Economics of Solar Thermal Energy

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There are essentially three main reasons why a consumer or commercial customer will adopt solar thermal solution:

1. Reduction of carbon dioxide emissions (Environmental)

2. Reduction of ongoing fuel costs (Financial)

3. Improved reliability of energy supply (utility independence)

I would like to focus on the financial reasons and how one determine whether solar thermal offers an advantage. We believe the most suitable metric for measuring economic or financial viability of solar thermal is to conduct a comparative study of alternatives such as electrical heating, natural gas etc. For the purpose of this post, I will compare a simple 150 Liter solar water heating application of solar thermal technology versus installing an electric water heating system.

Please see our calculations in the following document “Financial comparison between domestic solar water heating versus electrical water heater“.

The key metric we look at is total cost of ownership over the life cycle of the product. We we have found is that the difference is significant over a twenty year time period. According to our calculations, solar is R74,000 cheaper over time due to the reduction in electricity use.  This seems to offer quite a convincing picture in favor of solar. So why isn’t everyone putting solar on their roofs? In our opinion, consumer awareness is low and often the information published in the media is confusing causing consumers to delay their decision. As the electricity prices in South Africa rise, more and more consumers are looking at their utiliity costs and realizing that if they want to keep money in their pockets they’re going to have to save somewhere and energy costs are the most natural place to start. To hear some interesting insights into the financial benefits of solar thermal water heating and latest trends in the market see this video: Solar Thermal Round Table Discussion.

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How to Choose a Solar Water Heater in South Africa

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Choosing a Solar Water Heating System can be daunting, especially in South Africa. The following post provides a few tips and ideas for how to wisely choose the best solution for your needs. If you are a residential user of hot water, there are three types of collectors, flat plate, evacuated tubes and integrated systems. To learn more about each one see the US Department of Energy’s Solar Water Heater Consumer site. This website breaks the choice process down into the following steps:

1. How they work

2. Selecting a Solar Water Heater

3. Installing and maintaining the System

Once you’ve read the above web page, ask yourself the following questions:

1. What is your location’s ambient temperature? If it goes below freezing temperature then go for a closed loop system

2. What is your water quality? If bad quality water then go for closed loop as this offers a separate loop is mixed with glycol.

3. Are you in a high risk hail belt area? If you are then a flat plate system is probably a safe bet to avoid having to replace broken tubes.

4. What aesthetics are you looking for? Flat plate can be integrated into the house roofing and thus reduce the visual impact of your solar water heater.

The following articles offer more good tips and ideas when choosing a solar water heater “Ask the Experts: Which Collectors?” and “The Basics on Solar Water Heater”

Once you’ve read these documents you are now ready to choose your solar water heater. In South Africa, Eskom maintains a list of approved suppliers from which you can choose from. These systems and suppliers had to comply with stringent technical and business criteria so you know that you are getting a good quality product from a decent supplier. Happy shopping!

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The Cost of Importing Oil on South Africa’s Economy

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I recently attended an interesting conference that took place in Jerusalem, Israel. The conference had several speakers on a panel providing their perspective on the challenge the world faces in the quest for a clean, secure supply of usable energy and electricity. The major take away from this conference for me was a point made by Dr Gal Luft of the IAGS or the Institute for the Analysis of Global Security. During his presentation, he clarified the huge economic impact that importing oil from the twelve major producing countries is having on economies around the world. Essentially by relying on oil mainly for transport fuel purposes, countries that are net importers of oil are effectively transfer a significant amount of wealth into the hands of a few countries mainly in the Middle East. Take for example South Africa. According to the latest figures posted on the Energy Information Administration website, South Africa imports more than 306,000 barrels of oil per day. 35% comes from Iran and 35% comes from Saudi Arabia. 16% comes from Nigeria and another 16% comes from other countries. If we assume the price of oil is $76 per barrel (the price on November 25th 2009), this translates into an annual oil import bill for the South African economy of $7.8 billion US Dollars. This is about 3% of South Africa’s Gross Domestic Product. In a country with an unemployment rate of 22.9%, South Africa cannot afford to export so much money especially if there is a viable alternative that not only avoids exporting so much greatly needed foreign currency but also creates a significant amount of local jobs and produces energy almost for free once the capital costs are paid for. Solar, wind and other renewable energy offer a viable alternative today. If the South African government were to create the required regulatory framework that would enable renewable energy power producers to sell the electricity they produce with the same favorable government incentives and tax structures that oil and other fossil fuels enjoy, these non polluting energies would be price competitive. For an excellent review on the real cost of fossil fuels and benefits of renewable energy, please see Robert F KennedyJr’s presentation at the recent “Solar Power International conference in Anaheim, Calif”.  But this is only half of the equation. In order to get the South African economy off its addiction to oil, we need to build out an infrastructure that can support electric vehicles. Once again, the benefits of such a national program would be huge. Local jobs, transfer of skills and ongoing local revenue generating businesses instead of imports would help South Africa catapult into developed world status. This can be done in our generation.

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Big Vision for Solar Water Heating in South Africa

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As a result of the intensive efforts to jump start a massive role out of solar water heaters in South Africa, there is quite a bit of confusion as to what is a realistic target for installing solar water heaters in South Africa.

Let’s consider what would be required in order to install 1 million systems by 2014.  Assuming that we install 5 days per week and allow installers to take off regular public holidays, if we start January 1st 2010 and finish June 1st 2014, we would require 463 plumbers and 925 laborers assuming an installation rate of 2 per team per day.  This is entirely possible however when considering that there are only a total of 3,000 qualified plumbers throughout South Africa, it is clear that a significant training program is required. This is not impossible but it will take some time to reach full capacity.  Here are my calculations.

Start Jan-10 End Jun-14 Total days 1,612 Total number of SWH installed 1,000,000 Installed systems per day (assuming no breaks of weekends or holidays) 620 Holidays and weekends per year 118 Total days 1,081 Installed systems per day (assuming breaks of weekends and holidays) 925 Number of plumbers (est. 2 systems installed per plumber per day) 463 Number of laborors (2 per team per day) 2 laborors per team 925

For more details see:

http://www.engineeringnews.co.za/article/framework-in-place-for-big-solar-water-heater-vision-but-funding-needs-firming-2009-11-20

and

http://www.engineeringnews.co.za/article/second-take-the-rollout-of-one-million-solar-water-heaters-by-2014-2009-11-20

We can achieve the 1 million installations without any special funding requirements. All that the South African government needs to do is sign in an already drafted law that requires solar water heaters installed in every house that is larger than 500 m squared or costs more than R700,000. Each day that such a law is not implemented we loose another day, another lost opportunity and increased costs that goes with blackouts and load shedding.

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Concerns & Limitations of Evacuated Tube Systems

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One of the most common questions that consumers who are interested in solar water heaters will ask themselves is whether they should purchase an evacuated tube system or a flat plate system. The basic difference is that while a flat plate solar water heater system allows the transfer of heat via an insulated glass covered box, an evacuated tube system allows the heat transfer to take place within a vacuum that is created within individual tubes. Both can heat water up efficiently and effectively that is sufficiently hot for domestic use however under certain conditions each one may have various advantages and disadvantages. In this post I will discuss a few of these advantages and disadvantages, however there are a few principals that we should keep in mind when making a comparison of this kind:

1. There is no substitute for good material and well manufactured product. Regardless of whether you choose a vacuum tube or flat plate, it is important to only purchase products that comply with various quality standards. In South Africa for example the South African Bureau of Standards have a detailed process that qualifies solar water heating systems for their standard approval.

2. Products may perform excellently but not in certain environments. Thus it is important to make sure you choose the right product for the right climate. For example vacuum tube systems may perform well in overcast, cold temperatures but if you do not live in a location with overcast and cold temperatures then you should consider using a flat plate system.

3. When choosing a product that is supposed to serve you for many years, it is important to ensure that the product and its manufacturers have the required experience and expertise since you will want a supplier who has a good chance of remaining in business for the many years that you use the product. This is important especially if we are talking about 10 years or more.

Here are a few specific reasons why evacuated tube systems are not appropriate for the South African market:

· In areas such as South Africa with good sunshine and a moderate climate evacuated tubes are not shown to provide any increased efficiency. In fact on warmer days, the insulation in evacuated tubes can cause water to superheat to temperatures in excess of 100 degrees Celsius, which can cause potential injury or damage to property.

· Evacuated Tubes rely on a vacuum seal to prevent heat loss, over time this seal can be lost, reducing efficiency and ultimately requiring tubes to be replaced.

· Evacuated tubes are better suited to high temperature applications such as industrial situations where steam is required.

· Evacuated tubes are made of lighter glass than flat plates, and can break if hit by a hard ball or rock. The more fragile frame also means that they need to be handled with extreme care.

· Flat plate collectors can be imbedded within roof structure to lie flush with tiles.

· Flat plate collectors are not pressurized and therefore far less likely to break or require maintenance.

· Many of the evacuated tube systems available in SA are manufactured in China without necessary expertise and lack SABS certification.

For further proof that flat plate is the most tried and tested, reliable solution for solar water heating, see the latest figures on page 5 of the European Solar Thermal Industry Federation. As you can see Vacuum Tube systems are a small fraction of the total installed base.

http://www.estif.org/fileadmin/estif/content/market_data/downloads/2008%20Solar_Thermal_Markets_in_Europe_2008.pdf

Please other source material:

1. http://www.homepower.com/article/?file=HP132_pg40_Mehalic

2. http://www.bsu.edu/web/capweb/ldi/projects/usbsc/studentwork/aliano/final_solar_collection.pdf

3. http://www.righthouse.co.nz/yk-files/708f7629e6a44151b7ddd6d1c975ecf9/Solar%20Flat%20Plate%20v%20Evacuated%20Tube.pdf

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Clean Air, Health and Sustainable Energy Supplies are your constitutional right

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Developed countries have tendencies to enact laws dedicated to improving our quality of life through better safety, standards, regulations, etc. These laws are generally viewed as integral to the smooth running of an advanced and civilized society.

For example, the law requiring seat belts to be worn: this is not generally viewed as a law that infringes on our personal rights, but rather a law that aims to prevent loss of life and injury.

During the Minister of Energy’s Solar Water Heating Conference that took place November 5th 2009, at the Indaba Hotel, the constitutionality of implementing a solar water heater obligation was debated.

A disturbing yet prevalent point of view was voiced during the discussion that “it would be very difficult to get it changed (that perhaps it would be unconstitutional to tell people what they may or may not do with their own houses), and was concerned that perhaps the industry is not at a point to either be able to deliver, or enforce, if it were made law”.

While these comments seem sensible, they are actually quite troubling, and here is why:

  1. Good governance. It implies that the government has no right to regulate building codes in the interest of society. This is in contradiction with norms in the construction industry. Almost everything in the construction industry is regulated, from the types of facades, aesthetics, safety and more. Regulations regarding energy use in buildings make just as much sense as regulations regarding façades, and it can be argued that they are even more necessary for the betterment of society due to the dire state of our country’s energy infrastructure.
  2. Justice. Parliament creates laws in order to create a better society for its citizens. Shouldn’t we allow Parliament to decide whether alternative energy laws are needed in order to benefit society at large especially if there is such a broad support for renewable energy across the political spectrum and across all other society groupings, ethnic, language, color, race etc. How can we deprive society of cleaner air, better health, more prosperity to a broader group of citizen?
  3. Ethical. Is it ethical that South Africa allows people to heat their Jacuzzis, swimming pools, showers, washing, etc. in upper income households without any limits using an extremely scarce resource such as electricity while as a result of this excessive and wasteful use of a scarce resource, children in low income households do not have electricity to power a simple light bulb that may enable them to complete their matric exams, or streets in the townships don’t have lighting and as a result crime rates for crimes such as rape, violent robbery and assault continue to rise? The moral argument for renewable energy has been taken up by The Archbishop of Cape Town Thabo Makgoba who urged Eskom to “show bold leadership and consider changing its direction towards renewable sources of energy”. He said “Questions raised by many in the public arena remain unanswered – questions about renewable energy and whether or not Eskom intends to move in that direction in a deliberate manner”. He has asked state-owned utility Eskom to put a stop to plans to build more coal-fired power plants and invest in renewable energy instead after the recent resignation of Eskom’s CEO Jacob Marago.
  4. Economic. As many studies have shown both in South Africa and around the world, (see for example: http://cleanedge.com/jobs-insight/) solar water heating offers a net benefit to the economy through reduced import expenditures on oil and other more sophisticated equipment that powers our national grid, replacing these imports with locally made solar water heaters thereby creating jobs for thousands. Building an equivalent sized coal, nuclear or diesel based power generation is between 10 and 50 times more expensive.
  5. Arrogance. Many other countries have enacted laws related to alternative energy use, like Mexico, Greece/Cyprus, Barbados, Hawaii, Spain, Israel, Germany, Italy, Ireland, Portugal. Does this mean that these countries are enacting building codes that are unconstitutional?

Clearly it would be preferable if people adopted the use of solar water heating freely and without legislation, however as we have seen both in South Africa and around the world, if left to their own devices, citizens usually choose the cheapest, lowest risk (and most selfish) alternative.

In particular, South Africans have zero incentive to opt for alternative energy solutions due to the highly subsidized coal-based electricity grid where the average citizen pays only a third of the real cost of electricity and in some cases receives this electricity for free. Unfortunately, citizens are unaware of the economic toll that coal-generated electricity puts on all of our society: increased taxes, inflation, subsidizing of fossil fuels, increased health costs, and reduced availability of the electrical grid. These costs are estimated to come to R2 billion per day.

The concern that “…perhaps the industry is not at a point to either be able to deliver, or enforce, if it were made law” is clearly out of place. There is ample talent, desire, human capital, political will, financial resources within South Africa and amongst various international private and public institutions willing and eager to support the development if a vibrant and large South African Solar Water Heating Industry. What is missing is clear regulation.

Proposal

What is needed is a clear act of parliament to enact the already drafted legislation mandating all new houses larger than 500 square meters or worth more than R700,000 be fitted with a solar water heater, or that any burst electrical geyser must be replaced by a combined electrical-solar geyser. If implemented today, this market would immediately create a massive solar water heater industry overnight and initiate one of the largest solar water heater installation programs the world has ever known.

According to DBSA, Renewable Energy Market Tranformation Program Director, Yaw Afrane Okese, these specific market sectors are worth approximately 660,000 units and accordingly the Minister of Energy the Government is proposing to install 1 million systems by 2014. This means each day the decision to enact such a law is delayed the opportunity to install 530 units is lost (assuming the industry installs every day for the next five years). This type of legislation would cost the tax payer nothing and end users approximately R10,000 per unit on average. Considering that this type of program is focused on the middle to upper income levels who earn more than R16,000 per month, this represents a maximum of 5% of such a household’s annual income. The result would probably mean that this type of household would obtain a net benefit of improved electrical grid reliability which would improve their livelihoods and quality of life.

In conclusion, for the reasons described above, the government would be wise to urgently revise its organizational structure and resources in a way that will support the development of renewable energy in South Africa and start by implementing a solar water heater regulation for new buildings and burst geysers immediately.

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