China leads solar home revolution

By Ryan Rutkowski

Gazing across the Chinese urban cityscape, one quickly notices many strange tubular devices dotting the rooftops of many residential buildings. These are solar water heaters.

Solar water heaters rank among the world's fastest-growing applications of solar thermal technology. According to the WorldWatch institute, the solar thermal heating sector expanded worldwide in 2007 at its highest rate since 1995, up 19 gigawatts of thermal equivalent (GWth) to 147 GWth total capacity. Solar thermal energy harnessed for domestic water heating is the primary application of this technology, accounting for 86% of all installations in 2009.

China is the world's largest market for solar water heating (SWH). Since the 1990s, China has blossomed with an increase in annual production to 114.1 million square meters in 2007 from 0.5 million square meters in 1991, accounting for two thirds of global output. According to "The China Greentech Report 2009", the country has the world's largest installed base of solar water heaters, at over 125 million square meters, with one in 10 families such devices.

In 2007, SWH firms in China generated sales of 32 billion yuan (US$470 million). The country's annual production of solar water heater systems is twice that of Europe and four times that of the United States.

Moreover, China has become a global leader in the manufacturing of components for solar water heater systems. According to "The China Greentech Report 2009", over 95% of core solar water heating technology patents are held by Chinese firms. In 2005, China produced over 90% of the world's evacuated tubes, 70% of the world's borosilicate glass, and more than 90% of the world's "getter" - reactive materials used for removing traces of gas from vacuum systems.

In recent years, China has begun exporting its SWH technology. In 2007, the sector's exports grew 28%, with a total value of US$65 million, the equipment going to 50 countries and territories in Europe, the United States, Africa and Southeast Asia. China's leading export companies are Jiangsu Sunrain New Energy Group, Shandong Linuo Solar Energy Group and Beijing Tsinghua Solar.

Solar water heater systems can be seen across China, from the largest urban metropolitan areas to the smallest rural hamlets. The systems are most common on residential buildings in urban areas, while 90% of the systems are used in single households and 10% in schools, hotels and restaurants.

Altogether, over 30 million households in China use the systems. Southwestern Yunnan province, an area known for abundant sunshine and consistent year-round temperatures, has adopted widespread use of solar water heater systems, with almost all residential buildings in cities and rural areas equipped with them.

A combination of low production costs and significant government support has contributed to the rise of the systems. A standard household system can be set up for just over 2,000 yuan (US$294), compared with 1,800 yuan for gas and as low as 500 yuan for comparable electric water heaters. However, every cubic meter of natural gas costs about 1.7 yuan and every kilowatt hour of mains electricity costs about 0.44 yuan, compared with no cost for a SWH system - a significant savings over time, especially in areas with no access to natural gas and with abundant solar energy.

According to a study by Shanghai Jiao Tong University, SWHs were the most economical domestic hot water system compared with diesel oil boilers, gas boilers, or electric water heaters. The annual operating costs of SWHs in Shanghai were 70% less than electric water heaters.

On January 1, 2006, China passed a revolutionary renewable energy law to spur local governments to support the development of renewable energy projects across provinces. In 2007, the National Development and Reform Council's Medium and Long-term Development Plan for Renewable Energy in China called for an increase in the total installed area for SWH systems to 150 million square meters by 2010 and 300 million square meters by 2020 - of this 100 million square meters will be in rural areas.

At present, the Shenzhen Special Economic Zone next to Hong Kong, eastern Nanjing, Zhengzhou and Xiamen, and Shijiazhuang near Beijing, are among cities that make SWH systems compulsory on newly built and rebuilt residential buildings at 12 stories or below. In Shanghai, the local government is also pushing for an increase in the solar collecting area.

Three types of solar SWH systems are in use in China: vacuum tube collectors, flat-plate collectors, and combined storage collectors. The vacuum tube collectors are the most prevalent, making up 88% of the market in 2004, compared with 11% for flat-plate collectors, and less than 1% for combined storage collectors. New models often have electrical heaters inside the water tank to ensure efficiency in all weather conditions. According to a study by Shanghai Jiao Tong University, under weather conditions in Shanghai, the annual solar collecting efficiency of flat panel SWH systems is about 36-40%.

The SWH manufacturing market is highly fragmented, with more than 5,000 producers throughout the country. A lack of comprehensive standards for components and manufacturing and local protectionism has kept down the costs of entry for firms.

In April this year, the Ministry of Commerce announced a "Home Electronics to Countryside" program to encourage the growth of SWH systems in rural areas with a 13% subsidy on the cost of buying a system for rural residents. Many experts view this plan as a tool to encourage consolidation in the industry through adoption of more rigid standards. Only 92 of the 133 companies that placed a bid for the program were selected.

Shandong is the world production center for SWHs, based on measured area of concentrated heat vacuum tubes, with over 100 million square meters a year and 387 manufacturers. Of China's 30 leading makers of the products with over 10 million yuan in production value, 10 are based in the province, including some of the largest SWH producers, such as Himin Solar Energy Group, Shandong Sangle Solar Energy and Linuo Paradigma Solar Energy.

Dezhou city, home to Himin Solar, boasts that 90% of households there use SWHs and that the streets are lit with solar-powered lights.

Recently, Jiangsu province joined the drive into SWH manufacturing. Of the 92 companies selected for the home electronics to the countryside program, 15 were from the province, including Jiangsu Huayang Solar Energy Heater, Jiangsu Sunrain Solar Energy and Jiangsu Sunshore Solar Energy Industry.

Jiangsu Huayang has filed for 150 independent patents and exports products to the US, Germany, Italy, Singapore, South Korea and Taiwan.

The industry's growth is attracting overseas interest. On September 17, Milwaukee-based, AO Smith Corp acquired a controlling stake in Tianlong Holding, one of China's leading water purification companies. AO Smith is a world leader in residential and commercial water heating equipment and is already the second-biggest maker of water heaters in China, posting sales revenue of US$2.3 billion in 2008.

China's rapid adoption of SWH technology will help counter the country's dependence on fossil fuels. In 2004, SWH units already provided 12% of China's renewable energy, second only to hydropower. According to the government's mid-to-long term plan, China could save 20 million tonnes of coal by installing a total of 150 million square meters of SWHs by 2010.

According to "The China Greentech Report 2009", the market size for green technology in China could reach up to 15% of gross domestic product by 2013. Clearly, this is not only an opportunity for foreign firms to jump on the bandwagon of a Chinese market with astronomical growth potential, it is also a golden opportunity for Chinese firms to gain a foothold in the rapidly developing renewable energy markets in Europe and North America. China's solar revolution is well underway, and will not be limited by national borders.

Ryan Rutkowski is a master's student studying international economics at Johns Hopkins University - Nanjing University Center for Chinese-American Studies.

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