The solar water heater (SWH) rebate programme has been in existence since 2008, and is funded from the NERSA-approved demand-side management (DSM) budget. This is in support of the Department of Energy’s drive to install one-million solar water heaters in five years.
To date, 72 257 low-pressure solar water heaters (LP SWH’s) have been installed since 2008, adding up to a total of R344.7-million. A total of 29 449 high-pressure solar water heaters (HP SWH’s) have been installed in this time, adding up to a total of R172.8-million.
Currently, solar water heaters are a hotly-debated subject. Therefore 25° in Africa puts the spotlight on the SWH market and spoke to some key players, regarding this matter.
How has the solar water heating market changed since 1997?
James Shirley, general manager of Kayema Energy Solutions: South Africans paid only 12c per kWh and Eskom had a 25% reserve margin. Solar water heating in South Africa was reserved for areas with no power supply or those who purchased for purely environmental reasons.
Solar water heaters are a critical investment for every household, and reduce the peak load on Eskom significantly.
The benefit of reduced peak demand is that Eskom would not need to load-shed as often, and stations and network transmission/distribution components can be powered down to allow for more regular maintenance, increasing their lifespan.
Eskom’s DSM programme has also put rebates in place to assist end-users and commercial clients to make the investment even more financially viable and the decision to go solar even easier.
Barry Bredenkamp, operations manager at the National Energy Efficiency Agency: The solar water heater market has changed radically, and due to various factors such as increasing electricity prices, a more general awareness on “green” issues, various incentive programmes on offer and obviously, the rolling black-outs South Africa experienced in 2008. Improved quality of SWH-technologies has also assisted in overcoming consumer resistance and/or fear of the technology.
Lea Smith from Institute of plumbers South Africa (IOPSA): The market has changed drastically, and for obvious reasons. The problem is the fact that a growth spurt resulted in opportunists who did not care for the solar plumbing industry. These people only came to pillage the industry and weren’t interested in adding value to this market.
Dylan Tudor-Jones, the Managing Director of Solar Heat Exchangers: In 1997, the ROI for a solar water heater was much longer due to cheap and abundant electricity. It was therefore much harder to convince people to do the right thing by investing in SWH and sales volumes were lower.
How has load-shedding in 2008 influenced the SWH market?
Shirley: Load-shedding has highlighted the importance of energy-efficiency to average South Africans. While highly annoying and inconvenient, it has forced companies and homeowners to take action to reduce both their consumption and monthly electricity bills, and led to increased sales of solar water heating systems since the electric geyser is a major consumer of household electricity.
The increased demand has led to hundreds of solar water heating companies springing up all around the country, creating many new jobs, and existing plumbers learning the new skills required to install SWH systems.
Tudor-Jones: The load-shedding in 2008 and the Eskom Solar Rebate Programme have been the catalysts to the rapid growth of the SWH industry. However, with the growth have come additional challenges. Consumers are now spoilt for choice with 250 products (high- and low pressure) as well as 600 suppliers. Apart from too many options, consumers experienced a lack of education surrounding the various technologies available. To add to this, the current rapidly growing supplier base also needs to be educated to prevent making the same mistakes of the past. The mass product failures, regarding the 2010 frosts has definitely caused some negative public sentiment towards the technology.
How long will Eskom’s rebate programme last?
Shirley: It is unclear exactly how long the rebate programme will last. However, it was confirmed by Mr. Andrew Etzinger of Eskom on 30 June 2011, that additional funding was made available for the SWH programme and that it would continue for the moment.
The rebate values have already been reduced this year, and the numbers of systems that each supplier may submit for rebate each month have been limited in order to increase the amount of time the programme can run for.
For those still sitting on the fence about whether or not to convert to solar water heating, I would recommend that they do so sooner rather than later in order to ensure their rebate.
Smith: I really can’t say, but what I can say is that the solar rebate budget is completed for the year. However, they are running a special reduced rebate.
Bredenkamp: According to my knowledge, the rebate in its current form will not last beyond 2011 unless a significant amount of additional funding is secured for this purpose.
Tudor-Jones: When the money runs out?
How will Eskom replenish the money spent on the rebate programme?
Shirley: Unfortunately I can’t speak for Eskom (or NERSA). However, it is my opinion that should the programme continues any additional funds would be taken from the ever-increasing electricity prices.
Rewarding those who switch and penalizing those who choose not to switch to solar (or at least a heat pump) seems to me like the best way to go while our country is experiencing an energy shortage.
Bredenkamp: As consumers of electricity, the onus currently will rests on us to pay back the money for this rebate program. Even if the funding model changes from a tariff-based levy, we (as tax payers), will end up paying through a treasury/fiscal allocation.
Smith: The idea is simple, subsidise solar systems which reduces load on the electrical grid. With a reduced load there is no need for power stations. Subsidising solar is cheaper than building a power station.
According to Frost and Sullivan, the SWH market experienced volatile growth between 2007 – 2010 that was plagued by malfunctioning products, fly-by-night companies and incorrect installations. Do you agree? If so why?
Do you disagree? If so why?
Shirley: I agree strongly that the SWH market has experienced volatile growth. Unfortunately, many South Africans have paid good money for bad systems on terrible advice from people trying to make a quick buck on solar water heating.
A solar water heater should be selected based on reliability, service and applicability to your needs (much like any other investment), rather than on price.
Many of the systems that were brought into South Africa, while perhaps being applicable to another country’s environmental conditions, were not relevant to our local temperatures, weather patterns and water quality.
These factors have led to overheating in summer, freezing in winter, bursting due to pressure or rapid component deterioration due to chlorinated water – all of which have done damage to the name of the industry as a whole. Even worse than this, though, is the poor quality of installation and total lack of understanding of how the systems work by unqualified (and many supposedly “qualified”) installers.
Regulations and industry bodies are in place to deal with this. However, it is very difficult to police those operating outside of the rules unless something catastrophic happens and the matter comes to the attention of the ombudsman.
The good news is that we are now seeing fewer and fewer different manufacturers in the market – those who are surviving and doing well seem to be coming from “real” companies who have a long-term plan and will be around long enough to honour their warranties.
Bredenkamp: Probably before 2007, when there were no Standards in place and/or a test facility at the SABS.
Smith: I fully agree. The problem is the fact that a growth spurt resulted in opportunists who did not care for the solar plumbing industry. These people only came to pillage our industry and weren’t interested in adding value to this market.
Tudor-Jones: I do agree. The Solar Water Heating Division of SESSA reported at the March 2011 AGM that membership grew from 272 to 510 in 12 months. They also reported that 168 members had resigned in the previous 8 months. I know of a reported +/- 1000 collectors which failed during the June 16th 2010 black frost. This is one incident which caused many casualties within the industry and does not include other issues of overheating and the like that has also occurred since the influx of vac-tubes into the market.
How are building codes and regulations influencing the SWH market?
Shirley: SANS 10400X has now been promulgated, which means that within a few months it could become law for any new building that at least 50% of the water heating must be done by non-electric resistance means.
Since SWH is not applicable to every home or business, the client also has the option to achieve this by, amongst others, using heat pumps or installing a heat-recovery system.
It is becoming more important for developers, architects, specifiers, QS’s and consulting professionals to develop an understanding of the functioning, and advantages and disadvantages of each, and of which systems are available in the market that they would recommend to their clients.
Bredenkamp: The regulations have only just been published and once properly up-and-running, will have a positive effect, i.e. the requirement that where hot water is provided, a maximum of 50% by volume can be supplied by the traditional electrical-resistance water heater and 50% must be from a renewable resource.
Smith: The building codes and regulations impacted the SWH market drastically.
Tudor-Jones: We haven’t seen any impact as of yet, but we will see a positive influence once the new SANS10400 PartXA2 becomes mandatory in Feb 2012.
Karel Deist, Head of Laboratory Solar – SABS: These standards are there to support the market in a positive way. The standards and regulations protect the end user against possible abuse and claims about the functionality of these systems.
You have various standards and regulations that govern the installation of SWH’s like the Occupational Health and Safety act (OSH), the National Building Regulations and Installation codes.
There are two important clauses dealing with this matter in the said Occupational, Health and Safety Act. The first one is clause 10 which states the following:
General duties of manufacturers and others regarding articles and substances for use at work
(1) Any person who designs, manufactures, imports, sells or supplies any article for use at work shall ensure, as far as is reasonably practicable, that the article is safe and without risks to health when properly used and that it complies with all prescribed requirements.
(2) Any person who erects or installs any article for use at work on or in any premises shall ensure, as far as is reasonably practicable, that nothing about the manner in which it is erected or installed makes it unsafe or creates a risk to health when properly used.
(3) Any person who manufactures, imports, sells or supplies any substance for use at work shall.
(a) Ensure, as far as is reasonably practicable, that the substance is safe and without risks to health when properly used.
(b) Take such steps as may be necessary to ensure that information is available with regard to the use of the substance at work, the risks to health and safety associated with such substance, the conditions necessary to ensure that the substance will be safe and without risks to health when properly used and the procedures to be followed in the case of an accident involving such substance.
(4) Where a person designs, manufactures, imports, sells or supplies an article or substance for or to another person and that other person undertakes in writing to take specified steps sufficient to ensure, as far as is reasonably practicable, that the article or substance will comply with all prescribed requirements and will be safe and without risks to health when properly used, the undertaking shall have the effect of relieving the firstmentioned person from the duty imposed upon him by this section to such an extent as may be reasonable having regard to the terms of the undertaking.”
The second very important regulation that one should keep in mind is as per the SA Government Gazette no. 22355, Notice No. 509 and Regulation no 7079 dated 8 June 2001.
Every consumer must comply withSABS/0252: Water supply and drainage for buildings and SABS/0254: The installation of fixed electric storage water heating systems, or similar substituting re-enactment or amendment thereof if the consumer installation is of a type regulated by either standard.
This legislation requires that all new geyser installations and replacement geyser installations performed after the 8th June 2001 must be in accordance with the specification, which requires the installation to have a geyser drip tray with overflow pipe piped to the exterior of the building. Vacuum breakers must be installed on the hot and cold water supply and the overflow from the safety valve and expansion relief valve must be piped to the exterior of the building.”
What are the advantages of SWHs?
Shirley: The three main advantages of solar water heating are:
• They are reliable, especially thermosiphon systems which have no moving parts. Incorrect installation or a total lack of maintenance is the most common source of systems failing to produce hot water. Electric controllers ensure that during periods of extended rainfall, or the very cold winter days, the system reaches the desired temperatures.
• They are durable. Many systems offer 10 year guarantees, and flat-plate collector technology has been proven over the past 30 years to operate very well in conditions similar to South Africa. Clients can be certain, as long as they invest with a reputable company, that they will certainly see a great return on investment.
• They save money. It is not often that people get the chance to do something that is good for the environment, good for society AND saves money every month – a real triple threat.
Bredenkamp: The biggest advantage is the fact that we get to harness free energy from the sun and generally would have accessible hot water during times of extended power outages.
Smith: Renewable energy and lower energy costs are major advantages to SWH.
Tudor-Jones: The purchase of a quality solar water heater is a proven means to save electricity, therefore money and our environment. They are built to last and therefore have an excellent life cycle savings compared to that of an electrical geyser. When comparing prices, the difference in cost between the lower end, five year warranty models and the proven, ten year warranty models is about R5000. This may seem like allot, but when you consider that this is only one extra year of savings on your ROI in four years time, compared to doubling your warranty, then the investment in quality is absolutely worth it.
What are the disadvantages of SWH?
Shirley: High capital costs for a good system have been a major disadvantage and slowed the sales of SWHs in South Africa. Finally there are attractive financing options available for selected systems, and the monthly installments can be offset by the savings. Instead of asking “how much does the system cost?” can clients now ask “how much can I put back into my own pocket every month?”.
Aesthetic reasons have also been a bump in the SWH rollout process. Two years ago, we used to hear the term ugly almost every day. Now, however, many homes display their systems proudly and most of our clients are actually glad to show their neighbours that they are smart enough to install a system.
Bredenkamp: SWH’s don’t always achieve the expected savings, i.e. very dependent on the elements and human behavior. Another disadvantage is that if something does go wrong, the consequential damage to property can be quite significant.
Smith: The disadvantages of SWH’s are the fact that it is complicated to install. There is a need for a higher plumber skill base, and for the last 15-years our plumbing skills base has been eroded due to the lack of training. One can also say that another disadvantage is the fact that the technology is complicated and the consumer does not always understand the lifestyle shift. Another disadvantage is the fact that there were too many fly-by-night companies selling one thing and the consumer not getting the product that was promised to them. Thus the SWH market got a bad name.
Tudor-Jones: They are not always suitable for all applications due to shadowing, roof type, orientation, inclination and often aesthetics. They also have a higher capital cost than conventional geysers.
Where are the trends heading for SWH?
Shirley: The take-up on SWH has been slower than expected around the country. However, the general public is now far more aware of the options available to them. While many people want a SWH and understand all of the benefits, there has been no need to switch. More than half of our clients are people who have been quoted previously, and only made the decision to switch when their electric geyser had burst and a replacement system was necessary.
Every time the electricity price increases, sales volumes also spike – and so long as it remains “cheaper” to install a solar water heater than to use an electric geyser, the local market will continue to grow.
A couple of years ago it was very difficult to install an on-roof system in South Africa, since home owners were concerned with the aesthetics of systems. Recently, however, this has not been an issue and more and more clients are opting for thermo-siphon systems because of better cost and reliability over the split options.
Bredenkamp: Personally, I believe we will ultimately see more of a move towards heat pumps in the middle-to-high income market sectors. They are more reliable, predictable and ultimately more energy-efficient.
Smith: It is my opinion that the SWH trend is moving downwards. I strongly feel that heat pumps will become the new solar solution.
Tudor-Jones: More up-market and environmentally-conscious homes will install SWH whereas more middle-income, money-conscious homeowners will go for heat pumps.
How long does a SWH last?
Shirley: A good SWH has a design lifespan of 20 years or longer, and should have a warranty on physical components of 10 years – this ensures that every owner will benefit financially over an electrical geyser, even if financed.
Flat-plate collector systems have been installed in many countries around the world since the early 1980’s, many of which are still in existence today. A poorly designed or installed system, however, may only last two years. It is critically important that suppliers, installers and clients understand exactly what each system does and the impact that various environmental, water and time-of-use conditions have on each, so that they can offer the best advice and make.
Bredenkamp: Depending on the specific quality of the system, but generally the panels should last between 15 to 20 years and the reservoir tank five to ten years.
Tudor-Jones: Some better quality, proven brands can last up to 20 years. Cheaper models have been known to last between five to ten years. If ones return on capital is only in year four for instance and there is a risk of having to replace the unit or a major component of the unit in year five, then the investment in a higher priced, better quality and longer lasting unit becomes favorable.
Are we seeing more SWH products imported or locally manufactured? Why?
Shirley: While there are still more imported systems available than local products, we are now seeing more and more locally manufactured components and complete systems in South Africa. There are several reasons for this:
• In order to stimulate local employment and keep South African funds in SA, Eskom’s rebate structure is changing to allow for greater rebates for systems with a higher local content.
• The Department Of Trade and Industry is offering assistance for setting up local factories in order to stimulate local employment.
• There are now sufficient skills in South Africa to ensure that quality standards are met (and exceeded in many cases).
Bredenkamp: Definitely imported, and this has got to change if we really want SWH’s to make a significant impact to the South African economy through local job creation, etc. However, price and quality will always be the key determinant and it remains a challenge to compete with China in this regard.
Smith: Most of our SWH’s are imported, and this is simply because no South African manufacturer in their right mind will invest in such a market. What surety does South African manufacturers have, if they put capital in for factories and manufacturing lines etc, when their own government and parastatals do not support South African products.
Tudor-Jones: There are still more imports. Local content specifications may change this in future. Until there is less choice and a strong single supplier emerges, local producers will continue to struggle.
How do insurance companies play a role in the SWH market, if any?
Bredenkamp: Some of them are coming to the party, but the challenge remains that when a conventional geyser fails, the home owner basically wants the general situation relating to access to hot water resolved, without delay. If one first has to “think” about the pros and cons of SWH vs a conventional heater (cost, electrical back-up, aesthetic impact on the roof, etc.), the majority of customers opt to go for what they originally had installed.
Smith: Insurance companies play a massive role in the SWH market. They have a capture market, however the problem is that SWH’s do not fit into their models, i.e. the client wants hot water and they want it now, not later – SWH on average has a lead time of three to five days.
Tudor-Jones: Most major insurers have chosen reputable suppliers and proven brands as optional replacements when geysers fail but the uptake by the insured is still very low. I feel the insurance industry holds the key to turning around our solar industry as it makes the most sense to convert to solar when a big chunk of your capital cost is covered by your insurance company.
25° in Africa would like to thank James Shirley, General Manager of Kayema Energy Solutions, Barry Bredenkamp, Operations Manager at the National Energy Efficiency Agency, Lea Smith from the Institute Of Plumbers South Africa, Dylan Tudor-Jones, Managing Director of Solar Heat Exchangers, and Karel Deist Head of Laboratory, Water Meters and Solar – SABS, for their contribution to this article.