Between 2006 and 2010, the number of SWH suppliers in the industry increased from 45 to 700. There are currently approximately 300 active suppliers within the industry. However, a recent study conducted by Frost & Sullivan indicates that the uptake of the product by consumers has not yet been as successful as expected.
A competitive environment and high operating costs have seen suppliers struggling in the market. During 2012 the Sustainable Energy Society of Southern Africa (Sessa) witnessed a 40% circulation rate in the industry. This means that if 100 companies existed in the industry at the beginning of 2012, 40 of them would have left the industry by the end of the year. However, these 40 companies would have been replaced by other companies who wanted to invest in the industry, due to it being perceived as a booming industry.
“Many solar water heater suppliers agree that the Eskom rebate programme has created awareness about the SWH system and its benefits,” says Frost & Sullivan energy and power research analyst, Muneera Salie. “However, the demand for the product has not grown at the same rate as the amount of supply within the industry. Something needs to be done to stimulate the demand side of the market in order for substantial market growth to occur.”
In 2012, the SWH market generated a revenue of approximately R810 million. There are still many teething problems that persist and a 5% growth is expected during 2013. There has also been an increasing interest in the use of heat pumps. The demand for heat pumps and SWHs are currently more or less balanced. However, it is expected that the demand for heat pumps is going to grow at a faster rate than that of SWHs, thereby slowing demand for SWHs further.
“Industry participants are still positive about the market’s future growth,” Salie says. “Increased growth rates are expected as a result of greater focus being placed on the green building codes, as well as the government’s drive to allocate qualifying municipalities with low pressure SWHs. The involvement of the insurance industry will also have a positive impact on the market, but this is only expected to take off in the medium to long term. Approximately 300,000 burst geysers are replaced each year. Encouraging the insurance industry to allow burst geysers to be replaced by SWHs will drive the demand for the system,” she says.
Overall, initial growth is expected to be slow, but it is anticipated to increase over the forecast period (2012 – 2017). Total installations until the 13 January 2013, including Department of Energy funded projects, reached 314,703. To achieve a target of 1,000,000 SWH installations by March 2015, approximately 25,000 installations per month will be required between January 2013 and March 2015.
For the consumer, the cost of purchasing and installing a SWH system is still relatively high. The average cost of a high pressure SWH unit is about R16,000 and installation costs range anywhere between R2,000 and R6,000. In general, consumers are more concerned about the cost of electricity and expected increases, than the demand on the grid, and saving energy to decrease their electricity bills.
“The key challenge is to deal with pertinent market restraints which include consumer confusion regarding the product and its correct usage, installation problems, and the price of the rebate,” Salie says. “Once these challenges have been overcome, the focus should be on driving the demand side of the market in order to stimulate substantial growth.”