Global consultancy Frost & Sullivan (F&S) said that the solar water heater (SWH) market in South Africa grew significantly in the past four years, and suggested that the market was preparing for a second high-growth phase that would be larger than the previous growth surge.
The key would be to address the gaps in the market and be ready to support both the required legislative changes, and the changes needed in local manufacturing capacity.
For the market as a whole, F&S said that the development of installation skills, both qualitatively and quantitatively, remained the largest challenge.
“The key challenge facing the development of the SWH market is installation. SWHs require a mix of plumbing and electrical skills, as well as specialised solar installation skills, which must be learned,” said energy and power research analyst Dominic Goncalves.
SWH installation is about four times more labour intensive than installing a conventional geyser, and variable skills for products in different applications needed to be acquired − some of which could only be learned practically, such as different roofs, roof-restructuring, buildings, piping, latitudinal-tilt irradiation, and other variables.
F&S stated that the plumbing industry was operating at full capacity, and a pool of some 3 000 skilled plumbers needed to be bolstered by another 8 000 if the market was to cope with mass demand for SWHs in the next four to six years.
The transformation of skills from conventional plumbing to energy-efficient plumbing also required a different set of skills in order to install heat pumps, which were skills similar to those required for air-conditioning and refrigeration technology.
“To facilitate the transformation of the market, the coordination and communication of planning and implementation between key industry players and government will be required,” commented Goncalves.
He added that adequate skills development was the key to success or else the initiative was “doomed to fail”.
The manufacturing of some product types was an opportunity for new entrants, which could benefit from manufacturing incentive schemes recently proposed by government in its New Growth Path. This initiative fell within government's key focus areas, namely job creation, manufacturing, skills development, and the green economy.
F&S noted that South Africa’s SWH market expanded from less than 20 suppliers in 1997 to more than 400 in the beginning of 2011.
Through the Department of Energy and with initiatives such as Eskom’s SWH rebate programme, a target was set that South Africa should see the installation of one-million SWHs by 2014.
“The rationale was that such demand-side management could relieve up to 578 GWh of electricity from the grid, the equivalent of building a 2 000 MW power station,” explained Goncalves. “Furthermore, SWHs are often used during peak times (early morning and evening), the precise time when strained power stations are struggling to produce the required peak-time power,” he said.
However, F&S explained that between 2007 and 2010, the market experienced volatile growth, plagued by malfunctioning products, fly-by-night companies, and incorrect installation and application of the products.
“Volatility was caused by the negative reputation that SWHs were receiving, due to conflicting information and incorrect product application, as well as initial challenges in the development of the rebate programme,” said Goncalves.
“The market began to stabilise during the second half of 2010 – many fly-by-night companies selling cheap, imported out-the-box Chinese products left the market or changed their strategy, while established companies with good word-of-mouth reputation formed efficient distribution networks, franchises and partnerships,” he added.
F&S said that the slow-down in sales was misleading.
“New building codes have been announced that will change the face of the market, and conventional plumbing, as we know it. When the new building codes are officially instated, new buildings or those undergoing refurbishments will be required to account for at least 50% of their hot water consumption to be generated by energy efficient methods, for example SWHs or heat pumps,” F&S reiterated.
This would place demand pressure on the market to manufacture and install these product. F&S research has shown that SWH manufacturing in South Africa could be conducted at internationally competitive levels for flat plate product types.