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Friday Apr 19, 2013

Demand for solar geysers going cold

A recent study by Frost & Sullivan suggests that the demand for solar water heaters in South Africa is going cold, which could result in the country missing its renewable energy targets.

Although there has been phenomenal growth in the supply of solar water heaters since Eskom introduced its rebate programme in 2008, demand for this technology has not grown at the same rate as supply by the industry.

With the geysers being one of the most effective renewable energy sources available, Eskom was counting on a successful roll-out to manage demand on its constrained system.

The utility launched a largescale programme in 2006 and between then and 2010, the number of solar water heater suppliers increased from 45 to 700. There are now about 300 active suppliers.

The Frost & Sullivan study showed that 40 percent of new suppliers entering the industry exited every year. On top of the consumer uptake not being as successful as expected, a competitive environment and high operating costs have resulted in suppliers struggling to remain in business.

"Many suppliers agree that the Eskom rebate programme has created awareness about the solar water heater system... However, the demand for the product has not grown at the same rate as the amount of supply within the industry.

"Something needs to be done to stimulate the demand side of the market in order for substantial market growth to occur," Muneera Salie, an energy and power research analyst at Frost & Sullivan, said.

Consumers found the average cost of a high pressure unit relatively high at approximately R16 000. When one added installation costs, which ranged from R2 000 to R6 000, the cost of the units easily spiralled to over R20 000.

Last month, Economic Development Minister Ebrahim Patel said more than 330 000 solar water heater units had been installed in the country against the government's target to achieve 1 million installations by 2014. These included projects funded by the Department of Energy.

Frost & Sullivan calculated that to achieve the target of 1 million installations by March 2015, it would require approximately 25 000 geysers a month to be installed from January this year.

Finance Minister Pravin Gordhan announced last year that R4.7 billion would be made available for the solar water heater programme roll-out over a three-year period ending in March 2015.

The government was looking for solar water heating to provide 23 percent of renewable energy production and it had set a target for 10 000 gigawatt-hours (GWh) of the country's energy use to be sourced from renewable energy by 2013.

In May last year, Eskom was saving an estimated 250GWh a year from the geysers installed and this reduced demand by 46MW during weekday evening peak.

One of Eskom's suppliers in Cape Town said the disappointing uptake of the solar geysers was not because people did not see the technology as essential, but it was the initial outlay that made it unaffordable to most households.

The poor uptake of the solar geysers was due to the initial outlay, which made it unaffordable to most.

"The rebates also don't cover most of the initial cost. If people could pay it over time, we would see a change in demand. If banks could finance it, which some have begun doing, there'd be a difference," he said.

Eskom offers a maximum rebate of R3 936 for a 100- to 149-litre high pressure solar geyser and up to R8 964 for the biggest 250- to 300-litre geysers that are imported and assembled locally.

The utility reduced the rebate on solar water heaters in 2011 after it was doubled in 2010 to stimulate demand for the geysers.

The study also showed that there has been an increasing demand for heat pumps, which would grow at a faster rate than that of solar water heaters, thereby slowing demand for the geysers further.

"It's because of pricing. We are facing difficult financial times. People are cash strapped," the supplier said.

He said on top of subdued demand, suppliers had been exiting the industry mostly because the cost of carrying stock that was not selling was too high.

Heat pump geysers warm water more efficiently. Where a geyser uses three units of electrical energy to produce three units of heat energy, a heat pump converts just one unit of electrical energy into three units of heat energy.

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