The market for solar energy-powered building heating
The global market for solar water and space heating will reach nearly 1.2 billion square meters of installed capacity over the next decade, according to Lester Brown, founder of the Earth Policy Institute. If other developing countries adopt solar water heating like China, the global total by 2020 could exceed 1.5 billion square meters, equivalent to 690 coal-fired power plants. This represents an estimated cumulative capital investment of $300 billion, roughly half the cost if power plants had been the preferred investment. China installed 27 million solar water heaters on rooftops in 2010. With nearly 4,000 local companies manufacturing this equipment, these heating devices are rapidly penetrating the market. The Worldwatch Institute notes that 2 million Germans live in homes equipped with rooftop solar heating.
In 1980, the Knesset (the Israeli parliament) passed a law mandating the installation of solar water heaters in all new homes. As a result, Israel is the world leader in solar water heater use per capita, with a market penetration of 85%, saving approximately two million barrels of oil annually. Spain and Portugal have recently mandated that all new buildings be equipped with rooftop solar water heaters. It is surprising that laws are needed to mandate the use of these systems when the economics are so compelling. With a total annual amortization and operating cost of just $50, less than 15 cents per day, it is ten times cheaper over its lifetime than the cheapest alternative on the market.
Solar systems outperform electric showerhead water heaters, even those as cheap as $25 a unit. The heating element inside the showerhead consumes between 2,500 and 5,000 watts. While these heaters don't require a tank and use little energy during the day, they consume a lot of electricity when in use. It's like taking a shower with a fire hose or driving your kids to school in a Hummer. Anyone relying on a time-of-use meter will pay more than three months' worth of electricity bills that solar water heaters cover in a year, including both operating and capital costs.
Innovation
Paolo Lugari and his colleagues at the Las Gaviotas Environmental Research Center, based in Bogotá, Colombia, were challenged by Dr. Mario Calderón Rivera, President of the National Mortgage Bank (Banco Central Hipotecário), to design a water heater that could operate year-round at an altitude of 3,000 meters with approximately 200 days of overcast skies. Even Israeli experts, who had successfully established a solar water heating industry in the Middle East in the 1970s, suggested that such climatic conditions might require electric heating. Paolo and his team chose to rethink the design, opting for an innovative thermosiphon approach, eliminating all moving parts and selecting light-sensitive materials. The team succeeded in designing a device that uses only standard components.
Although the Bank's leadership was willing to accept the luminescent water heating system, which operates using light rather than direct sunlight, the financial experts were hesitant to embrace this innovative approach. Who would bear the risk of failure? Paolo and his team reviewed all the unknown factors, studied the choice of materials, and re-evaluated the simple design based on gravity and convection. Paolo Lugari decided to offer owners an unconditional 25-year guarantee, provided they cleaned the heater cover once a year and maintained the water tank insulation. With over 40,000 units installed in Colombia, Las Gaviotas can demonstrate 30 years later that its promise to replace any defective unit was not too risky or expensive, but rather set new standards in the business world.
The first cash flow
Las Gaviotas gained entry to the market based on a detailed cost analysis for homeowners, conducted with the kind permission of the mortgage bank. If the monthly energy bill could be reduced over the 25-year mortgage term, the new homeowner would lower their monthly expenses and payments, leaving them with more purchasing power for everyday living costs. Cooperation with mortgage banks and social housing agencies in Bogotá and Medellín paved the way for a profitable industry that provided a vital service at a very low cost.
The opportunity
Now that Las Gaviotas has proven beyond a shadow of a doubt to insurance companies that its device meets the strictest standard ever seen on the market, the whole world is interested in adopting this design. Gaviotas welcomes any improvements to existing models. However, having eliminated all steering controls and electric pumps, the breakthroughs expected over the years will rely on material choices rather than fundamental changes in structure and form. Gaviotas has drawn on existing experience to design water purification systems, large-scale hospital water heating systems (1,100 beds), semi-industrial solar ovens, and even sterilization equipment.
Since international insurance covers the 25-year warranty, the higher investment costs can be amortized over the quarter-century mortgage. The use of readily available parts simplifies repairs. The fact that the water is warm just 15 minutes after sunrise has convinced everyone that solar luminescence is an efficient energy source for all parts of the world struggling with rainy seasons and long periods of overcast skies. The key to success is coating the plates with blackened colophon, one of the main products extracted from resin harvested from the regenerated Vichada forest in Colombia, another initiative undertaken by Gaviotas.
Indonesia was the first country to express interest in the certification of solar water heaters. This development motivated Kalimantan's industrial development partners to adopt the Gaviotas business model. Gaviotas offered a package including a complete computer-aided manufacturing (CAM) assembly plan, an operational unit, and a disassembled model to facilitate local industrial development while reducing costs for consumers. The readiness to provide a master plan for local manufacturing, based on three decades of continuous improvements, offers a competitive development model for the developing world.
These systems are designed for the tropics, but a few simple adaptations ensure they also function in cold climates. It's perhaps worth noting that Las Gaviotas does not pay dividends to shareholders, but the Foundation reinvests its revenue in developing numerous other innovations, such as the regeneration of the Vichada rainforest, which was presented in the Blue Economy as one of the first examples of sustainable development and will be discussed in more detail in future articles.
