Market currently stalling but domestic RHI could drive down costs and unlock mass market potential

Research published today by the Solar Trade Association reveals that the prices of solar hot water systems could come down by 29.2% if the market expands tenfold to catch up with solar PV [1]. While the cost reductions enjoyed by solar PV since 2011 have been mainly driven by falling equipment costs, the cost reductions projected for solar thermal would be mainly driven by efficiencies on the installation side. Sales are currently slow in the solar thermal sector, but the STA expects the domestic Renewable Heat Incentive, launching next spring [2], will help boost deployment and unlock the technology's cost reduction potential.

STA Chief Executive Paul Barwell said:

"Solar heating installs more than doubled in the two years from 2008 to 2010 but have been in decline since then. The launch of the Feed-in Tariff for on-site electricity has spurred strong growth in technologies like micro-wind and solar PV, but the lack of a similar incentive scheme for heating left solar thermal in the shade. Current solar thermal install rates are almost back at 2008 levels.

"The good news is that the domestic RHI is now just round the corner and the STA has secured a workable tariff and regulatory framework for solar thermal, so industry now has a great chance of regaining the lost momentum. As costs come down, so too will the tariffs, as the Government seeks to minimise policy costs and stabilise consumer returns. So the message here is not that customers should wait for cheaper systems, but that from a macro-economic perspective, solar thermal is ready to realise its mass market potential and make a major, cost-effective contribution to the UK's renewable energy objectives."

The study, originally submitted to DECC during this summer's domestic RHI consultation, found that PV equipment costs had reduced by 66% since 2011 while the installer's non-equipment costs reduced by 49%. The paper builds on these observed trends to forecast a 21.6% reduction in equipment costs and a 35.8% reduction in non-equipment costs for solar thermal – a 29.2% cost reduction overall – if it is able to enjoy a similar level of market growth.

Stuart Elmes, Chair of the STA Solar Thermal Working Group and lead author of the White Paper, said:

"We should remember that the big drop in solar PV prices is not all about the Chinese kit. The mass market growth in roof-mounted PV generated many other efficiencies, including purchasing power, transportation, competition and innovation. Policy cost controls will keep returns constant, but the reduction in up-front costs will make solar thermal affordable for more and more homes and businesses.

"The best news for consumers is that if you install today, you can still claim a £600 grant towards installation (called a ‘Renewable Heat Premium Payment') as well as the RHI subsidy when it kicks in next spring, so now is the best time to go for solar thermal."

The STA will be discussing the White Paper and the STA's latest solar thermal deployment statistics [3] at today's meeting of the Solar Thermal Working Group. The STA will also address a wide range of issues around solar thermal and the RHI at the Solar Thermal Forum, jointly hosted with the European Solar Thermal Industry Federation at Solar Energy UK, which takes place at the NEC in Birmingham on 8th October [4].