This article is part of our special report Solar Power.
The solar thermal sector has been hit badly by the crisis in the construction sector, which had a direct impact on the heating industry, said Xavier Noyon, secretary-general of the European Solar Thermal Industry Federation (ESTIF).
Xavier Noyon is secretary-general of the European Solar Thermal Industry Federation (ESTIF).
He was speaking to EURACTIV's Frédéric Simon.
What was the impact of decreasing feed-in tariffs on the solar thermal sector?
This is largely irrelevant as overall solar thermal does not produce electricity and consequently whole debate on the regulatory framework is very different from that for solar PV.
In fact, there are two solar thermal technologies:
There is Concentrated Solar Power (CSP), which produces electricity. As there is only one site running in Europe, it is really a marginal technology which is represented by an association called Estela (the European Solar Thermal Electricity Association).
And there is solar thermal, which produces only heat. Solar thermal is a renewable source of heat production and therefore not at all involved in electricity supply.
It has nothing to do with the feed-in tariff.
Has the solar thermal sector been impacted by the financial crisis since 2008?
We have been seriously hit by the financial crisis, since we are closely linked to the construction sector.
In terms of renewables, we are associated to sectors such as biomass, geothermal, heat pumps, etc. – i.e. renewable heat production.
We have experienced two consecutive years of recession. The decrease in 2009 was around 10% and in 2010 it will be around 20%, after a peak year in 2008, which was historically the peak year for the solar thermal market.
Grid parity is the kind of Holy Grail to measure performance in the solar PV sector. Do you have similar projections for solar thermal?
People always try to apply the grid parity concept to the heat market, to the detriment of our industry for the debate in the public arena. Once again it must be stressed that the concept of grid parity cannot be applied to heat, there is no such thing as a unit price for heat, nor a heat distribution market.
In terms of figures, heat represents 50% of the final energy demand, so it is much more important than electricity production. And this heat demand can be met by various technologies – electricity included, but only with a small share.
Therefore, the market, the concept and the support methods are very different. Also awareness, understanding and the right political measures have been progressively incorporated in the political debate, but only gradually and at a very low level. And we still have to explain that by tackling electricity and renewable electricity, the whole heat demand, the whole energy demand, will not be met.
What we share with our colleagues from renewable electricity is the need for a framework which also includes incentives. Those incentives are to a large extent of a financial nature but not all of them.
Typically, the work that has been undertaken at European level is related to standards in the field of energy efficiency of buildings and of the construction sector. That has had a direct impact on the heating industry and it is a strong incentive for the market while not being financial.
There have been a number of EU initiatives there…
Yes, there is the EPBD [Energy Performance of Buildings Directive], as well as the upcoming legislation on the energy efficiency of heating appliances, which should have some impact. But of course there are also incentive schemes at national level – such as the feed-in tariff – but this debate was taken up at European level, so what we need is a similar debate.
A European debate on incentives for heating?
Yes. Most European countries – which are usually the most developed markets also in terms of renewable electricity – have support measures for heat.
Which ones are the leading countries?
In terms of markets and development of the industry, Germany and Austria have a very strong solar thermal market, and, traditionally Greece, Cyprus and Southern Europe have a very strong tradition.
…mainly for cooling I guess?
No, for hot water demand. Whereas in Austria and Germany solar thermal is used mainly for space heating and always in conjunction with another heat source.
So there are financial measures and incentives. What we demand is exactly the same as the electricity sector: what we need most are measures which are predictable, sustainable. It's not the level of the incentives that is the most critical issue.
If there were to be a concept of grid parity for heat, nearly all technologies would have reached great parity. The question is more the investment length as well as the issue of price transparency. So to what extent the prices of gas and fuel take into account all the external factors and are really fair prices.
So your main benchmark in terms of assessing your competitiveness is to compare with gas?
Gas, fuel and to a certain extent with heat pumps.
What kind of price differences are we talking about? Is solar thermal more expensive than gas or not?
It's a bit difficult to compare because with solar thermal you don't pay any more once you've installed it. So you only have the initial investment costs.
The difference is that you must have a heating system, whether it is solar thermal or another, so it's more a matter of calculating a return on your investment: does solar thermal pay for itself when it replaces fuel? Over what period? It depends on the country. It depends on the size of the installation.
Turning to the environment, are there specific issues for solar thermal?
It's a less complex technology than solar PV to a certain extent. It's using glass, copper and aluminium. The share of labour costs is estimated around 10%. So 90% of production is in Europe. The main industry is in Germany. Most of the manufacturers are German, but there are also factories in France, Spain and Portugal.
The prices of copper have increased immensely…
This is an issue for the whole heating sector because it is the best heat-conducting material. The whole heating industry uses a lot of copper.
There is a trend in the industry to use more and more aluminium instead of copper. The share of copper is still high. However its use is diminishing thanks to some new technologies.
But the price of copper is of course high, especially because China is the solar-thermal superpower of the world and has huge installed capacity of solar thermal in individual households. It's a bit like in Greece. It's something extremely common to have solar thermal on your roof. And they absorb 40% of the world copper market.
In terms of recyclability?
It's nearly 100%. It's metal and glass, so it's extremely recyclable.
Is international competition a concern?
No it's not a concern. Of course China is a 'solar thermal superpower' in the sense that they have a huge installed capacity because of the scarcity of resources in China.
They have pushed very early for solar thermal systems and they have based their market on very cheap systems for production of hot water for individual households. You go to the supermarket, buy a system, put it on your roof, and you can start producing hot water for the shower for a minimum price.
So they are absolutely different from Europe for the kind of products that they use and the markets that they operate in. There is to my knowledge only one manufacturer in Europe that is known to manufacture the whole system because it is not only the solar panel: it is also the pump, the tank, etc…
So this is an area where European companies are still competitive?
They are clearly on the European market, which is a specific market.
The labour costs for manufacturing are estimated at approximately 10% of the cost of the system. Most of it is raw materials and these have the same price in China as in Europe, so there is no issue with that.
In terms of product design and market requirements, the markets are so different that at the moment it's really not a concern.
Speaking about another region, solar thermal is completely dormant in America, although there are more and more talks about it in terms of heating for swimming pools and other products.
North Africa is also a region of great development. Solar thermal is a bit like PV, and offers a wide range of decentralised solution for heat. It is very useful for remote areas where you don't have access to the grid, a network or access to gas.
But the European industry is strong and is completely dominant on the European market. It's a European industry for a European market.
Are European companies looking to export?
Some of the major actors are trying to get active in markets like America, South America or India. But the markets are still so small. They are still underdeveloped.
The only really active other region for solar thermal is China, which has made this choice very early. It's a closed market but they sell all over Southeast Asia.
Could this become a trade issue for European companies?
No, because it's really based on the type of markets and products that are designed for this market. They are more appropriate for the needs of the local population than those designed in Europe.
So no kind of regulatory protectionism?
No, not at this stage.
Any upcoming regulatory issues at the European level?
Yes, we have expressed some concern about a recent communication on the low-carbon economy and energy efficiency. Especially on the low-carbon economy, as there is the concept of low-carbon electricity, which plays a central role. And in this, there is a large share of nuclear.
What we insist on is that there is a similar potential as for renewable electricity and renewable heat. Our goal of the largest share possible of renewable energies in the energy mix cannot be met if only the electricity question is addressed.
As it has been playing an exemplary role in renewable energy policy and for the promotion of renewables, the Commission should carefully communicate on the importance of addressing heat as a specific issue.
We don't want to mix the concepts of low-carbon and renewable electricity. 80% low-carbon can be converted into 80% renewable very easily with the right measures.
What about building regulations, for example zero-emission buildings?
We are now in the implementation phase; we believe it is going in the right direction. Further regulation is needed because the new build only represents about 1% of the building stock so this is not enough.
But everybody is aware of the extreme difficulty in imposing standards on the existing buildings and also about the sensitivity of individual households to increased standards. It has to be carefully undertaken.
So we want a larger, ambitious plan to revive the construction sector at the pan-European level, which would benefit the whole construction chain, not only on the energy efficiency angle. We welcome what has been done. But we believe very strongly in the EU's ability to set standards and to communicate these.
For example I will just mention that the feed-in tariff has not been imposed by Europe but it is a debate that is starting to take place at the European level and it has been implemented in certain member states. The role of the EU should not be neglected. Even though they don't have regulatory power, the Commission should stress the importance of an EU policy framework.