Out of the shadows? Solar thermal in the US

After years of neglect, solar thermal in the United States is on the up, thanks to increasing public awareness and a range of national and state-level support policies. Alasdair Cameron takes a timely look at the state of the industry, and what we can expect in the coming years.

Solar thermal for hot water is a proven technology. Reliable and efficient, it is one of the most cost-effective ways of reducing fossil fuel use, directly replacing natural gas or fuel oil in most households. Yet despite this it continues to suffer from a range of misunderstandings and frequent confusion (not least in the media) with photovoltaic power, with many continuing to see it as the ‘poor cousin’ of the solar energy family. As one installer put it, ‘for our energy, we just want a little respect.’

Now at last, thanks to increasing interest in environmental and energy issues, along with new federal tax credits, things in the US could be beginning to change. Delegates at October’s Solar Power 2006 conference in San José predicted growth of around 50% in 2006 for the glazed domestic solar hot water sector (SHW). If realized, this will have been the industry’s strongest performance for years, representing over 80 MWth of new capacity.


Although the United States has outstanding potential for solar thermal applications, it ranks very low in global market share, far behind countries such as Germany, Greece and Cyprus. Following the oil crises of the 1970s, the SHW sector grew in the 1980s and early 1990s, but for the last ten years the market has been largely static, at around 30-40 MWth per year (representing about 6000 separate systems). Hawaii, which has always offered rebates for solar thermal, dominates this market, accounting for 41% of installations. Nearly 15% of homes in the island state are equipped with solar heating. Other leading states or territories include Puerto Rico, California, Florida and Arizona.

Solar thermal installed on a house in Port Townsend, Washington thermomax canada usa west

While the SHW market has stagnated, the major success story of the US solar thermal sector has been in unglazed heating systems for swimming pools (the largest of which was installed to heat the Olympic swimming pool at the Atlanta Games), and here the market has grown steadily. Solar thermal is one of the most cost effective ways of heating pools, and the market for these systems has grown at 13% per year since 1997, now representing an annual capacity of more than 800 MWth. This is important as it has allowed the suppliers of solar thermal systems in the US to survive the lean times, and has helped to maintain a pool of expertise in manufacturing and installation in the sector. Altogether more than 300,000 pool heating systems have been installed in the United States.

Incentives support a growing domestic market

As mentioned, the solar thermal hot water market grew by more than 20% in 2005, and in 2006 it is expected to have expanded by a further 50% (see Figure 1). One of the major reasons for this growth of solar thermal is the new federal tax credit which has been introduced for solar installations.

Figure 1. Solar water and space heating installed annually in the United States. Source: SEIA

Effective from the 1 January 2006, and due to last until the end of 2008 (it was extended in late 2006), the new credit applies across the United States to both solar thermal (though not pool heating) and photovoltaics in the domestic sector, along with CSP and solar hybrid lighting in the business sector. It provides a rebate of up to 30% of the cost of any system installed during 2006-2008. For business customers there is no cap, while for domestic installers this is capped at $2000 per system, regardless of technology. Since solar thermal is so much cheaper than PV, this is a clear incentive to installing solar thermal systems. Once the tax credit expires, all new installations will receive the standard 10% credit which was previously in place.

In addition to the federal credits, a number of states such as New York, Florida, Hawaii, California and Illinois have introduced their own incentives to compliment the national subsidy. In California, for example, Governor Schwarzenegger’s recently enacted solar energy bill provides around $3.2 billion in funding over the next ten years, some of which will be available to solar thermal (it is not yet clear exactly how this will be divided up). Other national support systems are also being developed, such as Dennis Cardoza’s ‘Empowering America Act’. As well as extending the federal tax credit until 2015, this bill proposes to make it easier for householders to install solar panels on their roofs, essentially removing planning obstacles to domestic solar systems.

If the federal tax credit is successfully extended, predictions suggest that the US SHW industry could be represent around 5000 MWth per year by 2010.

Metering solar thermal in the US
Solar thermal, unlike PV, is not easy to quantify, and this has traditionally made it harder to meter. Whereas electricity is measured in kWh, heat has traditionally been measured in BTUs, and solar thermal is sometimes measured in the even more uncertain m2 of installation. This has led many to regard SHW systems as energy saving, or energy efficiency, measures, rather than energy generation systems. The lack of metering has also meant that, until recently, solar thermal could not benefit from selling ‘green tags’ or Renewable Energy Credits (RECs).

After years of relative inaction the US solar thermal market is set to grow rapidly thermomax canada usa west

Now, moves are underway to introduce widespread metering in new solar thermal systems. While this technology has been in use in Europe for sometime, it is relatively new in the United States. In essence, solar thermal metering systems measure the temperature of the water going into a solar thermal system against the temperature of the water coming out. This temperature difference, along with the quantity of water involved and a few other parameters makes it possible to convert BTUs in kWh. Several companies are in the process of introducing this technology to the US, including TCT Solar and Metrima. The ability to properly quantify the output of solar thermal panels is considered important to the continuing growth of the sector, as Roger Locke of TCT solar explained in San José. ‘I think this will get people excited about the industry’, he said.

Solar thermal heating and photovoltaics on the roof of the zero energy habitat home in Colorado, 2005 doe / nrel / pete beverly

The first utility to adopt metering technology for solar heating in the US was local power provider called Lakeland Electric in Florida. By metering the output of the solar heating systems, Lakeland generates RECs which it sells on the market. The consumer benefits by having Lakeland pay for the purchasing and installation of the system, and then having reduced heating bills. In time consumers have the option to purchase the systems, at which point they start to earn RECs. So far this has been a relatively small-scale operation, with meters installed in only 55 homes, but Lakeland hopes to expand it in 2007 to over 100 households per year.

The Chicago project
While ‘the windy city’ may not be a place that one would immediately associate with solar energy, the municipal government has taken a decision to use its buying power to stimulate the market for solar thermal in the US.

The wider introduction of metering will provide a welcome boost to solar thermal tct solar

Its first step was to recruit Solargenix to build a manufacturing plant on the city’s South Side, and to train local residents in solar thermal production and installation. As an incentive to Solargenix, the municipal government agreed to purchase $5 million worth of equipment for public buildings across the city. Since it does not maintain pools, it was decided that the best way to utilize solar thermal in Chicago was for hot water. 100 fire stations, 25 police stations and several large hot water consumers such as health centres were selected for the first round of installations, and many of these have now been completed. The combination of tradable RECs and federal tax credits, coupled with a regional carbon trading scheme (the Chicago Climate Exchange) has meant that the pay back period for these systems is as low as 3.5 years.

Solar heating on an industrial scale
A key area of interest in the future exploitation of solar thermal power is in generating heating for commercial or industrial uses. This can take the form of process heat for factories, space heating or cooling for office complexes or hot water for showers and kitchens.

To date, the industrial use of solar thermal is negligible in the US, but it is hoped that this could now begin to rise, although many in the industry think it will remain hard to convince companies to invest.

The island territory of Puerto Rico is one of the USA’s principal markets for solar thermal hot water tct solar

One of the important things about solar thermal, particularly for industrial applications (as they involve much higher capital outlays), is that the economic viability of solar thermal depends not just on insolation, but also on energy prices. Thus, it is more cost effective to install solar thermal in New Jersey which has high gas prices, than in Arizona which has far greater sunshine, but much cheaper energy.

Heat for industrial applications is a major user of energy in the US. In California, for example, industrial heat consumed 47% of all the natural gas used in the state, with a large part of this being consumed in the food processing sector. Food processing is a particularly good candidate for solar thermal, as the majority of the energy (80%) is consumed from July-October. This means that demand is highest as insolation is at its best. Furthermore, it allows the solar thermal market to tie in with the upgrading and repair cycle of these factories, thus minimizing downtime.

In Delaware, a study was recently conducted into the feasibility of using solar thermal to produce hot water for poultry plants. This concluded that solar thermal would become costs effective when fuel oil reached $1.3 per US gallon ($0.34 per litre). At the time of writing fuel oil was selling for $2.37 per gallon.

The world’s largest pool heating system was installed at the Olympic centre in Atlanta, Georgia doe / nrel / craig millar production

So, given that solar thermal is a mature and economic technology, why has it not made a greater impact on the market? In a recent presentation, the Capital Sun Group, which specializes in solar financing, claimed that there were a number of institutional and cultural barriers within business. These included the general trend to view solar thermal as an energy efficiency project, with many companies demanding payback periods of 18 months to two years. They also blamed a lack of knowledge in industry, an unwillingness to take risks and a bias towards production departments. (i.e. if the product turns out OK, then all must be well).

Hopefully in the future sustained energy prices and greater awareness can help to overcome these problems and allow solar thermal to attain its rightful place in industry.

Suppliers and installers

Thanks to its relatively low overall standing in the global solar thermal market, the United States has few large-scale manufacturers of solar thermal equipment, and the market continues to be dominated by European players (mainly German and Austrian), although increasingly Chinese companies are beginning to move into the area. Yet there are a number of US-based solar thermal equipment manufacturers, some of which have been established in the market for many years.

Following the introduction of the solar tax credit there have 22 new application seeking to register as certified solar thermal suppliers. This is because companies must sign up to the Solar Rating and Certification Corporation (SRCC) in order for their customers to receive the tax credit. However it remains the case that US-based solar thermal manufacturers are unlikely to seriously increase production unless there is a more long-term commitment to the tax credits.

Alasdair Cameron is Assistant Editor of Renewable Energy World
e-mail: rew@pennwell.com

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