Solar PV and Heat Pumps Dent Sales of Solar Water Heaters in China
The demand for solar thermal water heaters is currently facing a downturn in China, driven by the rapid expansion of photovoltaic (PV) systems, heat pumps, and other alternative heating solutions. These technologies have gained significant traction due to technological advancements and decreasing costs, reshaping the energy landscape.
From an analytical perspective, the surge in PV systems, heat pumps, and other alternative heating solutions significantly contributes to the decline of solar thermal water heaters. Unlike solar thermal systems, which are dedicated solely to heating water, PV systems generate electricity that can be sold back to the grid. This financial incentive, coupled with declining installation costs and improved technology, makes PV systems a more attractive option for both residential and commercial users. Heat pumps also present high efficiency for both heating and cooling, offering a versatile alternative.
China, once a leader in solar thermal technology, is now experiencing a significant market shift toward photovoltaic (PV) systems. Economic factors are critical in this transition, rising raw material and manufacturing costs have squeezed the profitability of solar thermal systems, leading to a 14% decrease in solar collector installations in 2023. The sluggish real estate sector, combined with heightened competition from alternative heating solutions such as air-sourced heat pumps, electric, and gas water heaters, has further exacerbated this decline. Among the collectors sold, vacuum tube products accounted for over 75% of the solar collector market. However, this segment is facing a rapid downturn as consumers increasingly prioritize energy efficiency and the trend toward gasification accelerates. Meanwhile, flat plate collectors, which represent less than 25% of the market, have seen even steeper sales declines due to reduced demand for split-type solar water heaters and increased competition from more efficient alternatives.
Looking ahead, the solar thermal market is expected to face further challenges due to the slow recovery of the real estate sector and ongoing competition from more efficient products. Government initiatives, such as the Solar Rooftop PV Systems Scheme, have incentivised the adoption of PV systems, negatively impacting sales of solar water heaters.
Despite the current challenges, there are emerging opportunities for solar thermal systems in China. National programs aimed at affordable housing construction, renewable energy demonstration projects, and rural revitalisation are expected to create new avenues for solar thermal applications. Additionally, the State Council's "Action Plan for Continuous Improvement of Air Quality" seeks to reduce PM2.5 concentrations in major cities, underscoring the government's commitment to improving air quality while supporting renewable energy technologies.
Furthermore, large-scale solar district heating projects and hybrid systems that integrate solar thermal technology with heat pumps present promising growth opportunities. By aligning with broader energy efficiency initiatives, the solar thermal sector can uncover innovative solutions that not only enhance its market relevance but also contribute to a more sustainable energy landscape.
Source: Parvesh Chordiya & Geetika Tandon, BRG Research