90% of Homes in Israel Have A Solar Water Heater. Why Don't More Americans Use Them?

In the United States less than 1% of homes use a solar water heater. Why?

If you look at the rooftops of buildings in Israel, you’ll notice something. All of them have solar water heaters. In fact, 90% of all homes in Israel use the sun to heat their water.

If you look at rooftops in countries like Greece and Cyprus you’ll see the same thing. Solar water heaters are everywhere. These countries all get a lot of sun. But sunshine alone doesn’t explain why some countries have so many solar water heaters and others don’t.

After Israel and Cyprus, the country with the most solar water heaters per capita is Austria. There are a lot of places that get more sunshine than Austria.

Source: Solar Heat Worldwide 2022 Annual Report

After Greece and Palestine, the next country with the most solar water heaters per capita is China. In Rizhao, China, a city of 3 million people 98% of homes use the sun to heat their water.

If sunshine told the whole story here, then you’d expect places in the United States like California, Texas, and Florida would have a lot of solar water heaters. But they don’t either.

In the United States virtually no one has a solar water heater. Less than 1% of American homes use the sun to heat their water.

Why water heaters matter

Water heaters are responsible for about 20% of energy use in a typical home in America and Europe. In countries like Japan that number is closer to 30%.

As we’ve seen in the last year, autocrats can use energy as a weapon. It’s not an exaggeration to say that the way we heat water for our showers has geopolitical consequences.

Using all this energy also has a big impact on the environment. Most water heaters run on fossil fuels which cause climate change. Some run directly on natural gas or propane or fuel oil, while others run on electricity which is generated mostly by fossil fuels today.

According to Project Drawdown, countries around the world could cut as much as 14 gigatons of carbon emissions by 2050 by encouraging more solar water heater adoption. For reference the United States emitted about 5 gigatons of CO2 last year.

All of that’s to say that the way we heat our water has big consequences.

Recently I started to wonder why some countries use free sunshine to heat their water, while other countries use expensive fossil fuels. This week, I decided to search for the answer to that question.

At one point a lot of Americans used solar water heaters

The first solar water heater was invented in 1891 by an engineer in Baltimore named Clarence Kemp. A few years later, Kemp struck a deal with two businessmen in California to sell his invention there.

California was a perfect market for the product. The state had a lot of sunshine and mild winters. But more importantly, energy was expensive there. A solar water heater cost $25 upfront, but it could save $9 per year in energy. By the 1920s about 40% of all homes in LA had solar water heaters.

Soon the invention spread to other parts of the country like Florida.

In the roaring twenties, Miami was a boom town. But it had a problem. The state didn’t have access to natural gas and its electricity was really expensive. As John Perlin writes in Let It Shine: The 6,000-Year Story of Solar Energy, “Newcomers to this tropical paradise found that there was no cheap way to obtain hot water.”

A few entrepreneurs spotted an opportunity and started selling solar water heaters and found incredible success doing so. By 1940, about half the population was using the sun to heat their water.

But the growth of the solar water heater market was short-lived.

In the 1920s, California prospectors found huge reservoirs of oil and gas off the coast of LA. Suddenly it was cheap to use natural gas to heat up water. “What killed [the solar water heater] in California was the discovery of oil,” Perlin told me.

By the 1930s electricity was also getting really cheap. During the New Deal era, the federal government built huge dams and other electricity generation projects all over the country. In doing so, they drove the price of electricity down significantly.

Meanwhile, the cost of solar water heaters began to rise due to increasing copper and labor prices. Between 1938 and 1958 the price of copper tripled in America; labor costs went from $0.25–$0.40 per hour in 1938 to $1.10 by 1955, according to Perlin’s research.

By the middle of the 20th century the reason that people weren’t installing solar water heaters in America was simple: They were expensive upfront and energy was cheap.

But the era of low cost energy in America didn’t last long.

Solar water heaters made a comeback in the 1970s

In the 1970s, a series of conflicts in the Middle East caused the price of oil to skyrocket. Over the course of a decade, oil prices rose by more than 400%.

In response to the crisis, President Jimmy Carter announced a series of policies to support the development of solar energy in the US. One of these policies was a tax credit where the government would pay for 40% of a solar water heater.

In a speech announcing the policy, he said:

“Nobody can embargo sunlight. No cartel controls the sun. Its energy will not run out. It will not pollute our air or poison our waters. It is free from stench and smog. The sun's power needs only to be collected, stored and used.”

Carter was so excited about solar that his staff installed a solar water heater and some solar panels on the roof of the White House.

Thanks to Carter’s tax credits and rising energy prices, the economics of solar water heaters suddenly made sense again. In just a few years, the number of units installed per year grew from about 10,000 to nearly 200,000.

But this period of growth, like the first one, would be short lived.

Source: NREL

Cheap fossil fuels killed the solar water heater in America

In 1985 President Ronald Reagan allowed Carter’s tax credits to expire and an era of free market capitalism and deregulation began. The following year Reagan asked his staff to take the solar water heater off the roof of the White House.

Meanwhile, energy prices declined from their peak in the 1970s. As Perlin writes in Let It Shine, “Once again the siren call of fossil fuels led people away from the sun.”

By the mid-1980s, solar water heaters were more expensive than other water heaters and energy was cheap. As a result the solar water heater market in America collapsed. Ever since then it’s been same story.

Without much government support, solar water heaters have remained expensive. Today they cost between $5,000 and $15,000 to install. By comparison a traditional water heater cost less than $1,000.

And with the exception of a few short periods, energy is America has been cheap ever since the 80s.

The combination of high upfront costs and cheap energy are the main reason that most Americans don’t have a solar water heater today.

In other countries, the 70s oil crisis had a longer lasting impact

Elsewhere in the world, however, the 1970s oil crisis had a longer lasting impact on how people heat water. Nowhere was that more true than Israel.

Throughout its history, Israel has always been plagued by energy scarcity. As one Israeli prime minister said, “[Moses] took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil.”

During the 1970s oil crisis, Israel’s government mandated solar water heaters in all new homes. And unlike the United States, they never turned back. Today 90% of homes in Israel use a solar water heater.

And because so many units are manufactured and installed each year, they’re incredibly cheap. In Israel a solar water heater costs just $700. That’s 10 times less than what it costs in the US.

Israel wasn’t alone in its support for solar water heating following the 1970s oil crisis. If you look at the countries with the most solar water heaters per capita, there’s a common pattern. Yes, many of them have a lot of sunshine. But there’s more to it than that.

Source: Solar Heat Worldwide 2022 Annual Report

All of these countries have a government that got behind solar following the 1970s oil crisis and, unlike the United States, stuck with it.

In Barbados, where there are more solar water heaters per capita than any country on Earth, the government subsidized the entire cost of a solar water heater in the 80s. They also put a 30% tax on traditional water heaters.

In Cyprus, the government followed Israel’s lead and mandated solar water heaters in the 1980s.

In Rizhao, China, the government invested in solar water heating R&D. They were so successful that today it costs the same amount to buy a solar water heater there as it does to buy a traditional water heater.

In order to prevent a climate crisis we need to replace fossil fuel-powered water heaters

Today countries around the world face similar problems to those of the 1970s. In the last few years energy prices have skyrocketed all over the world due to supply chain disruptions and Putin’s war in Ukraine.

But we also face a much larger problem in climate change. In order to reach net zero emissions, hundreds of millions of fossil fuel water heaters around the world will need to be replaced.

Fortunately there are more options available than there were in the 1970s. For example there are heat pump water heaters, which can run on renewable electricity. and importantly use 4 times less energy than a traditional electric water heater. They’re also much cheaper to install.

In some parts of the world, it’s going to make sense for people to install these high efficiency electric water heaters. In other parts of the world, solar water heaters will make sense.

But if you look at the history of the solar water heater market, one thing is clear: people don’t always adopt efficient clean energy technologies on their own. Reagan’s free market isn’t going to get more efficient water heaters in homes around the world.