LONDON — Should the European solar thermal industry be cautiously optimistic that a year without decline points to a market turnaround? Introducing the trade body’s new market report, European Solar Thermal Industry Federation (ESTIF) president Robin Welling commented that “overall, there was little development” across the sector in 2011. The European solar thermal market showed neither real decline nor growth when compared to 2010, Welling continued, but he noted that previously the market had decreased for two consecutive years.
The solar thermal sector in Europe has grown an average of 3.9 percent over the past five years, and 9 percent over the past 10 years. Solar thermal heating is viewed as the number one renewable heating source by Europeans, according to the results of a public consultation by the European Commission, and 44 percent of Europeans surveyed in a 2011 poll believe that the role of solar thermal in Europe’s energy mix will grow in future.
However, a new ESTIF report on solar thermal markets in Europe termed 2011 “a year of mixed messages” largely due to the diversity of market evolution across different countries.
EU-27 and Switzerland
Although Europe’s new installed solar thermal capacity in 2011, at 2.6 GW, was close to the capacity installed the previous year, and several important markets have continued to grow — including Germany, the largest European market, and Poland — ESTIF’s report shows that other markets such as Italy, Spain and Portugal are experiencing difficulties. Greece has managed slight market growth, which ESTIF attributes to the rising cost of other energy sources.
Large systems for commercial heating and cooling (above 35 kW or 50 square meters) have shown positive growth, and so have the very large systems (above 350 kW or 500 square meters) used in solar-assisted district heating and industrial process heat.
But ESTIF reports that, although these applications are growing, their numbers fail to compensate for the downturn in traditional market segments such as domestic hot water for single-family homes, where the financial crisis has caused a slowdown in retrofit and new-built projects.
Policy and targets
Solar heating and cooling is a key aspect of Europe’s energy policy, especially in terms of achieving 2020 targets. Total installed capacity in Europe is now 26.3 GW, which generates 18.8 TWh of solar thermal energy and saves 13 MMt (million metric tonnes) of CO2 per year. The Europe-wide solar thermal industry generates around €2.6 billion in annual income and employs 32,000 full-time workers.
According to ESTIF, achieving the European solar thermal target for 2020 will depend on several Member States — Italy, Belgium and France — which have ambitious targets, and to a lesser extent on Germany, Greece, Austria and Spain. Other nations such as the UK, Ireland, Denmark, Hungary, Bulgaria and Romania have limited objectives in place, or no objectives at all.
Overall the EU is on track to meet the 2020 target, and ESTIF believes that the economic crisis will make this task easier. Projected economic growth in the region, had it occurred, would have resulted in a significant increase in energy consumption, but the actual figures, says ESTIF, will make it easier for Member States to increase their share of renewable energy sources.
ESTIF does not predict a significant increase in the number of European countries implementing solar thermal incentives. But the federation sees positive signs for renewable heating and cooling in emerging markets such as Bulgaria and Romania, both of which feature a solar thermal component as part of their policy frameworks.
ESTIF reports an 11 percent increase in installed capacity in Germany, Europe’s largest market for solar thermal power, in 2011. Due to newly introduced degression in the nation’s financial incentive scheme, subsidies for renewable heat have been lowered, and ESTIF noted a market peak toward the end of 2011 due to private investors racing to benefit from higher incentives before the end-of-year deadline.
Italy has traditionally been the second-largest European market for solar thermal power, experiencing growth even during difficult times and establishing a strong solar thermal industrial base and ambitious objectives under the National Renewable Energy Action Plan (NREAP) — but ESTIF reports that the nation’s economic woes have taken their toll.
Uncertainty due to the government’s delay in establishing a clear and stable policy framework for the solar thermal sector has caused the market to shrink by 15 percent, with around 290 MWth of new installed capacity.
And there are more areas of uncertainty. A 55 percent tax rebate for renewable heat, which is available until the end of 2012, is to be amortized over a period of 10 years and thus is not attractive enough for many investors. The solar photovoltaic (PV) sector boom has drained both private and public investment away from solar thermal. And installing solar thermal in listed buildings (buildings which appear on the national historical register) is becoming increasingly difficult, involving much administrative red tape.
ESTIF reports that in 2011 the Spanish market contracted “not surprisingly once again”. This has been the third year in a row that Spain has shown a decrease, causing problems for the sector and especially for Spanish companies. The market contracted by 20 per cent in 2011, to approximately 187 MWth of new installed capacity. Due to a construction sector crisis, which is expected to continue, ESTIF believes that strong development of the large systems segment constitutes the best prospect for the Spanish market. However, an incentive scheme for energy production is also needed. Such a scheme is currently on hold, along with other measures in the Renewable Energy Plan (REP), after the new government announced budget cuts.
ESTIF notes impressive market growth in Poland as the reason for the nation’s rise to number four for solar thermal in Europe, with ambitious 2020 targets (10 GWth), a strong support framework and a steadily growing market: 177.5 MWth were installed in 2011. Support programs and subsidies include Voivodships Funds for Environmental Protection and Water Management, Regional Operating Programs and a Swiss fund which backs renewable energy investment.
A 2 percent French market decline in 2011 continued the downward trend of previous years; installations of hot water and combi systems decreased by 15 percent and 24 percent respectively. However, large installations in collective housing grew by 30 percent, enough to offset the drop in individual systems. More than 70 MWth of collectors were installed in collective housing for the first time in 2011, under the Fonds Chaleur (renewable heat fund). The future doesn’t look bright, though. In 2011, 250,000 square meteres was installed in metropolitan France, while the 1 million square meteres set out in the Programmation Pluriannuelle d’Investissement dans la Chaleur Reouvelable (the multi-year public investment plan for renewable heat) will definitely not be achieved, says ESTIF.
ESTIF reports that Austria, the largest per capita solar thermal market in continental Europe, is slowing down. Expected dramatic increases in fossil fuel prices have not materialized for consumers, and the nation’s focus on solar thermal is being challenged by its discovery of solar photovoltaics. The Lower Austrian region has stopped all incentives for solar heat, resulting in market collapse in the area and accounting largely for the market decrease at the national level. All other regions have maintained their incentive schemes. In 2011, the Austrian market as a whole experienced a downturn of almost 18 percent compared with 2010.
The Greek solar thermal market grew by 7.5 percent in 2011, installing 161 MW of new capacity, and ESTIF commends the nation for showing great resilience under very difficult conditions. Greece is a mature market where solar thermal technology is known and trusted, and is seen as one of the major options for fuel and electricity savings given the current environment of unstable and rising costs.
Markets with less than 200,000 square meters
Political indecision had a significant effect on several European markets in 2011, reports ESTIF, and this negative impact was even more pronounced in markets where installed capacity is between 50,000 and 200,000 square meters, such as Portugal, Switzerland, the UK, the Czech Republic and Denmark. Portugal and the Czech Republic exemplify the effects of “stop-and-go” policy measures, which have resulted in a significant market contraction of about 30 per cent in both nations with attendant business closures and job losses. In the UK, raised expectations and then uncertainty surrounding the Renewable Heat Incentive (RHI) caused the market to stall, and ultimately to shrink by almost 13 per cent, with less than 65 MW installed.
After strong growth in 2009 and 2010, Portugal’s market was also hit by the nation’s financial crisis, and declined to 89 MWth. Denmark’s market decrease of 3.5 percent resulted from a contraction in the residential and commercial (small systems) sector. The Swiss solar thermal market also declined by 3.5 percent, as it did in 2010. Some cantons modified their support schemes, but ESTIF estimates that these did not have a significant effect on the market overall.
Lead image: Europe map via Shutterstock