The solar water heater market may not be brand new, but it’s attracting a lot of new comers in recent years as more state and local incentives crop up. Sunnovations, which launched its first water heating system last year, announced Thursday that it has raised a series A round of funding to help it expand its market to Northeastern states and Colorado.
Sunnovations, founded in 2008, got the funding from Two Seven Ventures in Colorado but declined to disclose the amount. The startup’s CEO, Matt Carlson, told us that the amount is in the single-digit millions, and the company raised $250,000 in angel funding prior to that. The seed funding enabled the company to engineer a system that uses pressure and gravity to pump and circulate hot fluids to heat water, a patented design that comes with fewer parts and makes it cheaper to install and operate than other systems on the market, Carlson said.
Based in McLean, Virginia, Sunnovations engineers and contracts with American manufacturers to build its systems. It generates revenue by selling the systems to installers, and the latest funding round is key to expand its installer network. It has signed up installers in the mid-Atlantic states such as Maryland, North Carolina and its home state of Virginia. The company recent entered Massachusetts and is targeting New York and Connecticut next, Carlson said. It also has signed up a distributor in Colorado.
Installers who are selling Sunnovations’ systems include Southern Energy Management in North Carolina, SECCO in Pennsylvania and SunBug Solar in Massachusetts, Carlson said.
Although the solar water heater market has been around for decades, it hasn’t grown as quickly as it should, Carlson said. Companies that develop and install the more expensive solar electric systems, on the other hand, have done a better done of educating consumers, he added.
“This is a wildly under-discussed market. A lot of companies haven’t done a good job of telling the story of how (solar water heaters) can benefit you as a homeowner,” Carlson said. “A lot of websites are very technically oriented and haven’t made it easy for people to understand.”
Home and business owners are eligible to receive a 30 percent federal investment tax credit for installing solar water heaters. A growing number of states also are offering rebates to encourage their use. California, for example, launched its incentive program called CSI Thermal last year. The state budgeted $350.8 million for the program and plans to run it until the end of 2017, or when the money runs out. New York also launched one late last year that came with a $25 million budget.
The emergence of government subsidies has lured investors and entrepreneurs to the solar water heating space. Cogenra Solar, founded in 2009 and targets businesses and the government sectors, installed its first demonstration system at a California winery last year and attracted more than $10 million in funding from investors including Khosla Ventures. EcoFirst, previously known as PVT Solar, raised a B round of $13.7 million last year and has won contracts with several home builders. Both Cogenra and EcoFirst are developing systems that can generate electricity and heat.
Sunnovations’ system is strictly for heating water. The system comes with panels that direct sunlight to heat up the tubes inside that contain a glycol (antifreeze) mixture. When heated, the mixture expands and by convection moves to an 18-inch tall pump next to the panels. The company designed the pump to function without electromechanical parts to cut costs, Carlson said. The pump moves the heat transfer fluid to a water storage tank, in which a heat exchanger then heats up the water.
The system also comes with a reservoir next to the solar panels to store the glycol mixture when the water heater isn’t in used for an extended period of time, such as when homeowners go on vacation. Glycol mixture can overheat, break down and corrode the tubes inside the panel if left in the panels for too long, Carlson said. So when the water in the tank already is heated, the heated and expanded glycol mixture moves into the reservoir.