US Solar hot water heating market

When most people hear "Solar Power" they think solar PV, but there is a simpler form of solar: Solar Thermal. Renewable Energy World had an article today about a California program focused on increasing solar thermal in the state.  From the article:

Through the close of 2007, the state with the most solar water heating installed-annually and cumulatively-was Hawaii, followed by Florida and California. In late 2008, the federal Investment Tax Credit was extended to provide a 30 percent tax credit for residential and commercial solar water heating systems through 2016. This has laid the foundation for a new market in the U.S., spurred by state-level programs.

Starting in May 2010, California has a new set of programs subsidizing the purchase and installation of solar water heating equipment. Directed at reducing the use of natural gas and grid electricity, the program sets aside $358 million for direct economic subsidies and market development support. The program will continue through 2017, or until funding is used completely.

The new Solar Thermal program will be administered by the pre-existing California Solar Initiative. The amount of subsidy for each project is determined by the expected first-year annual energy displacement, based on rating by the SRCC. Incentives for natural gas-displacing systems are expected to start at $12.82 per therm and are required to decline in four steps to $5.13 per therm.

We already have an excellent article on Solar Thermal from one of the Mapawatt team who has a solar thermal hot water system installed on his home titled Residential Solar Thermal Hot Water Systems.

Solar thermal is a more efficient way to use the sun's energy.  You are just capturing heat (solar thermal), not converting photons to electrons  (solar PV).  The challenging part is comparing the payback of a solar thermal system to the payback of a solar PV system.

Solar PV is displacing electricity costs, which are relatively stable and predictable.  On the other hand, solar thermal is usually displacing your water heating source.  This can be electricity (easy to predict) but can also be natural gas.  Natural gas is volatile and is subject to crazy price swings (much similar to the price of oil).  Right now natural gas is priced very low, so it make it more difficult for a residential homeowner to swallow the higher install cost of a solar thermal system.

However, if you don't heat your water with natural gas then solar thermal could be an excellent fit (Hawaii doesn't have easy access to natural gas, which is why they have some of the highest installations of solar thermal systems).  Or if you are building a new home and have to get a water heater anyway.  Or if you are a school or government building where you aren't concerned as much with a quick payback.

So if you are looking at any kind of solar system, ask a few installers in your state what they recommend:  solar thermal or solar PV (as long as they install both types).  You may be surprised with the answer!

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Great points Steve and Jeff. It is truly amazing to see how far NJ has come with solar, even though most of the US has better solar access. They are a model for all the laggard states that don't have good solar incentives. If Jersey can do it, why can't your state?
New Jersey recently started offering a $1200 solar hot water incentive program. When it was first introduced it was only for customers with existing electric water heaters but it has since been modified to include gas water heaters. The NJ solar PV rebate program is so popular this year they have stopped taking applications for the 2nd funding cycle after only ~7 days. Each funding cycle is for 4 months. NJ is currently second only to California in solar PV installations and installed capacity.
While it may be different in other states, take a serious look at the cost of solar hot water vs. heatpump water heater + PV. At least up here in the Pacific NW, evacuated tube hot water works best - but of course is quite expensive, with a typical install in the $8,000-10,000 range + a backup source of water heat. You can get a name brand heat-pump water heater for $1,500 and 1kw of PV array (~$5500) to cover the needs of the heat-pump WH. Since you get a feed-in tariff in this state, there's no argument of what's cheaper. Especially considering when you have an excess of hotwater, much of that energy is essentially wasted as excess heat, whereas excess kWh from the array is fed back into the grid, further reducing your bill.

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