- Policy Issue
- Open Access
Incentives to using solar thermal energy in Taiwan
© Chang et al. 2015
- Received: 20 October 2014
- Accepted: 16 February 2015
- Published: 9 November 2015
A national subsidy program is one of the key elements for translating customer choice into a larger market share for renewable energies. Since solar water heaters (SWHs) are a cost-effective and mature technology, purchase-based subsidy programs have been sponsored by the Bureau of Energy, Ministry of Economic Affairs (BEMOEA) in Taiwan. The market of SWHs is associated with economic factors, population characteristics, degree of urbanization (available roof space), and climatic conditions. Regional programs have also affected the growth in sales. However, the penetration rates are still low, and the local market has changed little in recent years. Thus, the timing of the termination of the long-duration subsidy program is a subject of debate. In this study, a new scheme in the residential sector is proposed in the period of 2016 to 2019. In addition, small and medium enterprises (SMEs) make up the majority of Taiwanese companies. Most SMEs suffer from insufficient capital to support their commercial activities. To prompt solar thermal energy in the commercial sector, the energy service company (ESCO) business model can be adopted. The same feed-in tariffs for PV systems can be granted for SWHs and photovoltaic/thermal (PVT) systems with performance-based subsidies to end users or ESCOs.
- Solar thermal
- Purchase-based subsidy
- Performance-based subsidy
Taiwan is an isolated island and depends exclusively on imported fossil fuels to fulfill its energy needs. In 2012, the total domestic energy consumption was 100,383 × 103 metric ton of oil equivalent, in which the energy use in the industrial and residential sectors accounted for 38.2% and 10.9%, respectively (BEMOEA 2013). Moreover, utilization of renewable energy sources is critical for future socio-economic development. The Renewable Energy Development Bill was promulgated in 2010 by the government of Taiwan. The total capacity for power generation by renewable energy was 3,696.7 MW in 2012, including conventional hydropower (2,081.3 MW), wind power (571 MW), solar photovoltaic (222.4 MW), and biomass (822 MW). The accumulated area of solar collectors installed (solar water heaters (SWHs)) reached 2.27 million m2 (Chang et al. 2013a). Note that the renewable energy accounted for 1.89% of the total energy production in 2012 (BEMOEA 2013).
Throughout the world, purchase-based subsidies, including direct subsidies (Germany and Austria), tax credits (France), or tax reduction (Greece), have been used for SWHs (Kalogirou 2003; Chandrasekar and Kandpal, 2005; Menanteau, 2007; Roulleau and Lloyd 2008; Pablo-Romero et al. 2013; Abu-Baker et al. 2014; Higgins et al. 2014). Stevanovic and Pucar (2012) noted that a 20% purchase-based subsidy is considered to be an appropriate subsidy level that makes SWHs financially more attractive in comparison with conventional electric or gas water heaters. However, Roulleau and Lloyd (2008) also pointed out that increasing the total number of systems may not result in real energy savings over the lifespan of the systems. In addition, performance-based subsidies have been distributed by some countries (e.g., UK, Sweden, Netherlands, and Victoria, Australia) (Roulleau and Lloyd 2008; Abu-Baker et al. 2014). However, it is more difficult to monitor thermal output of an SWH than the electrical energy output from a photovoltaic system.
The current purchase-based subsidy program in Taiwan has lasted for 14 years. However, the national subsidy program seems to have lost its momentum in expanding the market. Policy makers should evaluate the efficiency of this long-duration subsidy scheme. The present study is devoted to an extensive evaluation of the current subsidy program and the local SWHs market. New schemes are proposed to ensure a sustainable SWH industry in Taiwan and real energy savings, including a revised scheme in the residential sector and a performance-based one in the commercial sector.
Methods- SWH market survey in Taiwan
Upfront subsidies (purchase-based subsidies) are the most widespread measure introduced by world governments. In Taiwan, the first subsidy program (1986 to 1991) was also based on the area of solar collector installed of an SWH, A SC. A direct subsidy of 2,000 NTD/m2 (1 USD ≈ 30 NTD) was granted to ‘the manufacturer’ for an SWH with glazed flat-plate solar collectors or evacuated-tube solar collectors. With unglazed flat-plate solar collectors, the amount was 1,000 NTD/m2. From 1991 to 1992, the subsidy was cut in half. Indeed, the end users were motivated by the financial incentive, and the ΣA SC reached 60,000 m2 by the end of the program.
The second subsidy program was activated in 2000. The Energy Research Center at National Cheng Kung University (ERC/NCKU) has been authorized by the Bureau of Energy, Ministry of Economic Affairs (BEMOEA) to organize an operation unit (Chang et al. 2011). A direct subsidy of 1,500 NTD/m2 was granted to ‘the end user’ purchasing a certified SWH with glazed flat-plate solar collectors or evacuated-tube solar collectors. The amount was 1,000 NTD/m2 for an SWH with unglazed flat-plate solar collectors. Note that the subsidy amount was double in remote islands. As shown in Figure 1, the ΣA SC doubled from 1999 to 2006. In the period of 2008 to 2009, there was a decline in the ΣA SC. To disseminate SWHs, the direct subsidy has been increased 50% from 2009 to present (the third subsidy program), e.g., 2,250 NTD/m2 for glazed flat-plate solar collectors and evacuated-tube solar collectors.
SWHs market (2001 to 2013)
SWH units installed in terms of A SC (m 2 )
3 to 5
5 to 10
10 to 100
Financial incentives are definitely one of the key factors influencing dissemination of SWHs in many countries. Government grants have paid for up to 50% of the initial cost of SWHs (Stevanovic and Pucar 2012). However, these discounted prices could lead to supply-side distortions. A possible negative impact on the sustainable development of the SWH industry is also expected. For instance, the total financial incentives offered by the Kinmen County (purchase-based subsidies, 2008 to 2010) and the BEMOEA in Taiwan approached the initial cost of an SWH (89%). Therefore, it is considered that there were many over-designed systems installed, resulting in a mismatch between the production and the demand for hot water (Chang et al. 2011). In addition, the long subsidy program in Taiwan has lost its momentum in expanding the market. The distribution of capital subsidies could be put to better use. To maximize energy savings with solar energy, this study proposes a new scheme in the residential sector and performance-based incentives in the commercial sector as described below.
A revised scheme in the residential sector
The timing of the termination of the current long-duration subsidy program is a subject of debate. The major concern for policy makers is how to ensure a sustainable SWH industry upon the end of the financial incentive. Under the current subsidy, all installers or dealers (492 persons in 2013) must take some training courses and attain a certificate issued by the BEMOEA. Upon the termination of the current subsidy program, economies of scale (or local market) will be the key element to sustain this professional network to ensure the quality of products and post-installation service for the remaining portion of a system’s technical life. When it comes to the end user, a field study (33,505 samples) was conducted by the ER/NCKU from 2008 to 2013 (Chang et al. 2013a). It found that the public attitude towards SWHs is critical to motivate first-time users. The survey indicated that energy conservation (68%) and safety (26%) are of major concerns. Recommendation by local installers/dealers (6%) or other SWH users (9%) is another key factor. Nevertheless, many households have replaced old SWHs (22%), of which the service periods of 10 to 15 years and over 15 years account for 22.8% and 58.0%, respectively.
A performance-based subsidy scheme in the commercial sector
Timilsina et al. (2012) indicated that technological improvements and supportive government policies result in phenomenal growth in utilization of renewable energy. To promote domestic PV installation, the ‘Million Rooftop PVs Project’ was initiated by the BEMOEA in 2011. Targets of 1,020 and 3,100 MW of installed capacity have been set for 2020 and 2030, respectively. The project adopts a photovoltaic-energy service company (PV-ESCO) business model by providing capital financing to local system integrators and installers, gaining profits from reasonable whole-sale pricing. A feed-in tariff (FIT), ranging from 5.23 NTD/kWh (installed capacity ≥ 500 kW) to 7.16 NTD/kWh (installed capacity = 1 to 10 kW), is offered. Note that the retailed electricity price in the domestic sector was 2.97 NTD/kWh in 2012 BEMOEA, (2013).
According to the ‘Measures for promoting solar water heaters’ by the BEMOEA, the minimum thermal efficiency (ratio of useful heat absorbed by a solar water heater to incoming solar energy on the solar collector) for a certified SWH is 0.5. A field measurement of an SWH for dormitory application was conducted by Lin et al. (2012). Results indicated that the thermal efficiency of the system was higher than 0.3 only when the daily solar radiation per square meter exceeds 7 MJ/m2 (the Chinese National Standard 12558-B7277). Note that the maximum thermal efficiency was approximately 0.45 for the system. Since more than 98% of SWHs have been installed in the residential sector, system design of larger-scale SWHs is a critical issue for most installers. Therefore, the expected energy savings over the lifespan of a system cannot be realized under the present purchase-based subsidy program. To disseminate SWHs in the commercial sector (such as the food, agro, textiles, chemical, and beverage industries), an upgrading campaign is necessary within system design to facilitate effective energy saving. Nevertheless, Islam et al. (2013) demonstrated that the installation of an SWH with a large A SC is more feasible compared to a small unit installed in terms of energy conservation and per unit energy cost over initial costs. Note that the initial cost per A SC can be cut in half for a larger scale system in Taiwan (Chang et al. 2009).
For the field measurements by Lin et al. (2012), a solar meter, power meter, flow meter, and temperature sensors were employed to monitor thermal efficiency and actual thermal output of the system. For the FIT, the thermal output should be measured with correct quantity. An incentive should be paid for real energy savings, but not for heat which is vented into the atmosphere or where a heat requirement has been created artificially. A cost-effective heat meter and data logging are required. Details about choice and maintenance of metering were given by Crowther et al. (2010). Further, to see any meter reliability problems, a physical meter reading can be adopted to monitor thermal output from 2015 to 2019, followed by automatic meter reading through the mobile phone system. It should also be noted that the ER/NCKU is conducting field measurements of thermal output for two larger-scale SWHs. Data from the monitoring devices have been sampled and transmitted synchronously to the host computer at the ER/NCKU through the internet.
Market of SWHs with the revised schemes
In the commercial sector, small and medium enterprises (SMEs) make up the majority of Taiwanese companies, comprising nearly 98% of the enterprises in Taiwan (SMEAMOEA 2013). Most SMEs suffer from insufficient capital to support their commercial activities. Therefore, economic viability is considered to be a key determinant of the dissemination of SWHs for industrial process heat applications. Based on the life cycle savings of SWHs, the payback period in terms of operation cost and effective energy savings over conventional heating fuels could be approximately 5 to 6 years (Pan et al. 2012). Thus, other than the direct subsidy to end users, the ESCO business model can be adopted by providing capital financing to ESCOs with SWHs installed in the commercial sector. In addition, a study that used a fixed FIT for SWHs in the UK was conducted by Abu-Baker et al. (2014). In terms of heating value of electricity (3.60 MJ/kWh), the same FIT for PV systems (NTD/kWh) can be granted for SWHs in terms of thermal output (NTD/kWth) in Taiwan. Upgrading system design or more innovative technologies for effective energy savings can be expected, resulting in a shorter payback period. Further, a significant amount of research and development work on photovoltaic/thermal (PVT) technology for both hot water and electricity production has been done since the 1970s (Chow 2010; Othman et al. 2013; Dubey and Tay 2013). Thermal and electrical energy can be produced by these systems at the same time. Therefore, this proposed that performance-based subsidy can also be applied for PVT systems and will help to match suitable products and systems with the best potential market.
Financial incentives by governments are definitely the key element for disseminating SWHs. However, the long-duration subsidy program in Taiwan has lost its momentum to expand the local market in recent years. To put capital subsidies to better use, a revised program is required. According to a general survey of end users, the service period of SWHs and the status of new construction, a revised subsidy program from 2016 to 2019 in the residential sector should aim to ensure a sustainable SWH industry in Taiwan and maintain a professional network to ensure the quality of products and post-installation service. In addition, few large-scale SWHs have been installed in the last decade. To boost the market, a performance-based subsidy program in the commercial sector (e.g., daily, textile and poultry industry) is proposed to maximize energy savings. The ESCO business model and FIT can be adopted for SWHs, as well as for PVT systems. To monitor thermal output, a cost-effective and reliable heat meter is a prerequisite. Meter reading is another major concern.
This work was supported by the Bureau of Energy, Ministry of Economic Affairs (102-D0303), Taiwan, Republic of China.
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