Bioenergy, Solar

Hot and cold: Despite recent ups and downs, explosive growth continues in the German solar thermal market

Issue 3 and Volume 10.

Thanks to its strong and consistent support mechanisms, and increasing public involvement, Germany has by far and away the largest solar thermal market in Europe. Gerhard Stryi-Hipp looks at the reasons behind this success and at factors affecting the strength of the industry.

Germany, Europe’s largest solar thermal market, had a record year in 2006. Altogether, 1.5 million square metres of new collector area with a heating capacity of 1050 MW were installed, representing an increase of 58% over the previous year. This has increased the number of installed solar thermal systems by 140,000, to a total of 940,000 systems representing 8.2 million m2 of collector area with a heating capacity of 5750 MW. Around 3700 GWh of solar thermal energy were generated in 2006, representing a primary energy saving of about 500 million litres of heating oil. The turnover of the solar thermal sector was €1.2 billion, creating 19,000 jobs in production, sales and installation by the end of 2006. This development shows a significant acceleration in market growth over previous years and the solar thermal sector remains optimistic for the coming years.

Motivation for the upswing

After a collapse of 40% in 2002, the solar thermal market in Germany has been growing consistently for several years (Figure 1). In 2004, the strong photovoltaic sector temporarily held back the solar thermal market for a while, but good growth had resumed by 2005.

Figure 1. Solar thermal market development in Germany. Source: BSW

The driving forces behind this development are increasing energy prices, concerns over the reliability of supply, and fears over the continuing process of climate change. Between 2004 and 2005, the price of 100 litres of heating oil in Germany doubled from €33 to €67, followed closely by the cost of natural gas. Since then, the price has ranged between €50 and €67 and almost nobody expects the return of low prices in the long-term future (and indeed, many expect further price increases). In addition to this, Russia, and several other countries have increasingly begun to use oil and gas supplies as a political weapon. In January 2006, Russia’s President Putin temporarily stopped gas supplies to the Ukraine and in January 2007 the oil pipeline to Belarus, ironically named ‘Druzhba’ (‘Friendship’), was brought to a standstill. While supplies to Germany were only briefly interrupted in both cases the events received a great deal of media attention. More and more, people in Germany have become aware of the fact that the oil and gas deposits lie in politically unstable regions. They assume that these types of events will become more common in the future and fear serious supply shortages like those during the energy crises of the 1970s.

Another increasingly urgent motivation for the search for alternatives to fossil fuels is the rapidly progressing process of climate change. The film An Inconvenient Truth by former US Vice-President Al Gore has further sharpened German awareness of the problem. The February 2007 publication of the IPCC report indicating that climate change is caused by humans and the April 2007 IPCC report describing the potentially drastic consequences for billions of people have had a strong impact in Germany and have triggered heavy political discussion of the measures required. On 3 February, the headline of the leading mass-market daily newspaper BILD read ‘Shocking World Climate Report: Our Planet is Dying!’ In the meantime, the majority of the German population is convinced that drastic changes in the energy supply will be needed in the coming years. A poll carried out last year showed that 59% of the population believe achieving independence from oil and gas is one of the government’s most important environmental tasks, and 87% want a consistent switch to renewable energy sources. The majority of the population are seriously considering directing their personal investment in this direction.

Continuity in the promotion of solar thermal energy

In this climate of support, German politicians are increasing their efforts to continue expanding the solar thermal market. The most important instrument is the market stimulation programme that has been providing support for solar thermal systems since 1999. The amount of subsidy per system has been continually reduced over recent years, and currently stands at only about 10% of the investment costs, but it has still been successful in stimulating the market. Over 90% of systems were subsidized as part of this market stimulation programme.

In the future, building-integrated solar thermal collectors will become much more common schüco international kg

While the programme has generally shown great continuity, it was also a contributing factor to the market crash of 2002 following the reduction in the subsidy rate in 2001. Since then, changes have been more cautiously implemented but the programme needed to be stopped once more in August of 2006 due to renewed excessive demand. The financial resources available to the market stimulation programme in 2007 have been increased by €40 million to €213 million; with about 70% available for solar thermal systems and 30% for biomass boilers. All subsidy applications in this year should be approved.

More systems for heating support

If the proportion of solar energy used for heating is to increase, then not only the number of solar thermal systems must increase but also the ratio of the solar heating per household. Up until 2005, domestic water heating systems dominated the German market, each with a typical collector area of 4-6 m2 and a 300 litre hot water tank for a four person household. Although this covered 65% of the domestic water heating requirements, it only covered 10%-20% of the total heating requirements of the house, depending on what the space heating requirements are.

Over the years, the range of so-called combined systems, providing space heating as well as water heating, has constantly expanded. Typical systems used in Germany have a collector area of 8-15 m2 and a storage tank with 500-1000 litres of water. These systems can increase the solar ratio of total heating for a single-family home to a value of up to 30%.

Solar thermal collectors will be increasingly used in facades during building refurbishments schüco international kg

To increase the proportion of combined systems, a greater subsidy per square metre of collector surface has been available since July of 2005, which compensates somewhat for the higher costs of the combined systems. At present, the subsidy rate for domestic water heating is €40/m2 of collector area and €70/m2 for combined systems. The improved subsidy helped cause an increase in the proportion of combined systems – from 25% in former years to 41% in 2006. Thus, the accelerated market growth in Germany has been achieved through an increase in the number of systems and also through an increase in the average system size.

Application process simplified

The most important preconditions for a successful subsidy programme are long run times, subsidy continuity, rapid processing, and ease of application. This is only achievable when adequate financial resources are made available. The German market stimulation programme has been subsidizing solar thermal systems since 1999, although the financial resources were not adequate in 2001 and 2006, which caused the programmes to be halted in these years. Since the programme was restarted at the beginning of 2007, it is assumed that the stop in the previous year has not significantly affected the market development.

Prefabricated heating stations are improving the efficiency of solar thermal systems in multi family houses solvis

An important change in the subsidy programme is the simplified application process introduced in January of 2007. Previously, a subsidy application was required before construction of the system, which was then processed and approved by the authorities. After construction of the system the invoices were supplied, the documentation checked, and the subsidy finally paid. In the future, the investor will be able to install a solar thermal plant without first applying for a subsidy. The investor will then present a subsidy application after after installing and paying for the system, and will receive approval and payment shortly thereafter. It is expected that the new process will further remove hesitation in the expansion of solar thermal systems. However, adequate financial resources for the programme must be made available to ensure approval of all applications, since investors will be relying on receiving the subsidy after the system has been installed.

Expansion of the market to large scale solar thermal systems planned

Up to now, about 97% of the solar thermal collectors in Germany have been installed in one and two family homes, but 20 million of the 37 million homes in Germany are in apartment buildings. Solar thermal systems have also not yet found their way into many other areas – such as hotels and restaurants, hospitals and retirement homes, student accommodation and other accommodation complexes, offices, and industrial plants.

There are several reasons why solar thermal systems have not played a larger role in these areas. The major factors are the economic conditions and the complicated structural nature of the players involved in the decision-making processes. In the rental accommodation sector, the investor/user dilemma caused by the German heating costs legislation (HKVO) obstructs any expansion. The property owner is compelled to carry the investment costs of a solar thermal system but the tenants benefit from the lower heating costs. The HKVO prevents the owner from billing the tenants for the solar thermal system. The owner can increase the basic rent within the scope of a modernization programme but this must also be an economic proposition for the tenants, i.e. the increase in basic rent should be compensated by the reduction in heating costs. This is usually only possible when the installation of a solar thermal system is part of a general modernization of the building heating system. However, a proportion of the commercial rental companies fear that a rental increase will reduce the rental attractiveness of their accommodation.

To date, relatively few systems have been installed in apartment buildings, while the heating facilities that have been installed in these buildings tend to vary greatly, which has resulted in a lack of standardization in large-scale solar thermal systems. In addition to this, there is a certain level of uncertainty among investors and planners as to the size of the solar yields, and the amount of heating oil or gas that can be saved, since the monitoring of these systems is still under development. Heating systems for apartment blocks are usually planned and commissioned by domestic engineering firms. These are hardly ever involved in the planning of solar thermal systems in one and two family homes, since the supplier usually sells small systems as a complete unit and the installer normally does any remaining planning. This means that, despite the large number of solar thermal systems in one and two family homes, domestic engineering firms still have little or no experience with solar thermal systems and there is a great need for engineers qualified in this area.

A district heating system with multiple solar thermal heating systems wagner&co solartechnik

Prefabricated thermal stations are being increasingly used in apartment blocks, which optimally distribute heat from all sources to the various different consumers. These systems have specially matched hydraulic components and a central control system already installed in the thermal station. Combined with modernization of the heating boiler these, systems often result in a 30% to 45% reduction in the consumption of heating oil or natural gas.

The EU project SOLARGE is comparing experiences made with large solar thermal systems in different European countries. It has created a database of over 100 systems all over Europe and provided a great deal of knowledge relating to solar thermal systems. Training material has been developed, expert workshops held, and a range of informative material has been produced. (see

Large solar systems on the offensive

Experience has shown that it is more sensible to divide up solar thermal systems based on the type of the system and not the size. For this reason, small systems refer to solar thermal systems used in one and two family homes for covering personal heating requirements. All other systems are referred to as large solar thermal systems. The main area of application for these systems is in buildings with between 3 and 12 homes, because 97% of all apartment blocks in Germany are in this size. Thus, the most of the large solar thermal systems will be in a size of 15-50 m2 collector area.

Solar heating and photovoltaics on a single family house solvis energiesysteme

The German Ministry of the Environment now wants to systematically develop this market, and with this in mind apartment blocks with three or more homes will now receive a subsidy of about 30% of the investment sum. Systems for process heat generation and solar-supported cooling will now also be subsidized at an increased rate. An information campaign for investors and a qualification process for house technicians, architects and tradesmen are also planned.

The Heat Act and EU guidelines

In a growing market it will become increasingly difficult to provide the financial resources necessary for the subsidy programme from the federal budget. For this reason, legislation on heating using renewable energy has been under discussion since 2005. Two basic models are being proposed, one indicating that, in a similar manner to Spain, all new buildings and larger renovations will need to generate a compulsory minimum proportion of the heating from renewable energy sources. In the other model, the so-called ‘Bonus model’, which is comparable to the EEG legislation in the electricity sector, a subsidy will be paid for every kWh of heat generated from renewable energy sources. The financial resources for this are obtained from the oil and gas importers, and small systems will receive a lump-sum payment. Both models and variations of these are still in discussion. In the light of climate change discussions, the government has announced that it will make a decision this year as to the structure of the new legislation.

In Germany, the development of European guidelines for heating from renewable energy sources is also regarded as very important. After the launch of the European Commission energy package on 10 January 2007, and the resolution of the European Council on 9 March 2007 to set a binding target of 20% renewable energy sources by 2020, efforts to establish heating guidelines as part of the general renewable energy guidelines are now proceeding with great urgency.

Solar thermal technology platform founded

In agreement with European and German experts, the vision of a building standard, specifying 100% solar heated new buildings by 2030 has been set. For existing buildings, solar modernization should represent the most cost-effective renovation option, resulting in 50% of the heating being supplied from solar thermal energy. Process heating usage up to 250°C should be primarily covered by solar thermal energy and the cooling of buildings should be largely done using solar-powered refrigeration systems.

The European Solar Thermal Industry Federation (ESTIF) has set a target of installing an average collector area of 1 m2 per resident by 2020. This would increase the total installed collector area from the present value of 16 million m2 to 488 million m2. With a growth rate of 25% per year until 2020, Germany could install a total of 170 million m2 of solar collectors, representing 2.1 m2 per resident and a sector turnover of €10 billion.

Solar thermal on apartments in Berlin bsw-solar

In order to bring solar thermal systems to the market at this scale, the solar thermal technology must be further developed. The currently installed systems are already very efficient and, when correctly planned and installed, run reliably with high solar yields, but extensive optimization potential still exists. The European Solar Thermal Technology Platform (ESTTP) was founded in 2006 in order to promote the systematic development of solar thermal technology. The intention is to develop a detailed solar thermal vision for the year 2030, a research strategy, and a concept for the expansion of the European solar thermal market by 2008 (see In addition, the German Solar Thermal Technology Platform (DSTTP) and other national technology platforms were founded in order to develop specific solutions for these countries and to support the work at a European level. The aim is to develop concrete proposals for technological development and the utilization of solar thermal energy on the European and the national level.


The German solar thermal market has developed very dynamically in 2006, and the sector expects further growth in the coming years. At present, solar thermal systems are mainly used in one and two family homes and other market segments such as apartment blocks, offices, and industrial buildings should be systematically expanded. A Heat Act for renewable energy is currently under discussion and is to be finalized this year. At the same time, technological development should be significantly accelerated through the activities of the German and European technology platforms. Politics, industry, researchers and consumers have understood that the proportion of heating supplied from renewable energy sources has been unfairly neglected in recent years and that a substantial need to rectify this exists. Intensive work has begun at both German and European levels to create a political environment allowing a massive expansion of the solar thermal market and a parallel acceleration of technological development in this area.

In the light of the current situation, a very dynamic future market growth in Germany and the rest of Europe is expected.

Gerhard Stryi-Hipp is Managing Director of Bundesverband Solarwirtschaft (BSW), the German solar industry association.
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