Diffusion of solar water heaters in regional China: Economic feasibility and policy effectiveness evaluation

Whereas the technical feasibility of solar water heaters (SWHs) has long been established, the economic feasibility of SWHs in regional China remains to be examined. This paper constructs cost models to calculate costs per unit energy saving of SWHs in 27 Chinese provincial capital cities. The cost effectiveness of SWHs is examined at the national level. At a micro level, we analyze the financial attractiveness of consumers’ investment in SWHs. A panel data model is employed to evaluate the effectiveness of a subsidy program in rural China. The results show that SWH costs, ranging from 0.305 to 0.744 CNY/kWh, are much lower than those of other major renewable energies across China. This finding indicates that the diffusion of SWHs is a cost-effective way to reach China’s renewable energy target. For consumers, incentive programs for SWHs are needed to improve the financial attractiveness of the devices in China. Existing subsidy policies for rural China have failed to significantly enhance the deployment of SWHs. The causes of the failure are examined and a new incentive program is suggested for rural areas of the country.