Status of Solar Heating/Cooling and Solar Buildings - 2021

Status of the Market for Solar Thermal Systems

Market Size and Trends

Solar thermal (liquid filled flat plate and evacuated tube collector) deployment data for Q1 2021 suggests that we could see the sector grow for the first time in 10 years. In 2020, less than 5,000 m2 of solar thermal was installed in the UK, down from a peak of 90,000 m2 in 2010.

Official estimates of total solar thermal installed capacity in the UK, which are based on the Renewable Heat Incentive (RHI) figures, are 27 MW for Domestic (8,982 installations and 62 GWh) and 6 MW for Non-Domestic (316 installations and 8 GWh) (DUKES, 2020). Using the HHIC sales data, solar thermal sales since 2008 equal around 445,000 m2 which approximates to around 312 MW installed capacity (assuming 0.7 kW/m2). The discrepancy between the two figures indicates that many solar thermal installations in the UK are undertaken outside official support programmes (such as the RHI).

Although solar thermal deployment has declined in recent years, deployment of solar power (residential and large-scale) has been robust and solar power diverters for hot water are known to be popular amongst consumers, although the actual level of deployment of these devices is unknown. Smart hot water tanks and compact thermal stores that can benefit from zero carbon solar grid power are commercially available.

Solar power used to produce green hydrogen is being explored in the South Wales Industrial Cluster with the ambition for it to be initially used to decarbonise heavy industry in the region (although tests for the future use of green hydrogen for home heating are currently in progress).

Typical Applications and Products

Typical solar thermal applications in the UK are forced circulation domestic hot water systems for houses with 2 to 5 m2 of flat plate or evacuated tube collectors and 150 to 250 litre hot water tanks. Flat plate collectors account for the larger share of the market (80 %); many of these systems are roof-integrated which are designed to replace roof tiles. The main certification systems for solar thermal in the UK is MCS Certified which means the collectors conform with MCS 004 or Solar KEYMARK and are installed in accordance with MIS 3001.

There is limited use outside R&D activities of solar thermal for district heating or space heating (see market drivers below for further explanation).

Several metal cladding companies offer Transpired Solar Collectors (TSCs) as part of their product portfolio. Generally, these are once through ventilation systems (with supplementary methane heaters) installed on industrial buildings. Sizes range from 100 m2 to the largest being a 4,334 m2 collector installed on the Marks & Spencer (M&S) distribution centre at Castle Donington.

Main Market Drivers

This information is intended for information proposes only and should not be relied on for tax, legal or accounting advice.

The main market driver for solar thermal over the least 10 years has been the Renewable Heat Incentive (RHI), which has a Domestic and Non-Domestic component. The Non-Domestic RHI is now closed to new applications and only installations which applied for an extension application (including solar thermal) can be installed up to March 2022. The Domestic RHI has been extended and will now finish in March 2022. The Domestic RHI allows homeowners to install solar thermal for Domestic Hot Water (DHW) heating only and the current tariff is 21.49 p/kWh, payable for 7 years and future payments are linked to the Consumer Price Index (CPI).

The recent growth in deployment in the first half of 2021 has been driven by the Green Homes Grant Voucher (GHG-V) which includes solar thermal (liquid filled flat plate or evacuated tube collector) as a primary installation measure. The GHG-V schemes runs in parallel to the RHI and ends in March 2022, although applications to the scheme closed on 31 March 2021 (extended as part of the Governments 10 Point Plan for a Green Industrial Revolution). The GHG-V was introduced as part of the HM Treasury Plan for Jobs (post-COVID economic stimulus). Solar thermal has been the most popular low carbon heat technology in the Green Homes Grant Scheme, with over 15,000 applications for solar thermal received between October 2020 and March 2021. The GHG-V scheme has been criticised by both MPs and industry, with criticisms principally targeted at the slow issuing of vouchers and the early scrapping of the scheme.

Alongside the GHG-V scheme are the Local Authority Delivery (LAD Scheme) and the Social Housing Decarbonisation Fund Demonstrator, which are principally aimed at ‘least able to pay’. The Social Housing Decarbonisation Fund Demonstrator has seen 13/17 of all successful project applications include solar technologies.

From 1 April 2021, companies can claim 130% capital allowances on solar panels, which include photovoltaic systems, which generate electricity, and solar thermal systems, which provide hot water. The capital allowances scheme allows taxpayers to write off the costs of certain capital asses against taxable income. The new super-deduction was introduced as part of the Government’s COVID business investment support package. The policy paper describing the new temporary tax reliefs on qualifying capital asset investments from 1 April 2021 can be found here.

More general corporate decarbonisation drivers which may form part of the solar thermal installation project proposal may include Streamlined Energy and Carbon Reporting (SECR), which requires large business to report their carbon emissions annual (and report measures to reduce emissions) and the Energy Savings Opportunity Scheme (ESOS), which requires large business to carry out energy audits every four years (business using ISO 50001 do not need to carry out an ESOS).

When the RHI, GHG and LAD Scheme end in March 2022, the Government is planning to implement the Clean Heat Grant and the initial proposals suggested that solar thermal would not be included. The Clean Heat Grant is anticipated to run for two years, after which the combination of a market mechanism and the Future Homes Standard are likely to become the primary drivers for all low carbon heat technologies.

A Green Heat Network Fund (GHNF) capital grant support scheme for heat networks is being proposed and it is anticipated that it will include large-scale solar thermal. The GHNF is expected to open to applications in April 2022 and run for three years to 2025. The scheme follows on from the Heat Networks Investment Project (HNIP), which provided financial support for the development of new heat networks.

Although renewable energy has largely widespread public support in the UK, with support for solar energy at 84% (BEIS PAT, 2021), there are a number of structural challenges for solar thermal in the UK (this is clear from the low deployment rate of solar thermal in the UK compared with nearby countries such as Ireland and Germany). The challenges can be summarised as (1) the low price of methane in the UK, with the bulk of environmental taxes placed upon the price of electricity (70% of consumers think the costs of low carbon heating is too high); (2) the “solar shock” in 2010, where a solar PV Feed-in-Tariff was introduced and set at 48.29 p/kWh, which made solar PV far more economically favourable to install compared to solar thermal; (3) restriction of the use of solar thermal to domestic hot water only within the RHI and the SAP (residential building energy standards); (4) static grid factors in SAP (set at grid carbon factors for 2012) which favoured electricity saving technologies over methane saving technologies; (6) increase in the use of combination boilers which do not require a hot water tank; and (7) the amount of work and cost associated with the application process for the RHI, which often made if financially unviable to make the application.

Industry

The UK is home to AES Solar, which has been manufacturing solar collectors in Scotland since 1979 and was the first manufacturer of flat plate collectors in Western Europe. In 2021, the AES Solar Luminary collectors were named Best Buy by Ethical Consumer. Naked Energy is a Crawley based solar thermal design company and their VirtuHOT solar thermal product achieved Solar KEYMARK and ICC-SRCC certification in 2021. SolarisKit are currently producing a limited run of flat pack solar thermal collectors in Dundee for an innovation project in Rwanda.

Other solar thermal suppliers (liquid filled flat plate and evacuated tube collector), including major wholesalers of plumbing products, offer imported products or own-label products made overseas. Solar thermal systems are generally sold either by the manufacturer to installers (to consumers) or via wholesalers, who sell to installers, who then sell to consumers.

TSCs are manufactured in the UK using both mild steel with pre-finished polymer coating and stainless steel with low-emissivity electrochemical coating.

Employment

There is no reliable information available on the number of jobs in or economic output of the solar heating and cooling sector in the UK. Data is however provided for the broader category of 'renewable heat' as part of the ONS UK low carbon and renewable energy economy (LCREE) survey (this category includes solar thermal, geothermal and heat pumps). Turnover in the LCREE was estimated to be £42.6 billion in 2019, of which, renewable heat accounted for £706.5m. Jobs in renewable heat have gone from an estimated 4,500 in 2014 to 6,100 in 2019. Jobs in solar photovoltaics and renewable heat in 2019 totalled around 12,900. In 2019, there were only 900 renewable heat jobs in business with 250 or more employees, meaning the vast majority of renewable heat business are Small & Medium Size Enterprises (SMEs).

Costs

Even with declining deployment growth rates, the experience rate (representing the reduction in installation cost with increasing deployment) for solar thermal in the UK over the past 10 years has been 13 ± 5% (Renaldi et al, 2021). In 2019, the total installed cost per kW was approximately £1,500. Given a typical residential-scale solar thermal system in the UK is around 2.5 kW, then an overall system cost would be around £3,750. Typical economic payback periods for solar thermal in the UK are around 10 years (McVeigh, 2017).

Solar thermal is classified as an 'energy-saving product' and depending on the circumstance, can be either 0% VAT (new build), a reduced rate of 5% VAT (if social policy conditions are satisfied or if the total cost of the products is not over 60% of the cost of the installation of the products) or the full rate of 20%.

In 2020, the average domestic consumer electricity bill was £707 (assuming 3,600 kWh/yr of usage) and the average domestic gas bill was £557 (assuming 13,600 kWh of usage) (BEIS, 2021). Analysis by Carbon Brief indicates that UK electricity bills have scarcely changed since 2008 and average gas bills have fallen significantly (more than 30% when adjusted for inflation). This has caused some speculation that the current environmental taxes on electricity maybe redistributed to gas in the near future.

Domestic hot water solar thermal systems in the UK typically generate around 620 kWh/kW of installed capacity. Thus, a typical 2.5 kW system for domestic hot will save around 1,550 kWh per year and savings around £50 per year assuming hot water heated by grid sourced methane.

Status of the Market for Solar Buildings

Scope

The concept of Solar Buildings is not one that is generally recognised, however Smart Solar Homes is promoted by the sector as a means to net zero energy buildings. There are a range of environmental buildings standards / frameworks that are used which encourage the use of solar energy, for example Passivhaus, Net-Zero Carbon / Energy Buildings, Active Buildings, BREEAM and One Planet Living.

For large city centre commercial buildings that use heat pumps for heating and cooling and commercial facilities where on-site solar is challenging to deploy, solar power based corporate Power Purchase Agreements (PPA) are common and are available from most of the larger solar developers.

Market Size and Trends

There are estimated to be over 1,000 buildings built to Passive House standard in the UK (Passivhaus Trust, 2018). Recent examples of environmental housing developments in the UK are the Parc Eirin development in Cardiff and Springfield Meadows development outside Oxford.

Main Market Drivers

There is little evidence of interest in Solar Buildings in the UK currently. Barriers to the Solar Buildings market in the UK include the abandonment of the UK’s zero carbon homes policy, the resistance of the construction sector to significant change and the relatively low cost of methane for home heating.

Employment

No reliable information is available on the number of jobs in the Solar Buildings sector.

Costs

A 2015 study by the Passivhaus Trust (sponsored by AECOM) found that the average capital cost of a Passivhaus building in the UK was £1,800 /m2 - £1,850 /m2 (gross internal floor area and normalised to 2014 prices), which is a 15-20 % uplift from a building designed to the Code for Sustainable Homes (CFSH) Level 4 standard.

Other Key Topics

Team ESTEEM Heriot-Watt University Student Team are taking part in the Solar Decathlon Middle East 2020.

R&D Activities

R&D Programmes

Although the decarbonisation of heating and cooling is acknowledged by many as an important area of research (The Royal Society, 2021), there is no dedicated national R&D programme. Solar thermal related projects (academic, industrial or collaborative) can potentially bid into a number of more general funding competitions run by either UK Research and Innovation (UKRI) or the Department for Business, Energy & Industrial Strategy (BEIS). In 2020, there was a £12m joint Engineering and Physical Sciences Research Council (EPSRC) and Natural Environment Research Council (NERC) led call ‘Decarbonising Heating and Cooling 2’ which focused on the challenge of heating and cooling decarbonisation.

Funding for early career researchers (for travel and conferences) is available through SUPERGEN SuperSolar and the energy research centres sometimes directly fund research; for example the recent UKERC Flexible Fund call 2 ask for research related to heat decarbonisation. The MCS Charitable Foundation provide grants for education and skills initiatives.

R&D Infrastructure

Institution Type Research Areas Involvement Website
BRE National Solar Centre Independent third-party approvals organisation Consultancy, research, testing, standards, training and products related to Solar Thermal and PV www.bre.co.uk/nsc/
Angela Marmont Renewable Energy Laboratories (AMREL) Academic (Loughborough University) Sustainable energy technologies www.lboro.ac.uk/research/crest/working-with-us/facilities/
LIA Laboratory Independent test laboratory Lighting www.thelia.org.uk
SPECIFIC Academic (Swansea University) and industrial consortium Building-integrated solar thermal and photovoltaics, thermal energy storage www.specific.eu.com/
Cardiff University Solar and Environmental Test Lab Academic test laboratory PV Test Rig and Solar & Environmental chamber www.cardiff.ac.uk/research-equipment/facilities/view/solar-and-environmental-test-lab

Actual Innovations

Open Climate Fix are working on solar forecasting using Artificial Intelligence.

Tepeo, Sunamp and Caldera are all commercialising various designs of compact thermal storage devices.

The SolarisKit polymer solar thermal collector is a unique prismatic shaped device solar thermal collector designed to be flat packable.

Support Framework

Background

Detailed analysis of the progress the UK is making in relation to carbon reduction can be found in the CCC’s Sixth Carbon Budget, which “provides ministers with advice on the volume of greenhouse gases the UK can emit during the period 2033-2037” (CCC, 2020). The evidence for the Sixth Carbon Budget in relation to space heating and hot water demand in existing UK homes can be found in the Element Energy report ‘Development of trajectories for residential heat decarbonisation to inform the Sixth Carbon Budget’. More broadly, in 2018, BEIS undertook a review of the evidence on options for achieving long term heat decarbonisation in the UK (BEIS, 2018).

The UK is currently transitioning between support mechanisms for low carbon heat. There are currently consultations open for Scotland (Heat in buildings strategy - achieving net zero emissions: consultation), Northern Ireland (Energy Strategy for Northern Ireland) and the England Heat and Buildings Strategy is expected in Q3 2021.

Government Agencies Responsible for Solar Thermal, for Solar Building Activities

The UK Government Ministerial departments that have responsibilities related to solar thermal are:

The UK Government non-ministerial departments and advisory bodies that have responsibilities related to solar thermal are:

Industry / non-governmental organisations that have responsibilities related to solar thermal are:

Most Important Public Support Measure(s) for Solar Thermal and for Solar Buildings

See sections on Main Market Drivers.

Information Resources

National Solar Associations (industry and non-industry)

The solar thermal industry represented by:

  • Solar Energy UK - Solar Energy UK was founded in 1978 (originally called the Solar Trade Association) and is a not-for-profit membership association that works to promote the benefits of solar energy (solar thermal and solar power). Chris Hewett is the CEO and Dr Richard Hall is the chair of the STA Solar Thermal Working Group.
  • Installers of solar thermal are represented by MCS Certified Solar Thermal Working Group.
  • There is a UK National Section of the International Solar Energy Society (ISES) called the UK Solar Energy Society, which is a non-profit organisation for all those interested in the advancement of the utilisation of the sun's energy.
  • SUPERGEN SuperSolar, led by Loughborough University's Centre for Renewable Energy Systems Technology (CREST), has the aim of establishing a UK network for solar R&D and includes universities, industry, and finance.

Related multi-technology associations which may include solar thermal are:

Single technology associations that are related to the solar heating and cooling sector are:

There is little known Trade Unionism within the solar energy sector in the UK, with most solar thermal installers being self-employed. The TUC (Trades Union Congress) does however partake in advocacy for the sector, for example ‘Cut to Green Homes Grant has taken a wrecking ball to green jobs in the North East’.

National Associations on Green/Solar/Sustainable Buildings

Associations and organisations that undertake work in sustainable buildings are:

Not-for-profit organisations that advise on solar, energy efficiency and/or sustainable buildings are:

Energy related research centres in the UK include:

  • Energy Catalyst “accelerates the innovation needed to end energy poverty. Through financial and advisory support, and by building strategic partnerships and uncovering new insights, Energy Catalyst supports the development of technologies and business models that can improve lives in Africa and Asia.”
  • Energy Systems Catapult “set up to accelerate the transformation of the UK’s energy system and ensure UK businesses and consumers capture the opportunities of clean growth”.
  • UK Energy Research Centre (UKERC) – Academic consortium focusing on sustainable future energy systems.
  • CREDS “the Centre for Research into Energy Demand Solutions. Working with researchers, businesses & policy makers, we support the transition to a net-zero society”.
  • EnergyREV was setup to “tackle the challenges around smart local energy systems from an interdisciplinary and whole-systems viewpoint which will provide an unprecedented breadth of expertise and depth of knowledge”.

Most Important Media for Solar Thermal and Solar Buildings

Weekly industry news (including consultations and solar energy advocacy) can be found in the Solar Energy UK weekly Bulletin. There is no dedicated solar thermal news platform, however Solar Media Ltd provide a range of solar related industry news sites, including Solar Power Portal, Current±, Energy Storage News.

News related to solar buildings / utilities can be found in the construction/HVAC focused websites/journals, such as Building, Utility Week, CIBSE Journal, Modern Building Services, H&V News and the RIBA Journal (the official publication of the Royal Institute of British Architects).

News on renewable energy related Parliamentary business (new legislation, committee meetings) can be found at parliament.uk. Information on Government consultations and official statistics can be found on the Department for Business, Energy & Industrial Strategy news feed. There are also news feeds for the UK Parliament Business, Energy and Industrial Strategy Committee and the Environmental Audit Committee. The PRASEG (Parliamentary Renewable and Sustainable Energy Group) has a weekly agenda briefings and news summaries news feed.

General climate change policy news and analysis can be found on Carbon Brief and commentary on environmental legislation can be found in Ends Report and Transform, the magazine of Institute of Environmental Management & Assessment (IEMA).

News on the latest research grant funding opportunities can be found on UKRI News. Most of the research centres have newsletters, for example the UK Energy Research Centre, the Oxford Martin School has a Future of Cooling Newsletter, and the Energy Systems Catapult has a newsletter.

The main in-person events (currently being held online due to COVID restrictions) are Solar and Storage Live, Futurebuild (catering to all aspects of innovation in the built environment) and Fully Charged LIVE (focusing on electric cars).

Although focusing on electric vehicles, Fully Charged Show on YouTube often features low carbon buildings and solar related technologies. Related podcasts include BetaTalk about low carbon heating and the Solar Media Editors' Channel podcast.