HAMBURG — Five years ago it seemed possible that solar water and space heating would break through into the mass market. Oil and gas prices were rising quickly and collector manufacturers had invested in larger production lines. But the successes of 2008 have not continued since. According to the latest projections by BDH, the German heating industry association, German plumbers installed 1.2 million square meters of solar collectors in 2012. This is 5 percent less than in 2011 and 40 percent less than in the boom year of 2008.
Applications in which water and space are heated in family houses are typical uses of solar thermal systems in Germany, forming 95 percent of the market, according to BDH statistics. But at the same time, they are the most expensive application, and there is little that the solar industry can do about that. “Even giving away collectors for free would only reduce the total cost of a solar water heating system by 6 percent for the end consumer,” estimates Bernd Hafner of the heating equipment producer Viessmann. More than half of the costs of a domestic solar water heating system lie on the installer’s side. Naturally the solar industry is trying to overcome the problem by working on simpler systems but the potential for cost reduction is limited and the situation may even get worse for solar thermal. With ever cheaper PV systems and high surpluses of solar electricity in summer, even water heating with PV might become cheaper than solar thermal within a couple of years.
If solar thermal is to play a major role in the energy revolution, a new market is needed urgently. Industrial and commercial applications seem to be a field that is worth cultivating. Many of them need heat all year round at low temperatures. Large solar fields, planned and installed by specialized companies could lead to significant cost reductions, as has been demonstrated by Danish district heating plants. For several years solar process heat has been discussed at conferences, described in papers and investigated in pilot applications, but the consumer response has been hesitant.
In summer 2012, as the development of solar thermal energy was falling short of expectations, the German government agreed on new subsidies, especially for solar process heat. Solar plants of collector area 20-1000 m2 that provide heat for commercial and industrial processes now receive a 50 percent subsidy of the net investment. The new subsidies are part of the Marktanreizprogramm (MAP), which is the responsibility of the Federal Office of Economics and Export Control (BAFA). “The new incentives for commercial and industrial process heat go beyond the classical MAP incentives for water and space heating,” says Ralph Baller, head of division at BAFA. “We call it MAP 2.0.” This might give solar process heat a decisive push.
Huge Potential for Solar Process Heat
In 2011 a group of scientists including Professor Klaus Vajen from Kassel University published what was then the most comprehensive study of the potential for solar heat in industrial processes in Germany. The nation’s industry consumes more than 508 TWh of heat per year, it reported. Equivalent to the yield of more than 1 billion m2 of solar collectors, based on figures from 2012 it would take a thousand years to produce and install these.
Unfortunately it is precisely those industries that have the highest energy demand that require the highest temperatures. Examples are metal production and processing, so solar is out of the game in their case. But, on the other hand, more than 20 percent of the industrial heat demand in Germany is for warm water, space heating and industrial processes that require temperatures lower than 100°C, so these applications could be supplied by standard solar collectors.
In absolute numbers the biggest demand for low temperature heat is in the chemical industry. Some chemical processes such as the production of ammonia or the cracking of naphtha need high temperatures, but side processes that require low temperatures are numerous. More than 15 TWh of heat below 100°C is needed annually for washing, drying and concentration processes, and another 8 TWh for hot water and space heating in the chemical industry, say Professor Vajen and his team.
The situation in the food and beverage industry is different but probably even more promising. The overall heat consumption here is only 28 TWh, including 17 TWh below 100°C. Pasteurization of milk and other liquids needs temperatures between 60°C and 145°C, blanching and scalding of vegetables and meat needs 45°C-95°C, drying processes start at 40°C and cleaning of production equipment is usually done at temperatures of 60°C-90°C. “In the short term the food and beverage industry is the most promising for solar thermal process heat,” says Vajen.
Based on the temperature profile for heat demand in various industries, the scientists determined that there is a theoretical potential for solar heat of 130 TWh. This includes processes with a temperature below 250°C, so in this case special collectors will be needed. A lot of this heat can be provided by efficiency measures such as recovering waste heat from electrical or high-temperature processes. And many low temperature processes are powered by electric heating elements directly incorporated in the machinery.
“For some plastic moulds, for example, there is no alternative available on the market that would work with direct heat except electricity,” explains Vajen. And even if the integration in the process is feasible, some companies simply have no space for solar collectors.
Vajen and his team assume that these restrictions eliminate 60 percent of the theoretical potential for solar process heat. For the remaining 40 percent, they consider a plausible average solar fraction to be 30 percent. This means that solar could cover 3 percent of the heat consumption of Germany’s industry, or 16 TWh a year, which is the equivalent of solar collectors of total area 40 million m2. Based on installation figures from 2012, it would take more than 30 years for the country to fulfill this potential.
New Sales Structures Needed
With the potential determined, the challenge is now to offer the customer the product they want. This is not as simple as it sounds. Most solar companies are used to selling collectors but industrial customers are not interested in shiny sun catchers; they want low-cost heat.
The few solar companies that are already successful in the process heat business have adapted to this market structure. They offer turnkey solar plants and work closely with the engineering companies that deliver machines and other equipment to the industry. For example, Ritter XL Solar has teamed up with Eisenmann, a large provider of paint shops. They call their partnership the Green Alliance for Sustainable Production. Eisenmann’s main business is the automotive industry. Painting cars requires huge amounts of heat that Ritter XL Solar can provide easily with its vacuum tube collectors. The alliance’s first common project was a solar-fuelled paint shop for the radiator manufacturer Zehnder in Switzerland. For all of their plants, Ritter XL Solar and Eisenmann guarantee their customers a certain solar yield.
Similarly, Industrial Solar, a provider of Fresnel collector systems, has signed a co-operation agreement with Dürr Systems, another paint shop provider, that has seen the startup in 2012 of a 132 m2 pilot plant at the Dürr headquarters in Germany.
Economic Expectations Are High
Besides legal obligations for energy efficiency, the main selling point for residential solar systems is their green image. For industrial processes this usually does not count for much. Only industries that serve consumers, such as brewing, have an interest in using an environmentally friendly heat source.
“About 85 percent of industrial companies decide their energy investment based on the payback time,” says Eberhard Jochem, professor of energy economics at the Swiss Federal Institute of Technology. This is due to the common but incorrect assumption that payback time is an indicator of economic feasibility, he explains, and recommends focusing instead on the return on investment. Detlef Seidler of Ritter XL Solar provides an example that involves a subsidized loan by the Kreditanstalt für Wiederaufbau (KfW): “This reduces current costs for energy from the first day on. Even with stable prices for heating oil the return on investment over 20 years is 8 percent. With a yearly price increase for oil of 5 percent the return on investment is 14 percent.”
Another way of looking at the economics is the generation costs per kWh of solar heat, including maintenance and interest rates. As is the case with return on investment, these costs often turn out to be positive for solar thermal. For example, in 2012 the young energy service company Enertracting won a contract to sell solar heat to E.ON Mitte that prevents a gas pressure regulating system in the utility’s pipeline from freezing. At less than a few euro cents per kWh, solar heat costs E.ON less than using its own gas.
Enertracting is not the only company travelling this path. Eisenmann also offers energy service contracts for its solar paint shops, and Austria-based company SOLID, which specializes in commercial solar systems, owes a lot of its success to its knowledge about contracting and financing.
Although energy service contracts can not change the economics of a plant, they can help on several other levels. The customer does not have to deal with a high upfront investment and maintains solvency. Neither are there any risks to be taken in an unfamiliar technology. Also, says Vajen, “A contracting company that offers a solution from a single source can tease out the maximum cost effectiveness of a solar system.”
A Strong Competitor
Rising fuel and electricity prices favor not only solar heat but other technologies too. Cogeneration with natural gas has a strong foothold in medium-sized enterprises in Germany. If the cogeneration plant reaches an overall efficiency of 70 percent or more, the natural gas comes free of fuel tax. But the key factor is that every company that produces its own electricity avoids paying the allocation for the feed-in tariff (FiT) for renewable energies and the grid fees. The result is savings of around €8 cents/kWh of electricity. This means that in a typical application the cogeneration plant is economically viable only by taking the cheaper-electricity route. The free heat is a bonus.
In real life this means that wherever a cogeneration plant can be installed the race is usually lost for solar thermal. A 50 percent subsidy will not change this, nor will a free-of-charge collector field. “Frequently the decisive argument for solar thermal is that there is simply no access to a gas pipe,” says Ritter XL Solar’s Seidler. The main fuel for those who do not have access to gas is heating oil. Unlike gas, the price for this fuel has risen drastically in recent years. “Since the new subsidy came into effect we have reached oil parity. The heat generation costs for solar thermal are lower than for oil,” says Seidler.
Also solar heat can replace electricity, as Helmut Jaeger, head of the solar company Solvis, points out. “In the confectionery industry, often electricity is needed to maintain quite low temperature levels. Similarly, the food warmers on a buffet usually work with electricity and without any insulation. We are in contact with a supplier of gastronomy equipment to discuss how solar heat could be used instead,” Jaeger says.
Rapid Development Needed
The new subsidy is speeding up what has been a tardy promotion of solar heat for commercial applications. “We receive many requests, so we realise that the improved incentives have an effect,” says BAFA’s Baller. By mid-February 2013 his organization had received around 40 applications for subsidies for solar process heat and another 40 informal requests regarding further projects. Typically these came from car washes and many agricultural processes such as breeding piglets, growing orchids, and heating greenhouses or fish ponds. Typical collector areas are 40-60 m2, which is a lot compared with existing plants, but not huge. Requests concerning big plants with collectors of several hundreds of square meters exist but are rare. “It seems that the incentives are not well known in the industry,” says Baller.
Conditions for solar process heat are favorable at the moment but nobody knows how long they will stay this way. The MAP subsidies rely on the federal budget and have experienced many ups and downs in the past years. Besides that, FiTs are shrinking and PV is losing its current market niche in Germany. That industry is looking for new business models. Electricity from PV plants of 1 MW or more can be produced for €10-12 cents/kWh, according to Alexander Woitas, head of engineering at German consulting and service company Solarpraxis. For many medium-size enterprises this is cheaper than electricity from the grid. In processes that are commonly powered by electricity it is much easier to exchange the electricity source than to redesign the whole process. The melting of plastic and chocolate are two such cases. And wherever power and heat are needed, heat production might be a good use for surplus electricity on sunny summer days.
Whether solar thermal, PV or cogeneration will be the most attractive option depends heavily on the political framework.
Eva Augsten is a freelance journalist focusing on the energy sector.