Framework to Promote Domestic Solar Water Heaters 1. Domestic Solar Water Heaters Significant demand exists for domestic water heating in the highlands of Yemen.Solar water heating offers a good opportunity for the highlands since during this period the solar radiation availability is high (more than 8 hours per day).
The proposed renewable energy policy framework targets a maximum potential savings of around 686 GWh from domestic solar water heaters in 2025 (Chapter 2 of this study). Urban household s solar water heating demand was taken from the empirical study. The urban household s electricity consumption, water heating load, and estimated collected energy by solar water heating systems.
Table 5 1: Urban household electricity demand, water heating load and energy collected by SWH systems Energy collected by SWH systems (k Wh/month) Water heating load per month Average consump ti on HH Categ ory 6 m 2 (200 liters stora ge ) 4 m 2 (100 liters storage ) 2 m 2 (50 liters storage ) kWh % total load kWh/month 2 m 2 50 liters stora ge – – – –
In order for the government to achieve the proposed targets, it needs to address the main barriers to solar water heaters in Yemen. Based on consultant s interviews with technology suppliers and stake holders, key barriers are the following: Lack of government policy and institutional support to kick-off the transformation of solar water heater market, Lack of awareness (consumers, policy makers, general stakeholders) on the benefits of the technology, High initial capital costs of solar water heaters, and Lack of financing mechanisms supporting the development of the market. The following sections propose strategic actions for the government to kick-off market development of solar water heaters in the country.
1.2 Financial Analysis Based on the estimated electricity savings from the use of solar water heaters, the study analyzed the financial attractiveness of the technology in Yemen. The solar water heater will bring significant decrease of monthly electricity consumption and each household will move one notch below PEC s tariff classification table. The overall financial benefit of the use of SWH is shown in Table 5 2. Similarly, the study carried out financial simulation and the financial analysis indicators are shown in Table 5 3.
Table 5 2: Domestic Solar Water Financial Benefits HH Financial Benefits ($ per month) Tariff (c/k Wh ) Demand rang e (kW h) Savings (kWh/ mont h) Consumption (kWh/mon th) HH Cate gory Tota l Price eff ect Savings effec t afte r before Up to >
Table 5 3: Solar Water Heater Financial Indicators NPV ($)  Payback Period (years)  Annual Savings ($) Capital Cost ($) Collector Size m m m 2
1.3 Market Transformation Framework The financial analysis reveals that solar water heaters are cost-effective and that it is not necessary to provide financial incentives to urban households in order to promote the use of solar water heaters. Key market transformation activities could include the following: 1.Development of market transformation plan 2.Launching of information and education campaign 3.Establishment of a revolving fund under the Renewable Energy Fund in the short term and partnership with microfinance institutions in the long term.
Under the market transformation plan, MEE needs to : identify priority areas – this could target capital cities and large towns in the Highlands identify existing and potential SWH dealers in these cities and large towns and to accredit them specify acceptable technologies, giving priority to locally manufacture technologies prepare criteria for programme participants, specifying certain conditions each household must satisfy prepare a 5-year financing plan
This is shown in Figure 5 1. The development of the market and identification of programme participants will be left to the accredited dealers. To stimulate household investments in solar water heaters, in the short-term MEE could initiate a financing mechanism in a form of a revolving fund to be established as one of the accounts under the REN Fund. The fund would provide low interest loan for the purchase of the solar water heaters. The loan payment could be integrated in the electricity bill.
In order not to create an increase in electricity payments, monthly loan payments should be set equal to electricity savings. Since the estimated payback period for smaller units is around 3 years, the revolving fund could provide a 3 year loan term to this consumers group. For larger households, financing terms could be shorter - maximum of one year.
Figure 5 1: Market Facilitation Strategy
Figure 5 2: Short-Term SWH Financing Mechanism
As shown in Figure 5 2, accredited dealers will be responsible for the development of the market and will initially screen programme participants based on screening criteria from MEE.
In the long term, once the market for solar water heaters as well as micro- financing will kick-off in Yemen, MEE could transfer the financing functions to banks and micro finance institutions. This is shown in Figure 5 3.