caribbean solar finance programme, credit union lending officers' training manual: lending for...

7/30/2019 Caribbean Solar Finance Programme, Credit Union Lending Officers' Training Manual: Lending for Consumer Applic

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CARIBBEAN SOLAR FINANCE PROGRAMME

Credit Union Lending Officers Training Manual

Version 01

LENDING FOR CONSUMER APPLICATIONS

OF SOLAR HOT WATER SYSTEMS IN ST.LUCIA

Prepared by:

Global Sustainable Energy Islands Initiative

&

The St. Lucia Co-operative League Limited


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CSFP Training Manual

FOREWORD

St. Lucia faces unique challenges associated with the generation and use of electric energy. Theisland nation depends, almost exclusively, on the combustion of imported diesel fuel for thegeneration of electricity. A significant portion of the nations foreign exchange earnings are usedto pay for such imported fossil fuels. This high level of dependence on imported fossil fuel, whencombined with the economic rents extracted by the monopoly position held by the generation anddistribution utility, result in a very high cost of electricity to residential consumers on the island.The average household in St. Lucia currently pays approximately EC$ 0.688 per kWh forelectricity, which includes a base charge of EC$ 0.654 per kWh plus a fuel surcharge of EC$0.034 through which the electric utility is permitted to pass on increases in the price of fossil fuelsdirectly to consumers. The structure of the fuel surcharge exposes island residents directly to theinherent volatility in the market price for fossil fuels. Turbulence in the Middle East andweather-related damages to the oil production capacity in the United States have recently led to adramatic increase in the price of fossil fuels and therefore consumers of electricity in St. Luciawill most likely soon see a further increase in the unit price of electricity on the island.

Many of the middle and low income households in St. Lucia who use hot water heating systemsharness electric water heating elements or electric point heaters to meet their hot waterrequirements. Given an average hot water consumption of 20 gallons per person per day, theseelectric water heating methods can consume up to 6 kWh per day to heat water for a family offour. Heating water with electricity is a costly practice given the high rates per kWh paid bydomestic consumers on the island. The market potential for solar hot water systems (SHWS) toreplace electric point heaters in St. Lucia has been recognized in studies, and many wealthyresidents and vacation home owners have purchased and installed SHWS. However, little hasbeen done to make such systems available and affordable to low and middle income householdson the island.

One of the foremost barriers to increasing access to SHWS for the low and middle income

segments of the population in St. Lucia is the high upfront costs of these systems. AlthoughSHWS provide households with an economical alternative to meeting their hot water needs in themedium-term, as there is no fuel and few maintenance costs associated with these systems, theinitial cost of a SHWS is high when compared to conventional heating alternatives. Companiessupplying SHWS and banks on the island have periodically offered short-term credit options tofinance the purchase of SHWS. However such credit packages have not been sufficient to defraythe high upfront costs of these systems to the point that monthly repayment rates equal theinstalled and electric costs for conventional water heaters. In addition, such financing has notbeen made available through institutions trusted by target segments of society. Middle and lowincome customers require medium-term financing to make SHWS affordable and prefer to accesssuch credit through their credit unions where they meet their other banking needs.

The United Nations Industrial Development Organization (UNIDO), the Organization ofAmerican States (OAS), and the Energy and Security Group (ESG) working in partnership withthe St. Lucia Co-operative League Limited and the Sustainable Development & EnvironmentUnit in the Ministry of Physical Development, Environment & Housing of the Government of St.Lucia are implementing the Caribbean Solar Finance Programme (CSFP). CSFP is designed toincrease access to SHWS for low and middle income households in the Eastern Caribbean bymeasurably reducing the constraints on, and increasing the capacity for financing of SHWS by


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the credit unions that service the credit needs of the target population while at the same timehelping build awareness among the membership of the credit unions as to the benefits of SHWS.

CSFP is executed through three program elements: a Training Course for Lending for SHWS forOfficers in Credit Unions, a Wholesale Consumer Credit Facility offering a low-cost long-termloan facility to credit leagues for on-lending to members of constituent credit unions to support

the purchase of SHWS, and a Consumer Awareness Campaign designed to raise awareness of thebenefits of SHWS among the credit union members.

The Training Course for Lending for SHWS for Officers in Credit Unions is a core element inCSFP. The Training Course is structured to train finance professionals in credit unions in themethods for analyzing and constructing loans for union members to purchase SHWS. Training inthe Course includes a Familiarization Module designed to introduce lending officers to thetechnical and economic aspects of SHWS, a Finance Module that instructs the credit officers inthe methods for lending for SHWS, and a Case Study Module that analyzes the financial viabilityof purchasing a SHWS versus expenses associated with electric hot water systems used by lowand middle income households in St. Lucia. The goal of the CSFP Training Course is to makelending officers more comfortable with SHWS technologies and more confident in their abilities

to assess related financing opportunities. The objective is to assist the lending officers in movingup the learning curve to the point that they begin asking the right questions and have a context forunderstanding the answers they receive.

The CSFP Partnership is pleased to present this Training Manual on Lending for Solar Hot WaterSystems in St. Lucia. This Manual is the textbook for the CSFP Training Course and has beenprepared by the CSFP Partnership and a team of consulting experts. The Training Manual is notmeant to serve as a stand-alone document but is rather designed as a reference tool thatcomplements instruction in the CSFP training sessions and builds on the lending proceduresdeveloped by each credit union in response to the Wholesale Consumer Credit Facility offeredunder CSFP and on the demand for SHWS generated by the Consumer Awareness Campaign.

On behalf of the CSFP Partnership, we hope this Training Manual and the associated trainingsession may serve as valuable tools in the development of lending operations in the credit unionswhich open access to SHWS for low and middle income segments of the population in St. Lucia.

Marco Matteini John E.H. RyanUnited Nations Industrial Development Organization Energy and Security Group & e3V


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ACKNOWLEDGEMENTS

First and foremost acknowledgements and thanks are given to the Board of Directors and staff ofthe St. Lucia Co-operative League Limited for their willingness to undertake the Pioneer Phase ofthe Caribbean Solar Finance Programme (CSFP) and its constituent Training Course, ConsumerCredit Facility, and Consumer Awareness Campaign. The Leagues commitment to CSFP andtheir intellectual input in the crafting of the Training Course has been remarkable, without such acommitment CSFP would not be possible. Special recognition is given to Mr. TerrenceCharlamagne and Ms. Geraldine Lendor for their leadership and wise counsel on all aspects ofCSFP and to Mr. Alexander Joseph for his tireless work on behalf of the League in support ofCSFP.

Recognition and thanks are due to the United Nations Foundation for their financial support forCSFP.

Thanks are also owed to the Organization of American States especially to its Trust for theAmericas and Office of Sustainable Development and Environment, and to the SustainableDevelopment and Environment Unit in the Ministry of Physical Development, Environment &Housing of the Government of St. Lucia for their assistance with the development of CSFP.

Special acknowledgements are due to Ms. Ayesha Grewal who is a Managing Director ofEnvironment Energy and Enterprise Ventures Plc. (e3V) and serves as the Training Advisor to theEnergy and Security Group (ESG) in the development of CSFP. Ms. Grewal was the coordinatorand editor of this Training Manual and is the author of its constituent Case Study Module.Acknowledgements are also due to each of the experts who authored the other modules in theManual. Mr. Mark Thornbloom of the Florida Solar Energy Center created the FamiliarizationModule, Mr. Alexander Joseph of the League produced the Finance Training Module, and Mr.Flavien Rudolph, General Manager, Solar Dynamics (EC) Ltd. contributed significantly to Ms.Grewals construction of the Case Study Module.

Thanks are also due to Dr. Marco Matteini, Program Officer, United Nations IndustrialDevelopment Organization (UNIDO) and Mr. John Ryan, a Director for ESG managing financeand policy operations and e3Vs Chairman and Managing Director, who together, working inclose partnership with Ms. Lendor and Mr. Charlemagne, were the architects and are now themanagers of CSFP and its constituent program elements. Dr. Matteini and Mr. Ryan also gavemuch appreciated guidance and constructive feedback on the design, development, and content ofthis Training Manual.

Finally and most importantly, thanks are due to all the lending officers in the credit unions in St.Lucia who are participating in the Pioneer CSFP Training Course and will hopefully soon makeloans for SHWS to low and middle income consumers in St. Lucia a reality.


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TABLE OF CONTENTS

FAMILIARIZATION MODULE ........................................................................................................... 1

Purpose ............................................................................................................................................ 1

Introduction .................................................................................................................................... 1

Solar Hot Water Systems .............................................................................................................. 1Components of a Typical SHWS .................................................................................................. 2

Different Types of SHWS for Domestic Applications ................................................................. 3

Advantages and Limitations of SHWS ......................................................................................... 6

Technical Risks of Domestic SHWS ............................................................................................. 7

Frequently Asked Questions ....................................................................................................... 16

References and Notes ................................................................................................................... 19

FINANCE MODULE ............................................................................................................................ 20

Purpose .......................................................................................................................................... 20

General and Classification .......................................................................................................... 20

Unit Size and Cost ........................................................................................................................ 20

Eligibility ....................................................................................................................................... 21

Loan Proposal ............................................................................................................................... 21

Quantum of Loan ......................................................................................................................... 22

Rate of Interest ............................................................................................................................. 22

Security ......................................................................................................................................... 22

Co-maker or Guarantor .............................................................................................................. 22

Service Charges ............................................................................................................................ 22

Repayment .................................................................................................................................... 22

Other Requirements .................................................................................................................... 22

Assessing the Borrower Certain Common Check Points ...................................................... 23

Appraisal of a SHWS Proposal ................................................................................................... 24

Sanctioning Authority.................................................................................................................. 25

Disbursement ................................................................................................................................ 26

Checklist for SHWS ..................................................................................................................... 26

CASE STUDY MODULE ..................................................................................................................... 27

Purpose .......................................................................................................................................... 27

General .......................................................................................................................................... 27

Costs Associated with Electric Point Heaters ............................................................................ 27

Costs Associated with SHWS ...................................................................................................... 28Comparing the Cost of Electric Point Heaters and SHWS ...................................................... 28

Conclusion .................................................................................................................................... 31


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1

FAMILIARIZATION MODULE

PURPOSE

The purpose of this Module is to provide lending officers in the credit unions with a general overview of

the technological aspects of solar hot water systems (SHWS) and to introduce the officers to the technicalspecifications of the SHWS that will most likely be financed under the Caribbean Solar FinanceProgramme (CSFP). The Module is also designed to serve as a base level reference tool for the officerswhen confronted with technical issues in regards to lending in support of target consumer purchases ofSHWS under CSFP.

INTRODUCTION

The idea of collecting the suns energy for mankinds heating needs has been applied in perhaps everyculture in history. Solar thermal technologies directly use the suns heat, typically in a concentrated form,towards various applications, such as heating water, generating electricity, heating and cooling indoorspaces, cooking, crop drying, and so on. Heating water using a Solar Hot Water System (SHWS) is one

of the most common applications of the technology, and has been around for centuries. Clarence Kemppatented the first commercial solar water heater in the US in 18911. He used the integral collector storage(ICS) concept, a principle whose basic precepts are still in use today. William Bailey revolutionized theindustry with the first flat plate collector in 1909. In the 1930s market penetration in Miami was 50%,and 80% in new homes2. As electric and natural gas prices dropped and copper prices rose, solar waterheating declined. Today, it constitutes only a small fraction of the water heating market in the US, but itis growing considerably in Europe and other parts of the world. While US sales dropped 2% in 20033they grew 22% in Europe4, where some 15 million ft2 (1.4 million m2) were installed, then tapered off in2004. Germany leads the world with over 8 million ft2 (750,000 m2) installed in 20045. Throughout theCaribbean, SHWS technologies have been well known for decades.

Sunlight is a variable fuel resource. As seen in Figure 1, its intensity is impacted by time of day and time

of year. This is because the suns raysmust pass through more air mass inthe morning and evening as comparedto noontime. Further, because of thetilt of the earths axis in its orbit, oursun appears to be higher in the skyduring summertime and lower in thewinter. Other variables such asclouds, pollution, and dust willdecrease the amount of solar energyreaching the earths surface.

Figure 1: Intensity of Sunlight as Impacted by Time of Day and Time of Year

Sunlight is a distributed fuel resource therefore, the larger the surface area that intercepts and absorbs thesuns rays, the greater the amount of solar energy captured. Also, the more time a given flat surface canspend perpendicular to the suns rays, the greater the amount of solar energy captured.

SOLAR HOT WATER SYSTEMS

A SHWS heats water using the suns energy, rather than electricity or gas, as fuel. A typical SHWSincludes a flat plate collector, a well-insulated storage tank, cold and hot water pipes, and other balance-


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of-system components necessary to harness thermal energy from the sun to provide households withreliable, safe, and affordable hot water systems for domestic use. Although the sizes of the systems varydepending on hot water requirements, typically SHWS sizing assumes a usage of about 20 gallons perperson per day for domestic applications.

The optimum way to collect solar energy for domestic hot water use is either the ICS (Integral Collector

Storage) collector or the glazed flat plate collector such as is shown in Figure 2. In a glazed flat platecollector, sunlight passes through the glass and is absorbed by a dark metal absorber sheet and convertedinto heat. The heat moves through the absorber sheet and into fluid in a pipe. As the sun heats theabsorber and fluid, they can get much hotter than the surrounding air. However, insulation on the backand the sides keeps them from cooling too quickly. The glass also helps trap the heat inside during theday, similar to how a car will heat up if left in the sun all day. The heated fluid leaves the collector andgoes to a well-insulated storage tank where it is stored until it is needed for use in the house. Then, thehot water leaves the storage tank and is replaced by cold water from the city or a well.

Figure 2: Cross-section of a glazed flat plate collector

COMPONENTS OF A TYPICAL SHWS

Solar Collector

The solar collector traps sunlight, converts it to heat, and conveys that heat to a working fluid such aswater. Glass and insulation allow water temperatures to rise quite a bit above air temperatures. In an ICScollector, the storage tank doubles as the collector.

Hot Water Tank

The tank stores the solar heated water for later use. It has thick insulation to minimize heat losses and ametal jacket to protect the insulation from damage. Often, an electrical element will be added to providebackup to the solar heat.


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Piping

Piping conveys the water between the different components. Due to the high temperatures experienced,only metal piping (usually copper, sometimes galvanized iron, but always the same material as is found inthe collector) should be used between the collector and tank. Metal piping is also common between thetank and the home, although certain plastics are sometimes used.

Pump

Pumps are not found on thermosyphon or ICS systems, but are found on photovoltaic-pumped (PV-pumped) active designs. The pump is used to push water around the collector loop.

Other

Valves and other components are necessary to safely and consistently provide solar heated water to thehome. These are discussed elsewhere in this Module.

DIFFERENT TYPES OF SHWS FOR DOMESTIC APPLICATIONS

While SHWS are based all on the same principles, the design of systems differs depending on localclimatic conditions, roof structures, costs, efficiency and size requirements of customers, etc. Thissection provides information on the typical SHWS installed for domestic applications in St. Lucia.

The Thermosyphon Design

One of the most common designs in thetropics is the thermosyphon design. It alsois perhaps the most straight forward andelegant in its simplicity. It makes use of thebuoyancy effect in natural convection tocollect the suns heat and store it in an

insulated tank for later use. The suns raysare absorbed by the metal plate, which heatsthe fluid inside the collector tubes. As thefluid is heated in the collector tubes, itbecomes less dense and rises to the top ofthe tank. Relatively cool fluid from the tankdrops down the outside pipe to the bottomof the collector to replace the rising heatedfluid. This cycle continues as long as thesun is able to warm the fluid in the collectortubes to a temperature warmer than the fluid

Figure 3: A Typical Thermosyphon System

in the tank. When the sun sets and can no longer warm the collector, the cycle stops. Because thecollector has only glass on one side, it cools quicker than the tank. The heavier cold fluid stays in thecollector, and the lighter heated water stays stored in the tank.

Insulation in the back and sides of the collector and the glazing in the collector front allow it to collectheat during the day at temperatures much higher than the surrounding ambient air. Insulation around the


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whole tank reduces heat loss so the solar heated water can be stored for long periods of time until it isneeded. A 40 gallon (150 l) tank will weigh over 330 pounds (150 kg), while the weight of the collectorswill be about 85 pounds (39 kg) for a single 21 square foot collector. The roof structure must be able tohandle this weight.

Figure 4: Cut-away View of a Closed Loop Thermosyphon System

In order for the thermosyphon effect to work, the

storage tank must always be physically abovethe collector. People have experimented fordecades with different sized pipe, size ratios,vertical vs. horizontal tanks, etc. But in each,the tank is always above the collector. Somedesigns, like Figure 3, send water from the tankdirectly to the collector. This is a very efficientway to collect heat but exposes the smallcollector tubes to potentially aggressive citywater. Others, like Figure 4, use a dedicatedfluid in the collector and transfer heat to the tankvia a heat exchanger. The collector loop uses a dedicated fluid and is a closed loop; that is, it is not

exposed to the city water. While the heat exchanger means some loss of efficiency, the collector andpiping are protected.

The Integral Collector Storage (ICS) Design

The ICS design is even simpler than the thermosyphon design. It might be considered a very large pieceof pipe inserted into the hot water supply line. Figure 5 shows a cut-away view of an ICS design. Thislarge pipe is placed in an insulatedbox with a window facing the sun,and acts as the solar absorber andthe tank combined, or integratedinto one unit. During the day,

sunlight passes through the glassand is absorbed by the darkenedmetal tube, heating the waterinside.

Figure 5: Cross-section of the

Integral Collector Storage Design

As the water sits in the tube, it slowly heats up over the day. The insulated box allows it to reachtemperatures much higher than the surrounding ambient air. When there is a demand for hot water, thesolar heated water leaves the top of the collector/tank and flows to the shower or sink. Cold water comesin at the bottom, replacing the hot water.

A filled 40 gallon (150 l) ICS system could easily weigh over 550 pounds (253 kg), with a relativelysmall footprint. Although this improves the odds that it will stay put in a hurricane, it also means that theroof structure must be able to hold all the weight through out its lifetime. Because there is only a sheet ofglass between the tank and the night sky, these tanks are not as well insulated as thermosyphon tanks.Hence, they tend to lose heat quicker than the thermosyphon tank does. This heat loss is a problem innorthern climates so this design is not very effective where the night skies get very cool or if there is asignificant morning load. However, in the tropics, the ICS design is quite effective. It is best used in


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applications where hot water use is in the evenings. Further, its simplicity means that there are fewerthings to go wrong, so these designs are very durable in areas with non-aggressive water.

The PV-pumped Design

This design allows you to place the tank at some location other than the roof. As seen in Figure 6, this

design requires a pump to circulate the water from the tank to the collector and back again. As the sunrises in the morning, it heats the water in the collector. It also shines on the photovoltaic (PV) panel next

to the collector. The PVpanel converts the sunsenergy into electricity, andis sized so that when thereis enough electric energy tostart spinning the pump,then there is enough solarenergy to heat the water inthe collector. The pumpsends relatively cool water

up to the collector, pushingthe warmed water out ofthe collector and down tothe tank. This continues aslong as there is sufficientsunlight to energize the PVpanel. When the sun setsand the pump can not run,the solar collector alsocools down. This designallows only the collector tobe visible on the roof.

Some feel that this is moreaesthetically pleasing.

Figure 6: PV-pumped Design

As the pump is onlycirculating water, ratherthan lifting it, a small pumpmay be specified whichhelps reduce cost. An air

vent is necessary at the collector outlet and at any other high points in the plumbing, since any air pocketsmight overwhelm the pump. The pump and PV panel must be properly matched or the system will not

work as intended. Most designs use city water directly in the collector loop. In areas with aggressivewater, the same design could be used with a heat exchanger between the collector and the tank.

Other Solar Water Heating Designs

Both the thermosyphon and the ICS design are described as passive, since there is no mechanical pump,while the photovoltaic-pumped design is considered active. All three designs could be direct. Thatis, water enters directly into the collector. The thermosyphon and the PV-pumped system could also be


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configured as indirect. In the indirect system, there is a heat exchanger that separates the water fromthe fluid that is in the collector.

It is possible that systems with pumps using alternating current (AC) be seen in this loan program. Thesedesigns use a pump powered by conventional 110VAC or 220VAC electricity, rather than PV. Anadvantage of these designs is that the AC pump typically cost less than the PV panel and pump.

However, they will not run if there is a power outage, and they do consume costly electricity. Thisparasitic power reduces the overall energy efficiency of the system as a whole. AC-pumped systems mayoperate on a differential controller or with a simple timer. The controller is more reliable than a timer, butrequires sensor wiring up to the collector, and introduces increased complexity over the simpler systemsdescribed above.

There are several solar water heating designs that wont be seen in this loan program, primarily becausethey deal with freeze protection. One is the antifreeze system that circulates a glycol in the collector loop.Another is a drain-back system that only pumps water into the collector when there is sufficient sunlightto heat it. Both protect the collector fluid from freezing, which is not an issue in the islands.

ADVANTAGES AND LIMITATIONS OF SHWS

SHWS are successfully meeting the hot water requirements of millions of households around the world.However, SHWS may not always be the optimal technology in delivering hot water. It is important toconsider both the advantages and limitations of SHWS before selecting it to meet the hot waterrequirements of a particular application. Experience has shown that when users have unrealisticexpectations of their SHWS, they are likely to operate it improperly or simply stop using it altogether.The following discussion summarizes the basic advantages and limitations of SHWS to help you knowwhen it is the right choice.

Advantages of SHWS

SHWS offer households a reliable, safe, and affordable alternative to meet their hot water requirements

for domestic applications. These systems have various benefits over conventional methods of heatingwater for home use.

Cost Effective: While the initial capital cost of purchasing a SHWS is almost always higher than anequivalent sized electric or gas heater, there are no related fuel costs and maintenance costs are typicallynegligible. In the medium-term, SHWS are usually cost effective in displacing the electric heating ofwater when the price of electricity is very high such as in small island nations like St. Lucia withgeneration systems based on imported fossil fuels and common use of inefficient electric appliances suchas electric point heaters to meet domestic hot water requirements. In addition, SHWS for St. Lucia isclearly one of the most effective energy conservation programs in the country as it conserves costlyconventional power that could be used for other purposes. For instance, one would draw approximately 6kWh of electricity from the grid per day to provide a family of four with hot water. Most, if not all of this

energy would be saved by installing a SHWS, depending on the size installed.

Free, Abundant Fuel: Heat from the sun, the fuel source for SHWS, is a widely available, inexhaustible,reliable, and free energy source. Hence, these systems have no monthly fuel bills. Like electric or gaswater heaters, there may be minimal costs associated with maintenance or fee-for-service installations.

Locally Generated Power: SHWS make use of a locally-available resource the sun. This providesgreater energy security and control of access to hot water. It also reduces potential hazards associatedwith transporting fossil fuels or the use of electricity in a water heating system.


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Environmentally Benign: The use of the suns energy to heat water using a SHWS produces no gaseous orother emissions during operation and offers an environmentally benign alternative to fossil and nuclearsources of energy. Further, the system operates silently and may offer a more visually pleasingalternative to power conduits strung across the landscape.

Effect on National Economy: A large part of export earnings of St. Lucia are used to pay for imported oil

and gas. Installing and using SHWS could substitute the use of fossil fuel-based heating systems, andreduce related expenditures. In addition, capital saved by not building additional large power plants canbe used for investment in health, education, economic development, and industry. Expanding theapplication of SHWS to meet the hot water requirements of households creates jobs and businessopportunities based on an appropriate technology in a decentralized marketplace.

Limitations of SHWS

High Initial Cost: Although residents of St. Lucia pay high prices for grid-based electricity, this cost isspread over time. The high initial cost of SHWS acts as a barrier for their dissemination across thecountry. Financing is needed to spread this high initial cost of SHWS over a longer period, therebymaking them accessible to low and middle income households in St. Lucia.

System Maintenance: While SHWS require relatively little maintenance and up-keep, end-user training insystem usage and limitations is essential to ensure effective operation of a complete SHWS. This factor ismitigated by the fact that a maintenance contract is typically included with the purchase of the system.However, any required training could easily be provided by the installer of the SHWS at the time ofinstallation.

Sun Dependent: Just as a gas-powered water heater will not run without gas, a SHWS will not operatewithout energy from the sun. Energy from the sun is a diffuse fuel source. Factors such as cloudsblocking the sun or shadows cast by vegetation and structures will diminish the systems output as willincorrect installation; however related limitations can be mitigated by appropriate system sizing andplacing.

TECHNICAL RISKS OF DOMESTIC SHWS

Introduction

This section is meant to define and discuss some of the technical risks associated with SHWS. The termRisk here refers to the potential of where and when the system might fail to deliver what it is designedto deliver: hot water. This would relate to the systems ability to perform according to design, as well asits ability to deliver over the years, or its reliability. As with any appliance, there are also some safetyrisks that should be understood. Related issues are divided into the following three subsections:Performance, Safety, and Reliability. There will be some overlap among these topics and subsections.

The best guarantee of performance is certification of the SHWS. While there are many high quality non-certified systems on the market, a certified SHWS will have been tested and inspected by a third party tomeasure performance under specific test conditions. A performance rating is given that allows the modelto be compared to other models certified to the same protocols. In addition, the system is evaluated forvarious safety, durability, and reliability issues.

There are a number of solar thermal certification entities available. In the US and Canada, jurisdictionswill specify either the Solar Rating Certification Corporation (SRCC) or the Florida Solar Energy Center(FSEC) Certification. In Europe, many governments require certification following the European norms


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or ISO (International Standards Organization) standards. Other countries are also active: Brazil has anactive testing and certification program and Mexico is considering a testing lab and collaborating with theUS and Canada to certify solar systems.

Performance

Orientation: Selection of the tilt and azimuth (or the orientation relative to south) of a solar collector hashistorically been decided based on the optimum orientation for maximum solar energy collection.However, in recent years tilt and azimuth have often been chosen on the basis of aesthetics or even windload resistance characteristics.

As detailed above, SHWS are designed to heat water by using sunlight as the fuel, rather than electricity,propane, or natural gas. Solar energy is a distributed energy resource. This means that it is evenlydistributed over an area and must be collected into one central place (the tank) in order to be useful. Thegreater the amount of sunlight the solar collector can intercept, the more heat it will collect and deliver tothe tank.

It can be shown that the best orientation for a fixed, non-tracking flat plate solar collector to collect the

most energy over a year is to be oriented toward the equator and at a tilt equal to the latitude of thelocation. The discussion here will relate to the northern hemisphere. Thus, with St. Lucia being at 13-14degrees latitude in the northern hemisphere, a solar collector will collect the most energy if it is pointingsouth and tilted at an angle of 13-14degrees off horizontal. This wouldcorrespond to a roof pitch of justunder 3 in 12.

If a relatively large winter load isexpected, then the optimumdirection is still south, but theoptimum installation angle is as

much as ten to fifteen degreesgreater than latitude. As can beseen from Figure 7 for OrlandoFlorida (latitude 28 degrees), thehigher tilt will allow the collector tocollect more energy in the winterwhen the sun is lower in the sky.

Figure 7: Optimal Angle for a Solar Collector in Orlando

An example of a large winter load might be a school kitchen or gym showers that would have no load inthe summer, or a hotel that hosts only winter tourists. In St. Lucia, optimum winter-based tilt angles

would be between 23 and 29 degrees off horizontal.

If a relatively large summer load is expected, then the optimum tilt for St. Lucia would be 10 degrees. Ingeneral, most collectors should be tilted at least ten degrees off horizontal so that rain will not puddle onthe glass. Also, most thermosyphon systems will require a minimum slope of the collector as specified bythe manufacturer. This minimum slope ensures that the thermosyphon effect will function properly. Alarge summer load might be seen in a vacation home, or a summer camp.


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Rack mounting might be used to tilt the collector to the correct angle. Most manufacturers provide rackmounts designed for their system. This type of mount is necessary if one is installing on a flat roof asseen in Figure 8. However, it might also be used to tilt a system on a sloped roof as well. Rack mountingmight be necessary if the system must be placed on the north roof, as seen in Figure 9, or if the roof slopeis too great to justify a stand-off mounting.

Figure 8: Rack Mounted Solar Collectors on a Flat Roof

Although tilting the collector to latitude provides the optimumenergy collection, many installers and homeowners opt to take aslight performance penalty and mount the collector parallel to theroof plane. A performance penalty of 6% is taken for tilts off-optimum by as much as 20 degrees. This loss of performancemight be recovered by specifying a system with a slightly larger(for example 6% larger) collector.

Figure 9: Rack Mounted Solar Collectors on a Slanting Roof

In the interest of aesthetics and sometimes even for better windresistance, collectors may be mounted just off the roof surface in astand-off mounting as seen in Figure 10. A stand-off mount shouldhave at least two inches (five centimeters) of clearance between thebottom of the collector and the roof. This will keep leaves and debrisfrom building up in between the collector and roof surface. Some

installations are even integrally mounted with the roof. These collectors become part of the waterproofroof membrane. Integrally mounted collectors must beproperly flashed to the surrounding roof material or theywill allow damaging leaks. If they are properly installedon structurally sound roofs, integrally mounted solarsystems are both aesthetically pleasing and could be

more wind-resistant relative to a stand-off mount or rackmount. However, with proper design and installation,all mountings discussed will in principle withstandhurricane-force winds up to specified design windspeeds.

Figure 10: Stand-off Mounted Solar Collectors on a Slanting Roof

What if an installer were to put a solar system on an east-facing or west-facing roof? Just as with tilt, anyvariation in azimuth that is not south will result in a slight performance penalty. A solar system on a westroof will be exposed to less sunlight throughout the day, as compared to an equivalent south-facingsystem. So, it will collect less heat over the year. Studies have shown that there is a 40% decrease inperformance for azimuths of 90 degrees off-south as shown in Figure 11. Again, this orientation-related

collectable energy loss could be compensated for by an increase in the collector size. Some argue thatplacing a collector on the west roof is better than on an east roof, since the solar energy is collected in theafternoon when the air temperature is warmer, and since the rate of heat lost from the collector decreasesas the difference between collector temperature and air temperature decreases. Warmer outside air allowsless loss from a heated collector. This argument may be true; however, if an area is prone to afternoonstorms, then the west roof is not preferred over east or south.

North facing collectors are not recommended. While this is not as great an issue as one approaches theequator from northern latitudes, north-facing collectors do not collect a significant amount of solar energy


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even in St. Lucia. If a collector must be placed on a north-facing roof, then it must be rack mounted sothat it faces south as seen in Figure 9. Some customers may insist that their system be placed on the northroof facing north. In this situation, one manufacturer requires that the customer sign a waiver stating thatperformance is no longer guaranteed.

Figure 11: Change in Performance Based on

Azimuths

Shading: Since a solar system collects the sunsenergy, it needs to have access to that energy.As such, shading of the collector should beminimized. Shading may occur from nearbybuildings, other solar systems or equipment onthe roof, or trees. When evaluating a site,remember that trees grow. A tree that is a smallsapling when the solar system is installed maygrow to shade the system over its 15 to 20-yearlifetime. The solar system may need to be

moved or the tree trimmed, to maintainperformance.

System Sizing: Sizing hot water storage to agiven load requires a bit of knowledge about the

consumer. The FSEC sizing procedure is based on either the number of people or the number ofbedrooms. It assumes a usage of about 20 gallons per person per day, or about 22 to 25 gallons (83 to 95l) per bedroom per day, which ever is larger. It assumes a hot water delivery temperature of 122F(50C). Jacuzzis or hot tubs would require additional storage. Helioakmi assumes a very cool deliverytemperature of 113F (45C) and a lower consumption of 9.25 to 21.15 gallons (35 to 80 l) per person perday, but they consider clothes washing and dishwashing separately.

Most manufacturers have already determined correct collector/storage ratios for their markets. Generalrules of thumb for the Caribbean are 1.5 to 2 gallons of storage for each square foot of collector, or a 2:1ratio. For example, an 80-gallon (303 l) tank would be well-matched with a 40 ft2 (3.7 m2) collector. Or,some US contractors assume 20 square feet (2 m2) each for the first two people in the house, and 8 ft2 (0.7m2) for each additional person. However, most established manufacturers have determined by trial anderror the correct ratio that keeps a customer happy. One very successful model in St. Lucia has a ratio of2.4:1.

What if the solar system is undersized? In theory, the solar system will operate more efficiently, since allof the solar energy collected is being used, and less is being lost during storage. However, the electric orgas backup will be used more. The customer will see less of a reduction in his electric (or gas) bill. If thebackup is shut off, the customer may experience hot water outages. This will certainly result in

complaints to the solar company about not enough hot water.

What if the solar system is oversized? In theory, one would have paid for more solar equipment thanneeded. The system will tend to reach stagnation temperatures more often. Most systems are designed towithstand stagnation temperatures indefinitely. However, the pressure-temperature relief valve may startto open regularly, causing a nuisance. Or, the water exiting from the relief valve might be misinterpretedto be a leak. Very high water temperatures in an oversized system could result in dangerous scaldingproblems at the fixture, if proper anti-scalding measures are not taken. See below for the importance ofanti-scalding measures. However, over-sizing assures that the customer will have sufficient hot water,


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even with the back-up heater turned off. It allows the customer to increase loads in the future, perhaps ifmore family comes to stay. Experience has shown that many customers do increase their hot water useafter installing a solar water heater when they know it is free solar heated water that they are using.

Note that most US sizing calculations including FSEC assume an annual solar fraction of 50-75%. Thatis, the solar system contributes 50-75% of the load over the year. A 75% annual solar fraction implies

that the solar system meets 100% of the load in the summer and 50% in the winter. Historically, this hasbeen done because of the higher cost of solar equipment and very low cost of fossil fuels in the US. A75% solar fraction assured that the solar system was never oversized or unused, optimizing the solarinvestment. This sizing assumption may change as both electric and gas costs rise. Most calculationsdone in the tropics assume 100% solar-supplied heat, or at least most of the load is supplied by solar withbackup only part of the time. This would mean that most of the time the system is oversized. SolarDynamics assumes solar will provide 99% of the load; Helioakmi estimates 70-100% of the load is solarsupplied. From a marketing standpoint, it makes more sense to supply a larger portion of the load withsolar heat. Todays collectors are made from materials that can withstand stagnation temperatures, theincremental material cost of a larger system is not significant, installation cost is about the same, and anti-scalding measures protect the consumer. If one is to err in sizing, perhaps one should err on the oversizedside.

Safety

Proper Piping Material: There are several acceptable piping materials, depending on the location in thesystem. Only metal piping should connect the collector to the tank in a thermosyphon system. Metalpiping is also strongly recommended between the collector and tank in PV pumped systems, in fact it isrequired for certified systems. The metal piping should be of the same material as the collector.Generally, copper tube is used, since most collector waterways are made of copper. Copper tube of TypeM or thicker is recommended.

Collectors and tanks could get quite hot under stagnation conditions. Although some plastics like CPVC(chlorinated polyvinyl chloride), polybutylene, and some polypropylenes are rated for hot water service in

a home, they are not rated for the potential high temperatures that could be experienced in the collectorand solar tank. Although CPVC has a pressure rating of 400 psi (2.8 MPa) at 73F (23C), it falls to 100psi (689kPa) at 180F (82C). There is a potential that plastic pipe might soften and rupture at very hightemperatures, causing dangerous release of hot steam or fluid.

Sometimes CPVC plastic pipe is used in the rest of the hot water plumbing after the solar system. It tendsto be cheaper and easier to work with than copper, it does not corrode when exposed to chemicalscommonly found in water systems, and it functions as a defacto dielectric break between different metalsin the system. CPVC is acceptable and allowed in many building codes for house hot water piping.However, the first few feet of piping leaving tanks and any piping near exhaust flues (for systems withgas backup) should be metal, not plastic.

Note that CPVC is a tan color. White PVC (polyvinyl chloride plastic pipe) is for cold water use only andshould never be used in the hot water plumbing loop. Other plastics such as polyethylene and ABS arealso only rated for cold water use, and some grades are for low pressure use only.

Scalding Risk: Scalding risks have received a lot of attention in the US in recent years. According to theNational SAFE KIDS Campaign, scald burn injury caused by hot liquids or steam is the most commontype of burn-related injury among young children6. The elderly and handicapped are also at risk due totheir slower reaction time. There are claims that water can scald at temperatures as low as 110F (43C)7.Some studies have shown that it takes 10 minutes to receive a third degree burn at 120F (49C), it only


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takes 30 seconds at 130F (54C), and one second at 160F (71C)8. In response to this safety concern,most US building codes now mandate some form of scald protection9. Even though many codes nowrequire protection at fixtures, SRCC requires a mixing valve in any certified system.

The first and best protection against scalding isprecaution, especially with the very young or the

feeble. However, anti-scald and mixing valves arealso a strong protection against scald accidents. Ascan be seen from the sample in Figure 12, mixingvalves have an inlet from the cold water supply (orcity water), an inlet from the hot water supply (ortank), and an outlet to the hot water load in the house.A temperature sensor checks the outlet temperatureand mixes cold water with the hot so that the outlettemperature does not exceed the set point.

Figure 12: Mixing Valve Used to Protect Against Scalding

In over-simplified terms, an anti-scald mixing valve has been tested to certain test standards, it is listed,and it fails closed. A simple mixing valve is usually much cheaper but it is not tested or listed and it mayfail open. Many non-US markets do not yet consider scalding to be a preventable danger.

Relief Valves: Without protection, a domestic hot water heater whose thermostat has failed would see acontinuous rise in temperature and pressure from the expanding water. This temperature and pressurewould continue to rise until the pressure exceeds the pressure capacity of the tank. If the tank bursts, thesuperheated, pressurized water would instantly boil and expand with explosive force. To prevent suchcatastrophic failures, water heaters are required by code to be protected for both over pressure and overtemperature conditions. This applies to electric, gas, and solar water heaters.

Certified systems must have pressure relief valves installed on all portions of the system that can be

isolated and heated. Relief valves must be set below maximum design pressure of all components. Forcomponents exposed to city pressure, the pressure relief is usually set to 150 psi (1.03 MPa). Valves areusually installed on the tank and include a temperature relief to avoid over-temperature situations. Outletof the relief valve must be plumbed to a safe place. Relief valves help protect the system from over-temperature and over-pressure situations that may damage or rupture components.

Figure 14: Two Pressure-only Relief Valves

Figure 13: A Temperature-pressure Relief Valve


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A pressure relief valve is required in all portions of the system that can be isolated. Most solar waterheaters have the pressure-only relief valve for the collector loop installed at the collector. Again, specialcare should be taken to ensure the hot overflow from this valve does not come into contact with people orpets; some codes specify how this should be accomplished. The discharge pipe must be large enough tosafely handle the overflow volume. A temperature-pressure relief valve or T&P valve is shown in Figure13, and two pressure-only relief valve designs are shown in Figure 14. Note the handle at the top for

checking the valve. Also note the lack of a temperature probe on the pressure-only relief valve.

Proper Mounting: Solar systems are usually mounted on roofs. The hurricane-resistance concerns thatwill be addressed below not withstanding, it is essential that the system be properly secured. The tank canweigh several hundred pounds, and the collector is not very lightweight either. Improperly securedsystems could roll or slide off the roof and cause damage to people and property below. Awning-mounted systems should of course also be securely mounted. It is usually sufficient to mount ground-mounted systems on concrete piers. Ground-mounted systems have significantly reduced wind-loadingconcerns but much higher concerns for damage from everyday risks. Also, they may consume valuablespace in the yard.

Tempered Glass: Certified systems must have glazings that are tempered or non-shattering. Tempered

glass is stronger than regular float glass and when it does break, it breaks into small pebbles that arerelatively harmless compared to the sharp shards of broken float glass. Non-shattering or laminated glasshas a clear plastic film adhered to the glass that holds the pieces together when it breaks. It is the kind ofglass found in automobiles. Collectors are not only exposed to winds and flying debris during storms,they are also exposed to everyday hazards like wayward tree branches and cricket balls.

Sub-par Materials: In addition to not performing up to specification, sub-standard materials couldsometimes lead to unacceptable safety risks. Bargain parts may not meet minimum internationalstandards. Sometimes even reputable manufacturers may export poor quality parts to faraway foreignmarkets in the hopes that the customers will find it too difficult to return defective pieces to the factory.This practice is bad business and reflects very poorly on the reputation of the factory, but it does happen.For example, brass fittings or copper pipe might fail at pressures lower than even the pressure relief valve

setting. This could result in a dangerous rupture in the system. St. Lucian manufacturers and assemblersshould take care to order parts from reputable vendors, and should vigorously follow-up on shipments ofdefective parts.

Another safety issue is lead-free solder. Lead is considered hazardous to health, and lead in any form hasbeen banned from potable water systems in the US and many parts of Europe. The lead ban includes thesolder used to make copper pipe joints. The traditional 50/50 lead/tin solder should not be used.Rather, 95/5 or 97/3 tin/antimony solder must be used by plumbers and installers.

Reliability

Reliability relates to how well the system will continue to provide service through the years. Failure or

degradation of components may not be safety issues, but they may mean lower performance as the systemages. Maintenance issues will also be considered.

Material Compatibility: Material compatibility is an important issue in avoiding premature failure of solarsystems. In particular, incompatible materials such as steel and copper should not be in the sameplumbing circuit. Sometimes it is unavoidable, such as copper piping returning to a steel tank. Then,dielectric unions should be inserted between the two metals. This helps to reduce galvanic corrosion.


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System Maintenance: A good warrantee is one tool to determine the reliability of a system. While even awell-written warrantee is useless if the company is out of business, the vendors involved in this loanprogram have been in business long enough to determine what is a reasonable warrantee. Warranteesusually run three to five years and cover manufacture defects. Some may cover parts and labor, but maybe voided if the system is improperly installed, if it is not installed by an approved installer, or if thesystem is abused. Most materials in properly installed certified systems are designed to provide trouble-

free service long after the warrantee has expired. However, some materials may require maintenance orperiodic replacement. Typical design lifetimes of collectors might be 20-30 years. Some claim pumpswill last 20 years, others claim 5 to 10 years. More delicate valves such as automatic air vents or reliefvalves that are exercised too often may need replacement after just a few years.

One material that may fail quickly is the insulation covering the pipes. Over several years, the sunsultraviolet (UV) rays will degrade insulation, drying it out and turning it to powder. Insulation of hotpipes is not as critical to performance in warm St. Lucia as it is in northern climates. However, loss ofinsulation does mean loss of collected solar heat. Also, disintegrating insulation can be an eyesore, orexpose hot pipes. There are coatings and coverings available. Aluminum and plastic coverings last avery long time but are relatively expensive. UV-resistant paint is less expensive, but may not give asprofessional of a look. Also, paints tend to need re-coating after several years. Another option is if the

installer were to offer to replace damaged insulation in critical places after a period of time, perhaps aspart of a maintenance package.

Valves could be a source of problems after several years of operation, especially in locations where thewater quality is poor or aggressive. Corroded valves may fail or develop leaks. Calcified valves maybecome inoperable or become plugged. This might stop the system from operating. Or, in the case of apressure relief valve, it might impair the valves ability to perform its function. All valves should bechecked periodically to assure that they are functioning as intended. The inspection might be done by thehomeowner, or it might be done by the company as part of a maintenance package.

Installers should offer customers a maintenance package. This might be included as part of the sale price,or it might be offered as an optional add-on to sale. It is useful to check the system every few years to be

sure that it is still functioning properly. This could include checking the insulation for deterioration,checking valves for operability and/or calcification, checking the sacrificial anode for depletion, andchanging out or replacing any of these parts that might no longer function efficiently. It is also importantto flush the tank periodically to remove any sediment buildup. While some tank manufacturers requirethat this be done semi-annually or even quarterly, annual flushing schedule or even bi-annual may besufficient. Any maintenance plan should be clear on frequency of visits, what is inspected, and who paysfor parts or components that need replacement.

Hurricane-Resistant Mounting: Hurricane-resistant mountings are another good measure of reliability.These mountings go beyond those discussed earlier that just assure a system will not slide off a roof.Hurricane resistance is something that is being considered among the architects and engineers of theregion, after last year's storms leveled so much of Grenada and Haiti. A hurricane-resistant mounting

must be able to stand up under hurricane force winds. It is possible to conduct wind-load testing to ASCEstandards and calculate how much wind a particular system and mounting will withstand.


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Figure 16: J Bolt Mount

Figure 15: Spanner Mount

These tests and calculations also determine how the collector will fare, examining the glazing, framewalls, and connecting bolts as well as the roof mounting technique. However, these calculations arebeyond the scope of this training course. Further, there are some basic mounting designs that will be asignificant improvement over what is currently done in the field.

Two of these are shown in Figures 15 and 16. Note that both the spanner mount and the J bolt mountrequire that an installer enter the residence to get access to the underside of the roof deck and therafters. Previously, installers usually only had access to the yard and the roof, possibly entering a kitchenor pantry to hook up the hot water line. These new mountings also require increased installation time, andmay add to the cost of installation. Further, on rafters that are exposed to the living space, the mountingswill be visible. This might be undesirable for high-end residences, but there are ways to minimize (not

eliminate) the "eye sore". And finally, a hurricane-resistant mounting is not of much value if the roof andrafters are not securely attached to the walls, and the walls to the foundation. This might be taken intoconsideration when specifying hurricane-resistant mountings on weak roofs.

If the mounting is on a flat concrete roof, the ideal mount is to tie into the metal reinforcing rod duringnew construction. On existing concrete roofs, it could be necessary to drill through the masonry and fix aplate on the underside of the concrete.


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FREQUENTLY ASKED QUESTIONS

1. Will I get hot water from my SHWS in the morning?

Yes, if your system is properly designed and installed. If you had a cloudy day yesterday, or you used upall the hot water last night, it may take more time to get hot water from your SHWS. However, if your

system comes with a back-up electric heater, turn the element on 15 to 30 minutes before you need the hotwater. A thermosyphon or PV-pumped system usually will keep your water hotter overnight than an ICS,but in the islands ICS will usually provide satisfactory service.

2. How much time is needed for water to reheat after I have used all the hot water from the system?

It depends on the collector/tank ratio and whether it is a good sunny day, but a good system can recover intwo to four hours of good sunlight.

3. Does the SHWS require new or special plumbing to connect the hot water taps to the system?

The installer will cut into the cold water supply to your existing hot water heater. He may choose to

remove the existing heater if it is in bad condition. The SHWS either replaces the existing water heater oris placed upstream of the existing water heater in the piping path. There is no other disturbance to thehouse plumbing.

4. Can I use hot water from the SHWS for my washing machine?

Absolutely yes! Solar heated water is often plumbed straight to clothes washers and dish washers, since amixing valve is not necessary. Using solar heated water greatly improves the cleaning power of manysoaps and detergents. However, if you intend to use hot water from your SHWS to wash clothes, dishes,and so on, make sure the company supplying the system is aware of this so the SHWS can be accordinglysized.

5. How does cloud cover effect the efficiency of my SHWS?

If you walk into the shade or if a cloud goes by, your skin feels cooler relative to standing in the hot sun.In the same way, the heat-collecting process slows when sunlight is diminished with clouds or shading.As long as the collector is hotter than the tank and maximum tank temperatures have not been reached,the system will collect heat.

6. Can I increase the capacity of my SHWS later if required?

Yes, if you find that you are consistently running out of hot water or if your family has increased, theinstaller may install a larger system, may add a second system, or may just add another collector to assuresufficient hot water supply.

7. What maintenance does the system require?

Like electric and gas water heaters, the tank should be flushed periodically to remove sediment and thesacrificial anode will need to be replaced periodically. Some delicate valves such as air vents or pressurerelief valves many need replacement if they function too often or are in areas with aggressive water. Theinsulation on pipes will degrade over time. Many companies will offer a maintenance agreement toperiodically check your system for proper operation.


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8. What is the difference between a solar hot-water panel and solar PV panel?

A solar hot water panel converts sunlight to heat. It has a liquid in it (usually water) and pipes going inand out if it. A solar PV panel converts sunlight directly into electricity. There is no liquid, but it willhave two wires coming from a junction box on the back.

9. What is the space requirement for installing a SHWS?

The footprint of an SHWS depends on the size installed. For a 4 or 5 person household, a thermosyphonsystem might take up 40 or 50 ft2. This is larger than most skylights but smaller than a large satellitedish.

10. What dangers are associated with using a SHWS?

The tank dangers are the same as with an electric or gas water heater: proper pressure and temperaturerelief valves must be installed and functional or the system will risk exploding in an over-pressuresituation. The collector dangers are the same as with any roof-mounted equipment: it must be properlyattached to the structure to avoid danger to people below, or to avoid blowing away in a hurricane.

11. Do I have to get my water tested (for sediment, minerals, etc.) before I can install a SHWS?

If you or your neighbors have not had trouble with scaling, corrosion or sediment in your hot waterbefore, then there should be no need to be concerned for a SHWS. If scaling or corrosion has occurred,then an indirect, or closed-type of design may be a good choice. If you plan to use water from an untestedwell or unknown source, the water should be checked for these things and for potability, regardless ofwhether or not you install a SHWS.

12. What is the life of the different components of the SHWS?

If properly installed in areas without aggressive water, the collector life can exceed 10 or 15 years. Good

pumps and valves may exceed this lifetime. Some valves may require changing after three to five years.If properly maintained, tanks may also last as long as the collector. By comparison, electric and gas waterheaters may last between five and ten years.

13. What is the cost of the different components of the SHWS that I may have to replace over time?

Air vent valves, T&P valves, sacrificial anodes and electric heating elements may cost less than EC$ 30,some tempering valves may be under EC$ 130, and most pumps will be under EC$ 270. An unscheduledservice call will cost more than the actual cost of the component replaced, to cover the cost of thetechnician and the site visit. A maintenance contract is a good way to anticipate unforeseen repairs.

14. How is the SHWS protected from pressure-related bursting?

Temperature-pressure relief valves are required on any plumbing loop that can be isolated and has aheating source. This includes the tank and the collector if it can be isolated from the tank. A pressure-only valve may also be required on the collector to keep the valve from opening unnecessarily duringnormal stagnation conditions.


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15. Can I install a SHWS on an existing structure or do I have to build new structures for the SHWS?

Yes, SHWS usually goes on an existing roof. Most manufacturers have sufficient mounting materials toinstall SHWS on all types of roof structure found in St. Lucia including shingle, tile, flat concrete, ormetal. Sometimes it is installed as an awning above a window or in the yard. Some large systems havebeen used as shades for car parks.

16. I have an electric hot water system. Can I use any part of that system with a new SHWS?

Yes. You can install your SHWS as a backup to your existing water heater, or you might choose to installa SHWS as a replacement to your existing electric heater when it fails. The installer will take this intoaccount when he sizes your system. If you are replacing your electric heater, he might recommend alarger SHWS or one with an electric backup. Some people with electric backups have turned off theelectric and have reported more than sufficient hot water for their needs.

17. Can I move my SHWS from one location to another?

Yes, but just like any other major appliance (such as an air conditioner or even large refrigerator), it will

require a qualified technician to safely and properly remove it from your roof and install it at your newlocation. Be sure that the technician caps the plumbing, seals any roof penetrations, and disconnects anyelectrical connections if used.


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REFERENCES AND NOTES

1. A Golden Thread, p. 117, by Butti and Perlin, Cheshire Books, Palo Alto CA, 1980.

2. ibid, p. 152.

3. US Department of Energys Energy Information Administration, as reported in Energy DesignUpdate, December 2004, p. 7

4. French periodical Systemes Solaires report 2004 EurObserver Barometer on Solar ThermalEnergy, as reported inEnergy Design Update December 2004, p.8

5. Sun & Wind Energy 1/2005, p.8

6. National SAFE KIDS Campaign (NSKC) Burn Injury Fact Sheet, Washington (DC): NSKC2004.

7. Comment by Redwood Kardon, c 1998, opinion writer for CodeCheck.com at

http://www.codecheck.com/q_a_tpr.htm

8. Domestic Hot Water Scald Burn Lawsuits: the Who, What, When, Why, Where, How Bynum,Petri, and Myers, Seminar and Technical Paper for Annual ASPE Meeting, Indianapolis, Indiana, October25-28 1998. via http://www.tap-water-burn.com/pamphlet/abstract.htm

9. 2003 International Plumbing Code, Section 424.3 (www.iccsafe.org) requires mixing valves atshower heads complying with ASSE1017 and limited to 120F (49C). Other references apply.

NOTE: All Figures taken from Solar Water and Pool Heating Manual July 2004 (Draft), prepared byFlorida Solar Energy Center, Cocoa Florida; unless otherwise noted.

Credit to Mark Thornbloom for photos in Figures 8, 9, and 10.


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FINANCE MODULE

PURPOSE

This Module of the Manual is designed to introduce lending officers in credit unions in St. Lucia to the

approaches and methods relevant to financing the purchase and installation of solar hot water systems(SHWS) under the Caribbean Solar Finance Programme (CSFP). While each credit union may have itsown specific guidelines related to the financing of SHWS broad guidelines with respect to loans forSHWS under CSFP are briefly discussed below.

GENERAL AND CLASSIFICATION

Loans for SHWS fall under the same category as general personal or consumer durable loans. As such,general eligibility criteria, the minimum amount required as a down payment by the member versus themaximum loan sanctioned by the credit union, loan proposals and application procedures, security andguarantees, appraisal procedures, disbursement, service charges, and repayment procedures will besimilar to those established by the credit union for general consumer loans.

UNIT SIZE AND COST

Briefly reviewing and summarizing the material presented in the Familiarization Module, a typical SHWSincludes a flat plate collector, a well-insulated storage tank, cold and hot water pipes, and other balance-of-system components necessary to harness thermal energy from the sun to provide households withreliable, safe, and affordable hot water systems for domestic use.

Typically, SHWS are sized based on the number of people who would be drawing hot water from thesystem. In general, the systems are sized based on the assumption that each individual in the householdwill consume 20 gallons of hot water, at a temperature of 122F (50 C), per day. In addition, mostmanufacturers have already determined correct collector to storage ratios for their markets. General rules

of thumb for the Caribbean are 1.5 to 2 gallons of storage for each square foot of collector, or a 2:1 ratio.For example, an 80-gallon (303 liter) tank would be well-matched with a 40 ft2 (3.7 m2) collector. Or,some US contractors assume 20 square feet (2 m2) each for the first two people in the house, and 8 squarefeet (0.7 m2) for each additional person. However, most established manufacturers have determined bytrial and error the correct ratio that meets customers requirements.

The table below provides the approximate prevailing cost per unit of three different sizes of SHWS thatare commonly installed in St. Lucia:

Table 1: Approximate Cost of Three Different Sizes of SHWS Commonly Installed in St. Lucia:

Customer Base Unit Size Cost (in EC$)

2-person Household 35-50 gallon tank and 15-20 square foot or21-25 square foot collector $2,670 $3,200

4-person Household 65 or 66 gallon tank and 25 to 35 squarefoot of collector*

$3,340 - $3,740

6-person Household 75 or 80 gallon tank and 35 to 40 squarefeet of collector

$3,870 $4,400

* The customer can increase the collector area for an additional $280 to $370 depending on the size selected.


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Tank sizing starts at about 15 - 20 gallons per person, with no less than about 35 gallons simply becausesmaller tanks are not available. This sizing baseline would be revised based on the salespersonsassessment of the customers lifestyle and available tank sizes. For instance, the salesperson may suggestan increased storage capacity for high school children, people who entertain a lot, or houses with extrashower heads to meet relatively higher hot water requirements. Lower storage capacity may be suggestedfor retirees, vacation homes, etc. The ratio of gallons to people declines as the number of people

requiring hot water from the SHWS exceeds two. While the Storage to Collector ratio (in gallon persquare feet) for the Caribbean is about 1.5 - 2.0 (2 gallons per square foot), it is important to allow thesalesperson some flexibility in sizing a system within these guidelines. While one may think that asalesperson would want to sell the largest model the customer will buy, there is a strong incentive toproperly size the system. If it is too small it will not be able to meet the customers hot waterrequirements, resulting in repeated complaints and a possible call-back under warrantee. If it is too large,the relief valves will open too often, again resulting in a call-back possibly under warrantee.

For additional information on the technical aspects of SHWS, please refer to the Familiarization Moduleof this Manual.

ELIGIBILITY

The loans to support union members purchase of SHWS under CSFP are to be treated as special loansand will be offered only to members falling into the low and middle income categories. A household istreated as a low income household if the monthly income of the household is EC$2,500 or below. Amiddle income family is one where the total monthly income to the household is between EC$ 2,500and EC$ 4,000.

In general, in order to qualify for a loan for a SHWS from a credit union, the low or middle incomeapplicant must, first and foremost, be a member of the constituent credit union and must have sufficientsavings that are not hypothecated in support of another loan or pledged as surety for a loan to anothermember. In addition, the individual must have been a member of the credit union for the minimumamount of time stipulated by the union. The applicants share balance must be adequate to cover the

prescribed percentage of the loan required for hypothecation, failing which he must provide other securityto cover the value of the SHWS. Further, the applicant must have definite sources of income forrepayment of the loan and must be creditworthy.

Applicants must own a property or must have a long-term lease on a property in order for the loan to beapproved. Alternatively a loan may be granted to a customer for purchase of SHWS to be placed on theirparents home. An applicant who is merely renting from month to month does not have a stable enoughdomicile to be granted a loan to purchase SHWS.

Consideration will be given to members that are servicing another loan from the credit union at the timeof applying for a loan for a SHWS. In order for that member to be granted the loan for the SHWS, her/hisexisting loan and related repayments must be on schedule and in good standing. If the existing loan is

delinquent, the request for the SHWS loan will be denied.

LOAN PROPOSAL

The loan application shall be submitted in the form prescribed by the credit union. The applicant shallfurnish all the necessary information as required by credit union.


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QUANTUM OF LOAN

While credit unions differ with regards to the amount of share capital the member must have to supportthe loan, on average the minimum requirement is 33.33%. The loan from the credit union would cover100% of the installed cost of the unit, including cost of accessories and the warranty, if not included in thebase price, as per the proforma invoice or quotation.

RATE OF INTEREST

The credit unions may charge interest not to exceed a rate of six (6) percent (%) per annum on all SHWSsub-loans accessed by middle income households. The credit unions may charge interest not to exceed arate of four (4) percent (%) per annum on all SHWS sub-loans accessed by low income households.Middle income clients are defined as households earning equal to or greater than EC$ 2,500 monthly butless than EC$ 4,000 and low income clients are defined as households earning below EC$ 2,500 monthly.

SECURITY

If the member applying for the loan has a minimum un-hypothecated share capital of 33.33%, additional

security may not be required. However, in the absence of such, the applicant may be asked to secure aco-maker or provide acceptable collateral before accessing the loan. Acceptable forms of collateral forthese loans could include the SHWS financed by the loan, allocation of a portion of the members salaryas repayment of the loan, certificates of share holding in public or private limited companies, businessassets, cash surrender value of insurance policies, and so on.

When accepting a particular form of collateral, the lending officer must take into account the nature of theasset with respect to its liquidity, possible depreciation in the value of the hypothecated asset, and otherfactors that could impact the unions ability to recover the value of the loan through sale of the collateralin the event of default.

CO-MAKER OR GUARANTOR

A credit worthy co-maker (preferably a third party) good for the loan amount may be included in the loantransaction as a guarantor. This would apply in cases where the members share capital is less than33.33% of the loan. The third party must be a member of the credit union, in good financial standing,and with an adequate debt to income ratio. In general, the eligibility criteria for the third party are thesame as for the member.

SERVICE CHARGES

Service charges applicable to the SHWS loan will be determined by the internal policy of the credit unionto which the member applies for the loan.

REPAYMENT

The loan is to be repaid in periodic installments over a period of one to five years depending on the sourceof income of the borrower. Interest shall be paid monthly or as mutually agreed upon by the member andthe credit union and accordingly be debited to the loan account.

OTHER REQUIREMENTS

Other requirements for a SHWS loan include:


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A salary slip certified by the applying members current employer Insurance certificate for the property in question Proforma invoice or quotation from the manufacturer or supplier who will provide and install the

SHWS for the cost of the system including all accessories and installation

A certificate stating that the system has been installed in compliance with recommended performance,reliability, and safety practices

Where the loan is required to be secured by mortgage, the applicant shall also submit the original titledeed of the property, encumbrance certificate, legal opinion, property valuation certificate, and othersupporting documents

ASSESSING THE BORROWER CERTAIN COMMON CHECK POINTS

To frame a proposal quickly, the lending officer should meet with the applicant. The assessmentstandards will vary from person to person, depending upon the size of the proposed loan, experience ofthe loan official, dealings of the potential borrower, and so on. It is advisable that the officer meet theborrower directly and not through any agency or third person. Such a meeting provides an opportunity tocollect first hand information for discussion. It also helps the loan officer check the various statementsand figures furnished in the loan application. The following brief should help the loan officer prepare therelated proposal efficiently.

The background of the borrower should be evaluated when assessing the loan proposal. Some of thecommon questions to be asked include:

Who is the borrower? What are his/her sources of income? If she/he has not previously taken a loan from the credit union, how has she/he met her/his credit

requirements (if any) till date?

Does she/he have outstanding financial commitments to any other institutions or individuals and whyhas she/he not approached the union for credit requirements?

If she/he has taken a loan from the credit union in the past does her/his repayment record meet theunions policies?

In the case of a new borrower, the loan official should collect the requisite details, and check theapplicants credit worthiness through credit check provider.

The loan officer should also look into aspects particular to SHWS when assessing the application,including:

Has the time required to install and initiate operation of the equipment been clearly specified?Is the SHWS being procured from a reputed manufacturer/supplier?Have provisions for adequate after-sales been made?

Have arrangements for the supply of spares in case of defective materials been made?

The following general aspects must also be examined:

What is the amount of loan required, and are cost estimates included in the application reasonable asper standard rates?

What will the loan mean to the borrower from the cash-flow point of view? When and how will the loan be repaid? Where will the funds come from for repaying the loan?


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environmental conditions and reductions in pollution levels; and other similar benefits should also beconsidered.

As the initial investment in the system is relatively high the payback period of the loan should ideally berelatively longer. Nevertheless the loan official should verify that the investment is financially viableover the term of the loan. The Case Study Module presents a financial work-up analyzing the financial

viability of a loan taken in support of purchasing a SHWS versus expenses associated with an electricpoint heater typically used by low and middle income households in St. Lucia.

Economic Aspects

St. Lucia spends a large portion of its foreign exchange earnings to pay for imported fossil fuels. Thecountry is all but exclusively dependent upon the imported oil and gas to generate electricity. As a resultof the high landed cost of these fuels and the monopoly position of the generation and distribution utility,low and middle income households in St. Lucia pay approximately EC$ 0.688 per kWh consumed. Thishigh per unit cost results in a high cost paid to meet domestic hot water requirements by using electricpoint or tank heaters. Households can reduce these expenditures, and the countrys dependence onvolatile international fossil fuel markets by supplementing the electric point heaters with SHWS.

Managerial Aspects

SHWS technology is relatively simple and the system is comparatively maintenance free. This factcoupled with a warranty and/or an AMC should be sufficient to ensure the proper functioning of thesystem with minimal management of the SHWS.

Repayment Capacity

The scope of this Training Course is limited to the financing of members purchase of SHWS fordomestic applications. As the income generation capacity of such loans is by nature limited, repaymentcapacity should be gauged based on the potential clients existing income and expenditure levels, and the

cost savings associated with the installation of the SHWS. As such, the lending officer should adopt aholistic approach and consider the entire budget of the applicant to gauge her/his repayment capacityrelying on viable and known sou

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