Solar thermal heating capacity increased by 19 gigawatts of thermal equivalent (GWth), reaching 147 GWth, according to the report from the research institute. The growth rate is the highest for over a decade and preliminary estimates for 2008 indicate a similar expansion, it notes.
Solar thermal is the most mature solar technology and has provided households with an affordable means for domestic water and space heating as well as cooling. It accounts for the lion's share of the total solar market, but receives less attention and R&D funding than the more technical photovoltaic (PV) solar sector, which converts sunlight directly into electricity using solar cells.
China in particular has invested in the technology. It now accounts for two thirds of global capacity and installed 80% of all new systems in 2007, the report shows.
The Worldwatch Institute attributes Chinese dominance to a lack of access to natural gas in many homes, as well as to affordable prices. It also acknowledges a boost in governmental support for research and development in the field.
A much vaunted example of solar energy's success in China is the city of Rizhao, where 99% of all households use solar water heaters and benefit from savings in their energy bills.
Against the general trend, Europe experienced the first slowdown in the market in 2007, the report shows. But preliminary figures for 2008 show a recovery, with "a strong rebound" in the largest market, Germany, and growing demand in the Mediterranean region, it adds.
Europe's advantage is that it has the most comprehensive portfolio of applications, comprising hot water and space heating for residential buildings and hotels, district heating, space cooling and industrial processes, the Worldwatch Institute argues.
While just under half of new installations in 2007 were intended for water heating in single-family homes, the figure was 97% in China, it added.
Intended to contribute towards the EU's climate protection goals, the bloc's new Renewable Energy Directive - agreed in December 2008 - includes heating and cooling for the first time, which should provide a further boost for the industry, the report argues.
The potential for emissions cuts from the buildings sector is substantial as it accounts for around 40% of the EU's final energy demand (see EurActiv LinksDossier on 'Green Buildings'). As heating accounts for over two thirds of the energy used in buildings, the EU hopes to slash emissions considerably by replacing fossil fuels with renewable energy in heating.