By Tor 'Solar Fred' Valenza
April 27, 2011

I wish I had the exact answer to this blog post's question, but I can only make some educated observations and solutions. Most research regarding consumer attitudes toward solar is generally PV related, rather than solar hot water related. At the same time, solar hot water has some obvious challenges, especially in the residential space. Here are four challenges and some corresponding solutions.

1) Solar hot water competes with dirty (and cheap) natural gas. With the exception of Hawaii, natural gas is currently fairly inexpensive right now. The amount of hot water that an average residential customer uses typically makes for a slower return on investment. Want me to back that up? Check out Free Hot Water's solar hot water calculator, plug in the numbers for any state for residential, and you can see for yourself. (Full disclosure: Free Hot Water is a client, but big deal. This is a useful and relevant tool.)

Solutions: Either home solar water heating systems have to become dramatically less expensive or natural gas prices have to rise. Unfortunately, solar thermal technology and pricing is not going to fall in the same way that PV has fallen. Different markets and different manufacturing costs, but solar thermal prices will fall...slowly. As for natural gas prices rising, that may appear to be a long shot, but recent news about the environmental cost and abuse of hydraulic fracturing (fracking) may add more cost pressures onto natural gas when stricter Federal regulations are enforced. Of course, those stricter regulations remain to be seen...

2) There are fewer local and Federal incentives for solar hot water. While California has just passed some generous rebates that make solar thermal very attractive for commercial customers, the incentives don’t apply to pool heating and take up perhaps 20 to 25% of the cost of residential systems. Other states are much less generous or down right stingy. SRECs? Forget about it. The 30% Federal investment tax credit can also help reduce up front costs, but only for non-pool heating applications. While that extra 30% is great, it generally benefits those who often owe taxes at the end of the year.

Solutions: One solution would be to make the 30% tax credit refundable. As it stands now, the credit can be carried over for 5 years, but that’s a difficult sales case to make to someone who rarely owes taxes. In addition, governments could increase the rebate amounts for solar water heating systems, making a faster ROI. Finally, local and federal governments could allow the 30% Federal ITC to apply to pool heating, opening a huge opportunity for Western and Southern states, where pools are largely not being used due to the high cost of heating them during the non-summer months. And could you SREC states please include solar thermal SRECs? Pretty please? Yes, New Jersey, Pennsylvania and Connecticut, you. Why? Because you're leaders, not followers, right? Right. Enough said.

3) Solar hot water has fewer marketing resources. While I genuinely appreciate the money and time that SEIA put into its solar generations videos and PSAs, solar water heating was barely mentioned throughout the series. Most of the images and statements were all PV related.

Solutions: It would be great if SEIA and other solar organizations would dedicate a campaign (or three!) to solar water heating for homes and businesses. In addition, it would be great if solar water heating manufacturers could increase their marketing budgets. Given the lukewarm demand in the solar thermal sector today, it’s understandable why manufacturers and installers are tightly holding the purse strings for now. I hope that changes as the economy improves.

4) Fewer financing options for solar hot water. It’s wonderful how there are so many solar leasing and PPA (a.k.a. home solar agreement) options for solar PV today. However, the same cannot be said for solar thermal. These arrangements have enabled many solar PV installations by taking the sting out of the upfront cost of solar PV, but have yet to be implemented on a large scale for solar water heating.

Solutions: Obviously, solar PPA companies and clean tech venture capitalists could design more programs for solar thermal, but banks and VC's have to find the right financial formula. Reviving PACE programs could help as well, but that appears to still be in recovery mode. Additionally, solar PV companies that currently only offer solar leases and solar PPA’s for PV could expand into solar water heating.

The good news is that even without high subsidies, solar water heating does make financial sense for large commercial applications, such as apartment buildings, hotels, hospitals, etc. (Again, see Free Hot Water's calculator for examples.) The less good news is that these venues are still largely unaware of solar hot water and solar thermal financial benefits. That's not just me, but also mentioned in a recent Alta Terra blog post. I would add that even when commercial owners are aware of the cost savings, they must still find the courage and the financing to move forward. Like the residential sector, it would be wonderful for solar PPA companies/banks to carve out some solar financing love for commercial solar hot water applications.

Those are my general observations. Admittedly, they’re not based on hardcore market research data, but just my experience at Free Hot Water and talking with other solar thermal installers.

Got more challenges and/or solutions? Bless your solar water heated heart. Please add to them here in the comments section below.

Thanks. And as always, UnThink Solar.

Tor Valenza a.k.a. “Solar Fred” advises solar companies on marketing, communications, and public relations. Contact him through UnThink Solar or follow him on Twitter @SolarFred.

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