A lack of standards or criteria led to scandals that the industry has yet to live down. Customers got defective or improperly installed systems that never saved them any money, while tax credits lined installers' pockets, said David Kopans, director of regulatory affairs at Fat Spaniel, an energy-management company with trials in solar-thermal.
"There were some horror stories of cases where nothing was really installed. There was something on the roof, but it wasn't connected," he said. "Generally in the United States, there was a bad taste in everyone's mouth after that situation."
Now, the Golden State is trying again.
The state Legislature last week passed a bill that will create solar water-heating incentives for 10 years in the state, if it's signed by Gov. Arnold Schwarzenegger by Oct. 14. The bill is intended to encourage the installation of 200,000 solar water-heating systems to reduce natural-gas consumption.
Huffman said he is "very hopeful" Gov. Schwarzenegger will sign the bill, adding that his office worked with the governor's staff early on, making changes that staff members asked for.
The bill is one sign that solar water heating is starting to regain respect after long being relegated to "second-cousin status," said Mike Taylor, technical services manager for the Solar Electric Power Association.
And it's not the only sign.
Hawaii, Florida, Massachusetts, Oregon and Washington have solar water-heating programs, some through local agencies or utilities. And in May, Conergy subsidiary SunTechnics Energy Systems made headlines when it bought Aztec Solar, a solar water heating company. The news that Conergy, a large photovoltaic manufacturer and installer, was expanding into the market gave solar water heating a boost.
Of course, solar water heating hasn't had a bad reputation everywhere. While it hasn't done well in the United States, China, Spain, Israel and other countries have embraced the technology.
According to a report by Environment California, an environmental advocacy group, 46 million houses worldwide had solar hot-water systems by the end of 2005, with a combined capacity of about 88 thermal gigawatts. Israel, Cyprus, Greece, Austria, Turkey, and Japan have the highest per-capita usage, while Chinese installations make up almost 80 percent of new systems, according to the Worldwatch Institute, a think tank focused on environmental and social issues.
One appeal of solar water heating is that it's simpler to heat liquids with the sun than to make electricity, said Robert Wilder, CEO of WilderShares, which manages three energy indices. Solar water-heating systems also are much cheaper than solar-electric systems, he said.
"It's just a no-brainer," he said. "It's such as easy way to capture solar power."
But while the U.S. has lagged behind the rest of the world in solar water heating, industry insiders said California's bill could help change that.
"California is trying to put a quarter of a billion dollars on the table," Kopans said. "That should get people's attention. …Seldom does a government put a quarter of a billion dollars on the table and nobody tries to pick it up."
According to a fact sheet for the bill, California relies heavily on mostly imported natural gas for water heating and the state's demand is expected to continue to rise.
State Assemblyman Jared Huffman, D-San Rafael, who introduced the bill, anticipates California could save about 24 percent of its residential natural-gas usage and cut about 75 percent of residents' water-heating costs, if the bill succeeds in creating a mainstream market for solar water-heating systems.
"This bill is so important because it's really the other half of our solar future," he said. "We have photovoltaic solar to displace electrical use, but solar hot water is the best tool we have to displace natural-gas use. And we need to do both to solve our energy problems, meet greenhouse-gas goals and protect consumers from the volatility of the fossil-fuel markets."
While solar still makes up a tiny part of water heating in the United States - "You probably don't have enough zeros on your calculator to explain how small a percentage it is," Kopan said - it is growing very rapidly, he said.
Over the last two and a half years, Kopans said he has seen more solar water-heating companies at trade shows and increased state activity around the technology. New business models have cropped up, such as one from Canadian company Mondial Energy, which finances solar water-heating projects, paying the upfront costs for customers in exchange for an agreement to buy the hot water.
Aside from new policies, high natural gas prices and concern about global warming are helping the technology grow in the United States, said Mike Taylor, SEPA's technical services manager. And a change in the industry's image from "pony tails and pickup trucks to suits and real businesses delivering real businesses" also has helped, Kopans said.
But is there opportunity for new technology here?
Market for Innovation
Ethan Zindler, head of North American research at New Energy Finance, a research firm, said solar-thermal is "not that sexy" because there isn't a lot of new technology involved.
"The way it's perceived is that it doesn't seem like a cool killer-app technology," he said. "But I also think … simple, clear opportunities to do solar PV have been snapped up, so I think we're seeing VCs searching around the edges for technologies that haven't been explored as thoroughly."
Kopan said there's still room for innovation, suggesting mounting and racking systems as one place where improvement is needed. Still, it's unlikely the California bill will invigorate entrepreneurs and venture capitalists the way the solar-electric initiative could, he said.
"There's lots of room for technology innovation, but [this bill] is a drop in the bucket in the global supply chain for this stuff," he said. "You're going to see a significant impact from this, but you're going to see most of it on the installation and consumer-awareness side."
And, even with all the government support, Taylor said solar water heating still has to contend with its image problem.
"With PV, you can take the average homeowner and say, 'Here's the net-value payback,' and do the same with solar-thermal, and I think people always pick PV," he said. "There's some chic appeal to it."
More aesthetically pleasing systems could make a difference, he said.
In the meantime, California hopes its latest attempt to bring more solar water-heating to homes and businesses will be more successful than the last.
While the California Public Utilities Commission will put the details of the program together if it is approved, Huffman said it will include safeguards to make sure it is supporting only the best technologies and companies. "We have attempted to really bulletproof this program against some of the problems that have been experienced in the past," he said.