Encircling Cities From Rural Areas? Barriers To The Diffusion Of Solar Water Heaters In China’s Urban Market

Solar thermal heating is a comparatively low-tech and low-cost renewable energy technology, but its contribution to global green energy is much higher than the eye-catching solar PV, which is often ignored in many countries’ renewable energy policies. In fact, these cheaper but “good enough” low-tech innovations are also of great significance in addressing global climate challenges. These technologies may enjoy a disruptive nature in the context of developing countries because they possess the considerable potential to move up markets and eventually emerge as dominant, though many system barriers are expected before they realize their full potential.

Since the early 1990s, China has become the world’s leading country in the production and consumption of solar water heaters (SWH). This is attributed much to China’s indigenous technology breakthrough in evacuated tube collector, which significantly reduces the cost of SWH.  This low-cost environmental innovation happened to meet Chinese residents’ fast-growing need for economic hot water during China’s unprecedented urbanization. SWH is particularly popular in China’s rural areas and small cities, but its diffusion in mainstream cities is rather disappointing.

Unlike other renewable energy technologies, the early diffusion of SWH in China is mainly driven by its huge domestic market demand rather than incentive policies. Only after China’s Renewable Energy Law took effect in 2006, China’s national and local governments began to encourage SWH diffusion with subsidies in the rural market and mandatory installation policy in the urban market. However, local governments’ policies to mandate SWH-building integration in the urban market have only achieved a limited success. This paper thus aims to explore the systemic roots of this phenomenon, supported by documents and interviews data from the author’s fieldwork in China.

Previous research on the diffusion of renewable energy technologies has paid much attention to the role of government policies and user preferences but lacks a systematic understanding about why they succeed or fail in particular contexts. This paper instead resorts to a systematic analysis framework, multi-level perspectives (MLP), to unravel why SWH-building integration fails to fulfill its potential in China’s urban market.

The MLP believes that a radical transformation of a socio-technical system results from the interaction between three levels: landscape, regime, and niche. A regime is characterized by path dependence and lock-in, directing the reproduction of a socio-technical system. The core concern of system transformations is to destabilize existing regimes, including materials and artifacts, network of actors, and rules. Changes in the landscape level exert external pressures on the existing regime and open windows of opportunity for niche innovations to grow to challenge the regime. This paper hypothesizes that the unsuccessful popularisation of SWH in China’s urban market is because landscape factors are not forceful enough, SWH niche development is still weak and incumbent regime remains strong.

The findings reveal the factors influencing SWH-building integration from landscape, regime, and niche levels respectively. The general landscape of international concerns over carbon emissions and Chinese national policies for green development has formed a favorable context for SWH diffusion in terms of legal institutional changes and renewable energy discourses, but it is still not forceful enough to exert more pressure on urban regimes. China’s fast economic growth has been a strong market pull for SWH diffusion, but its political landscape has provided much less incentive for governments to invest in this grassroots technology. Since the industry is mainly driven by an economic rationale, environmental discourse are not an adequate imperative to encourage further diffusion in the urban market.

At the niche level, the technology is still not advanced enough to meet the high-end demands of urban markets. Economic savings have not provided enough incentive for the richer urban consumers to adopt SWH. In addition, shortages of skilled-talent, weak system design, and price-oriented demand undermine the industry’s innovation capacity. Too much focus has been placed on the market promotion in the rural market, while there are very few R&D efforts in developing high-quality SWH system for urban high-rise buildings. This weak system design is also contributed by the fact that SWH-integration entails systematic cooperation among SWH firms, estate developers, and building design institutes, which currently is obstructed by their different interests and knowledge bases.

In terms of regime resistance, the urban building infrastructure, high-end market demand, inappropriate government intervention, and conflicts of interest among governments, SWH suppliers, architectural design institutes and estate developers, constitute a very selective environment for the SWH to grow in turban the pace. Lack of high industry standards and poor quality inspection further aggravates the market environment, making it difficult for good innovations to develop.

While the rural market seems to have provided an ‘empty’ space for the technology, the urban market is apparently an ‘occupied’ space with many vested interests, which is shaped by China’s economic, political and cultural landscape. Without institutional forms to provide incentives and a strict quality inspection institution, environmental regulation could simply lead incumbent actors to evade their obligations with least cost, resulting in an opposite effect. Therefore, when up-scaling a grassroots environmental innovation from the peripheral areas to the core areas, needed are changes in the system level, rather than simple policy interventions.

These findings are described in the article entitled Encircling cities from rural areas? Barriers to the diffusion of solar water heaters in China’s urban market, recently published in the journal Energy Policy. This work was conducted by Zhen Yu and David Gibbs from the University of Hull.