980s. The Interstate Renewable Energy Council (IREC) has offered a certification for solar thermal contractors through the Institute for Sustainable Power Quality (ISPQ). A handful of old pros notwithstanding, clueless training schools with unqualified trainers steadily eroded the knowledge base. Unbelievably, trainers with only a few years under their belts were writing books and offering their own courses. Even worse, some of these so-called experts used their PV credentials as their qualifications to provide solar thermal training.
On the technology side, the promotion of evacuated tubes for SDHW systems and space heating has been damaging. Evacuated tubes have numerous problems where pressurized water is used. They have had success in China in thermosyphon systems that use unpressurized water. For most applications, however, flat-plate selective-coated collectors simply out-heat evacuated tubes to 140 degrees F. Arguments can be made for daily higher temperature requirements in snow- and frost-free regions, but these are few and far between.
Another problem was the promotion of pressurized glycol systems – especially with evacuated tubes – instead of drain-back systems. Many contractors who were new to solar thermal quickly gave up on SDHW after trying pressurized glycol systems. Typically inadequately trained, they faced a high volume of callbacks on their installations. Instead, they concentrated on PV systems, which are easier to install and are more profitable.
To make matters worse, almost all of the European manufacturers have left the U.S. marketplace. Also, I expect all water-heater tank manufacturers will quit offering systems and collectors by 2018. They are all trying to perfect WHHPs and more efficient instantaneous gas water heaters, as they see no future in SDHW.
There was a point 15 years ago when solar thermal contractors regarded PV as the sizzle on the steak. Now, PV has become the steak – the main course.
Thomas Lane is co-founder of ECS Solar Energy Systems Inc., a designer and installer of solar PV and SDHW systems based in Gainesville, Fla. Since 1977, Lane has been an IREC ISPQ-certified Independent Trainer in solar thermal systems. He can be reached by email at tom@ecs-solar.com.
