Financial measures Serbia should offer for solar water heating systems

Abstract

Hot water consumption is an important segment in the energy consumption in households in Serbia, where majority of households heat water with electric resistance storage water heaters. A more appropriate alternative is installation of solar water heating (SWH) systems in households. The current number of installed SWH systems in Serbia is negligibly small – only about 0.1% of all households. Serbia has recently adopted feed-in tariffs for generating electricity from renewable energy sources (RES), but it did not provide any incentive for SWH installations. It is generally accepted that best form of SWH incentive is a direct subsidy to reduce high upfront costs. The aim of this work is to suggest the level of the subsidy which Serbian government should offer in order to reach the level of SWH deployment comparable to that of more developed countries. After financial analysis of SWH installation in six Serbian cities, followed by contingent valuation survey among household owners in Serbia, it is concluded that 20% subsidy is justified already by CO2 mitigation potential of SWH systems, while 50% subsidy, which lowers equity payback period to 5.5–6 years, generates most interest among household owners.