Solar Water Heaters in Lebanon: An Emerging $100 Million Market

19 january 2013

The very first solar water heating system installation in Lebanon probably goes back to the seventies of the last century. Few solar water heaters (SWH) were installed in the eighties, yet talking about a “market” for solar water heaters became accurate by the early 1990’s. However, SWH’s were not on to a successful start. In 2008, only some 25 companies were involved in this market, still in its infancy stage.

Numbers collected by the Lebanese Center for Energy Conservation (LCEC) from the Central Bank of Lebanon (BDL) and the Ministry of Energy and Water (MEW) show that the actual size of the local market for solar water heaters was USD 18 Million in 2011 alone. Numbers also show that SWH companies registered at the LCEC increased from 25 in 2008 to more than 130 in 2011. What is the secret behind this rapid market development?

In fact, there is no secret. Rather a sound policy developed jointly by the Ministry of Energy and Water (MEW), the United Nations Development Programme (UNDP), and the Central Bank of Lebanon (BDL) and implemented through LCEC. It all goes back to 2009, when UNDP and MEW signed a new project funded by the Global Environment Facility (GEF) aiming at the development of the solar water heaters market in Lebanon. The initiative, entitled the “Global Solar Water Heating (GSWH) Market Development and Strengthening Initiative,” aims at creating an enabling environment for SWH by working along four major axes: legal framework, financial framework, technical and quality control, and policy setting.

The GEF-funded project has set an objective of installing 190,000 m2 of new solar water heaters between 2009 and 2014. The challenging objective was outstripped by an even tougher national target: in 2010, the Minister of Energy and Water Mr. Gebran Bassil launched the national target of “a solar water heater for every house,” claiming that if neighboring countries like Cyprus or Greece have come to achieve this target, why wouldn’t it also be the case in Lebanon?

Today, “a solar water heater for every house” turns from a difficult challenge to an achievable objective. In 2011, more than 13,000 SWHs were installed in individual systems only (excluding collective systems), totaling around 45,000 m2 of surface area with a market size of USD 18 million. Installations in the first quarter of 2012 are even more encouraging, and estimations of a market size of USD 25-30 million in 2012 sound reasonable.

The main driver for this emerging market is the national financing mechanism for SWH developed by the Ministry of Energy and Water and the Central Bank of Lebanon (BDL) based on a decision by the Council of Ministers. On 10 March 2010, decision No. 59 of the Council approved the plan proposed by the Ministry of Energy and Water to offer subsidized loans to Lebanese citizens willing to install a SWH. Loans are offered at 0% interest rate, and most importantly, the Ministry has dedicated a total amount of USD 1.5 Million to offer an additional USD 200 subsidy for the first 7,500 loan applications.

It is no doubt that this official move has paved the way for the rapid development of the market, targeting residential houses across Lebanon. In 2011, a total of USD 343,400 was awarded on the basis of individual USD 200 grant subsidies to create a market momentum of USD 18 million. This is a perfect example of “how sound governmental policies can boost a green market.” This is also the title of the report written by the LCEC to present market dynamics in 2011.

In a recent survey conducted for the GEF-UNDP-GSWH project team by the international company for statistics AMER Nielsen, 73% of SWH suppliers claim that the national financing mechanism is the main driver behind market development. In addition, 76% of the companies declare that the demand for these systems witnessed a remarkable increase (an average of 55% on sales). Even more importantly, the study shows that the penetration rate of SWH in the residential sector is of 13%, while the willingness among citizens to install these systems reached 25% among non-users. To make things clearer, the county has a potential market of more than 100,000 SWHs, thus creating a market of around USD 100-150 Million over the next three to five years.

With such a huge market on the horizon, LCEC invests a lot of efforts to working on the quality control of both SWH products and installers. A quality control process is put into place, and continuous trainings and workshops are conducted to raise the performance of companies.

This impressive momentum for the SWH market is materializing in different places. Recently, UNDP and the Order of Engineers and Architects in Beirut signed an agreement to offer SWH to engineers and architects. The starting point for this initiative is the installation of 1,000 SWH, under the slogan “A solar water heater for every engineer,” in synch with the Ministry’s motto.

On the other hand, many municipalities have taken the lead in the enforcement of installing SWH in all new buildings. Such municipalities are pioneers. Yet, the real challenge is in the update of the building code of Lebanon to include mandatory SWH installations, a task that LCEC has recently started activating.

In 2011, eight Lebanese commercial banks participated in the national financing mechanism for solar water heaters. The high potential market will attract even more banks and investors to reach the USD 100 million ceiling. The SWH market is, however, just one component of the energy efficiency and renewable energy sector, or simply green energy. With such big investment potential, could green energy become a real market driver for our national economy? Is green energy a solid candidate to join real estate in this task? While skeptics would doubt, only the future could prove this statement right or wrong.