Cyprus solar water heating cluster: A missed opportunity

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0301-4215/$ - se

doi:10.1016/j.en

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Energy Policy 35 (2007) 3302–3315

www.elsevier.com/locate/enpol

Cyprus solar water heating cluster: A missed opportunity?

Christos N. Maxoulisa,b, Harris P. Charalampousb, Soteris A. Kalogirouc,�

aCyprus Organisation for Standardisation (CYS), CyprusbCyprus International Institute of Management (CIIM), Cyprus

cHigher Technical Institute, P.O. Box 20423, Nicosia 2152, Cyprus

Received 6 September 2006; accepted 28 November 2006

Available online 19 January 2007

Abstract

Cyprus is often called the ‘‘sun island’’ because of the amount of sunshine received all year round. The abundance of solar radiation

together with a good technological base has created favourable conditions for the exploitation of solar energy on the island. This led to

the development of a pioneering solar collector industry in Cyprus, which in the mid-1980s was flourishing. The result was an

outstanding figure of installed solar collector area per inhabitant. Nowadays, Cyprus is cited as the country with the highest solar

collector area installed per inhabitant, worldwide. This means that the local market for solar thermal collectors (for domestic

applications) is now rather saturated. It was only rational to assume that Cypriot firms equipped with their gained expertise and leading

edge would have safeguarded a sustainable growth and have an international orientation, focusing on exports in an emerging European

and eastern Mediterranean thermal solar market. Unfortunately, this is not the case today.

This paper reviews the economic performance and the competitiveness of Cyprus and the evolution of the solar water heating (SWH)

industry using the cluster theory of Michael Porter. Its aim is to give insight and explanations for the success of the sector domestically,

its failure with regards to exporting activity, pinpoint the industry in the European map and finally give recommendations for the cross

the boarders commercial success of the industry.

r 2007 Elsevier Ltd. All rights reserved.

Keywords: Solar water heating; Diamond model; Industry statistics

1. Introduction

Cyprus is the third largest island in the north-easternMediterranean, with an estimated total population of750,000 at the end of 2004 and total land area of 9251 km2.

Cyprus has an open, liberated market economy with arecord of strong economic performance reflected byperiods of swift economic growth, full employment andexternal and internal stability. The economy of Cyprus isprosperous and diversified, driven primarily by the touristand services sectors; but at the same time is highlydependent on imports of raw materials, capital goods andenergy due to the absence of natural resources. Cyprusdoes not have any native fossil fuel resources. It is almosttotally dependent on imported energy products, mainlycrude oil and refined products.

e front matter r 2007 Elsevier Ltd. All rights reserved.

pol.2006.11.021

ing author. Tel.: +357 22 406466; fax: +357 22 406480.

ess: [email protected] (S.A. Kalogirou).

With estimated per capita GDP of h17,700 in 2005equivalent to some 85% of the EU-25 average, Cyprus hasachieved a remarkable level of convergence with theadvanced European economies. Its real GDP growth rateoutperformed the last decade EU-15 and the trend isestimated to continue in the near future (Ministry ofFinance, 2006; European Commission, 2006).The Cypriot economy has transformed from an exporter of

primary product manufactured goods, mainly clothing andfootwear, to an international business and services centre. Forthe period 1995–2003, the services sector accounted for 75% ofGDP (Ministry of Finance, 2006). The growth is mainly drivenby the construction cluster, reflecting a growing demand forresidential and commercial properties by foreigners andresidents. The tourism, transportation, storage and commu-nication, real estate, renting and business activities, educationand health services also contribute to the growth whereas themanufacturing cluster seems to decline mainly due to externalcompetition.

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While Cyprus is the most prosperous among the 10 newEU member countries, its relative position in terms ofinnovation performance is lagging behind. Because of thehigh numbers of positive changes in trend indicators theEuropean Innovation Scoreboards is classifying Cyprus asa ‘‘catching up’’ country (European Commission, 2005).Under these circumstances, the main challenge for theCyprus government is to effectively exploit its increasedmeans following the accession to the EU and to improve itscompetitiveness and innovative potential of the country.By focusing on a specific innovation policy, the mainchallenges based on the performance of the country, willhave to increase both public and private R&D expenditure,as well as promote high-tech industry and enhance researchfor innovation. According to Professor Michael E. Porter(1990), the prosperity of advanced nations depends on

innovation and for Cyprus this innovation inadequacyconsists a major threat.

1.1. Diamond model

Michael E. Porter (1990) in his influential book ‘‘The

competitive advantage of Nations’’ introduced a newcompetitiveness theory, the so-called diamond model.The diamond model can be utilised as a framework toexplain why some industries within certain nations aremore competitive than others. The model suggests thatthe national home base of an organisation plays animportant role in shaping the extent to which it is likelyto achieve advantage in a global scale. In other words,the home base provides basic factors, which support orhinder organisations from building advantages in globalcompetition.

The diamond model is based on four interlinked factors,which affect companies in specified clusters. Local govern-ments can be perceived as the invincible fifth factor, whichcan indirectly influence the diamond’s attributes. The fourdiamond factors are briefly elaborated below:

�

Factor (input) conditions: These factors are difficult toduplicate and contrary to conventional economic theorythey are usually created rather than been inherited.Specialised factors of production are skilled labour,capital and infrastructure. � Demand conditions: If the customers in an economy are

demanding, they impose greater pressure to the firms,thus the firms are forced to constantly innovate, henceimprove their competitiveness.

� Related and supporting industries: The existence of

related industries facilitates the exchange of informationand ideas and promotes innovation. Additionally, itcreates a framework of utilising synergies and spillovers.

� Context for firm strategy and rivalry: Direct competition

impels firms to be more productive and innovative.

The role of government in the diamond model, aspreviously mentioned is to act as a catalyst by encoura-

ging companies to raise their performance, stimulatingearly demand for advanced products, focusing onspecialised factor creation and stimulating local rivalryby limiting direct cooperation and enforcing antitrustregulations.

1.2. Major clusters

A cluster is a geographic concentration of competing andcooperating companies, suppliers, service providers, andassociated institutions (Porter, 1990).Cyprus major clusters comprise the Hospitality and

Tourism, the Transportation and Logistics, the FinancialServices, the Business Services, the Construction Services,the Agricultural Products, the Biopharmaceuticals and theCommunications Services. These clusters totaled 6.4 billionEuro in the 2003 Cyprus exports and contributed around96% of the overall export capacity of the country, whichwas equal to 6.7 billion Euro. On a global exports basis theHospitality and Tourism cluster ranked 45th and presenteda share of 0.38%. The Transportation and Logistics clusterranked 43rd, presented a share of 0.33% and growth of0.13% while the Financial Services ranked 33rd andpresented a share of 0.16% and growth of 0.03% (Porter,2005). The actual importance of the Hospitality andTourism cluster for the Cypriot economy is far greater,because almost all other economic sectors supporttourism. Only an in-depth analysis using Porter’s DiamondModel would reveal the extent of Cyprus’ dependenceon tourism, but an initial estimate would indicate thattourism currently accounts for at least half of the island’seconomy.The Financial Services cluster is based on a well-

developed banking system and contributes around 20%of GDP. Cyprus is an important regional financial centreowing to tax incentives, an extensive network of double taxtreaties, its advanced infrastructure, highly educated labourforce and strategic geographic location. Additionally, it hasextensive links to the Middle Eastern and Central/EasternEuropean business markets.

2. The Cyprus SWH industry

Cyprus is perceived as a developed economy based onthe Euro/capita per year threshold. The annual GDP/capita—which is currently h17,700—is way over thedeveloped economy threshold of h13,000. Despite the factthat Cyprus’ attainment of per capita income is compar-able to innovating countries such as Israel, Ireland andKorea, Cyprus continues to remain in the non-innovating,technology-borrowing stage of development. This‘‘achievement’’ is attributed to the rapid growth of thetourist and offshore sectors over the past two decades.Since both these sectors are losing steam, the first becauseof environmental degradation and rising costs and thesecond because of impending higher taxation due toCyprus’s EU accession, Cyprus cannot expect the future

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1A standard unit of measurement for SWH is the m2 of collector

installed. The average m2 of absorbing area for a single unit is 3m2, i.e.

15,000 units installed ¼ 45,000m2.

C.N. Maxoulis et al. / Energy Policy 35 (2007) 3302–33153304

to be a simple projection of the past. Panayotou and Sachs(2002) suggest that in order to upgrade the Cypruseconomy, the efforts must focus on sectors like informatics,telecommunications, biotechnology, diagnostics and mole-cular therapy. This is probably true and maybe the bestway to move forward. Nevertheless other traditionalindustries, which enjoyed some favourable diamondfactors, may also deserve our attention. These industriesmay never be the cornerstones of our technologicalupgrade but they would undoubtedly contribute a respect-able share in the economy.

The industry under investigation, the solar water heating(SWH) Industry is one of them. This industry belongs tothe wider manufacturing sub-sector, which is a section ofthe broader secondary sector of production. This sub-sector is characterised by long-term structural problems,due to, among other things, the small size of the majority ofmanufacturing units, which negatively affect their ability toutilise advanced technology and modern methods ofmanagement, production and marketing. The manufactur-ing sub-sector oversaw a declining trend the past 20 years.The decreasing trend of the contribution of the manufac-turing sector to GDP is also attributed to the fasterincrease of production costs, as well as the intensificationof competition due to the implementation of the CustomsUnion Agreement between Cyprus and the EU and thetrend towards liberalisation of world trade (Mamuneas andPashardes, 1999).

Has the SWH industry in Cyprus entered a stalemate?The fact is that the solar thermal industry was probably theonly manufacturing industry that was not greatly affectedby the overall declining trend of the Cyprus manufacturingsector. Nevertheless, the aim of this paper is to show that ifproper remedies were taken and if a brave strategy wasformulated and embraced, the Cyprus SWH Industrycould have achieved a sustainable growth and a remarkableexport activity.

2.1. Historical development

The first solar heating systems were imported from Israelin 1959 (Kalogirou, 2001; Korniotis et al., 1999). Cypriotindustrialists began the manufacture of solar water heatersin the early 1960s, initially by importing the basicaccessories from Israel. The progress in the first yearswas rather slow. This is attributed to the rather high costsand the fact that this was a new technology. As moresystems were installed the local companies gained expertiseand most technical problems were solved. With therationalisation of the product the cost was decreased orremained stable and this led to the installation of moreunits on the island. The mid-1970s were marked by the oilcrisis, which boosted the interest for Renewable EnergySources and this favoured the use of solar power fordomestic hot water applications. In addition to this, theTurkish invasion on the island in 1974 had also affected theSWH industry. With one-third of the population becoming

refugees, the necessity for new and temporary buildings,primarily housing projects, resulted in a dramatic evolutionof the construction industry. This directly affected thedemand for SWHs. It must be noted that the governmentconstructed the majority of the temporary houses and thiswas one of the main reasons for the widespread installationof SWHs, since the government’s policy dictated that everyhouse should have such a system. This sudden upsurge indemand was a further encouragement for the industry toimprove the old designs offering more efficient SWHsystems (Korniotis et al., 1999). At that time there were twoways to heat water for domestic applications in Cyprus,these were the utilisation of solar energy and the use ofelectricity. Gradually the solar collector substituted theelectric heater, and eventually it became the standardsolution for the production of hot water for domesticapplications (Michaelides et al., 1991).In the 1990s the SWH production has reached a

maximum of 13,000 units or 40,000m2 per year.1 Todaythe installed collector area in Cyprus is 0.82m2 perinhabitant, which is the highest figure worldwide. Thisfigure means that for every 3.5 persons, i.e. on average forevery Cypriot family, there is a SWH installed. Thisinevitably means that the local market for domestic SWHis rather saturated. The current production of SWHs variesfrom 10,000 (30,000m2) to 15,000 (45,000m2) units peryear. This production covers the demand, which arisesfrom the new dwellings in Cyprus and the decommissionedSWHs due to ageing. This trend is clearly illustrated inFig. 1, which shows a cyclic behaviour and not a positivetrend. The production of SWH depends on many internaland external factors, among them the construction industrygrowth, the existence of subsidisation schemes in thecurrent year, the replacement rate of old SWHs, theinstallation of SWHs in large projects serving purposesother than domestic water heating and finally the SWHexport—import trade balance.It is evident that for the late 20 years the production of

SWHs follows a cyclical behaviour. After the steadygrowth of the 1970s the production of SWHs has reachedsaturation. As illustrated in Fig. 1 on the average the localproduction is around 34,000m2 and it is growing at a veryslow pace.

2.2. Integration of the solar thermal energy in Cyprus’

energy mix

The energy system of Cyprus is dominated by importedoil products. As illustrated in Fig. 2 oil products representthe 90% of the primary energy sources.The remaining 10% is shared between coal, an energy

source used for cement production and by some otherheavy industries in Cyprus and solar energy. Having in

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Average Production (1982-2002)

1982 1984 1986 1988 1992 1994 1996 2000 2002 2004

Co

llecto

r a

rea

(m

2)

50000

40000

30000

20000

Year

1990 1998

Fig. 1. SWH production in Cyprus for the years 1982–2003 (CYSTAT, 2004).

90%

5.5%

Oil products Solar Energy Coal

Primary Energy Sources

4.5%

Fig. 2. Primary energy sources in Cyprus.

C.N. Maxoulis et al. / Energy Policy 35 (2007) 3302–3315 3305

mind that a remarkable 62% of the country’s exportearnings is used to pay for the country’s oil import and thefact that Cyprus has no natural oil resources and thereforerelies entirely on imported fuel for its energy demands, thesignificance and importance of the solar thermal contribu-tion becomes apparent. This 4.5% of the solar thermalcontribution arises from a respectful 29% contribution inthe residential sector and a modest 5% in the tourismsector, i.e. the use of solar thermal energy by hotels.

Cyprus’ energy mix is currently changing. With a targetto double the Renewable Energy Sources (RES) contribu-tion to the energy system, and to increase the contributionof electricity consumption from RES from 0% to 6% bythe year 2010 the government formulated a RES ActionPlan for the years 2002–2010 which includes among otherthings the introduction of liquefied natural gas (LNG) inthe energy mix and a new grant scheme for the promotionand the subsidisation of RES.

In light of the above the solar thermal industry in Cyprusdeserves our attention for two reasons. Firstly, the onlycontribution of RES should be credited to a large extent tothe local industry. Furthermore, as analysed previously, if

proper remedies were taken the industry has the potentialof sustainable growth and in parallel with the REScontribution the industry may contribute in the country’sGDP and job creation.

3. Assessment of the cluster

3.1. SWH manufacturers and employment

The backbone of the cluster is the solar water heatermanufacturers. The characteristics of the industry werequite favourable for the evolvement of the Small andMedium Enterprises (SMEs) as principal solar water heatermanufacturers. This fact is not a local attribute since in theEuropean region only few manufacturers of solar collectorsemploy more than 30 people (OPET-TERI, 2000). Cur-rently there are more than 50 manufacturers of solar waterheaters in Cyprus. The manufacturers can be distinguishedin two categories. The first category is consisted of the localleaders, with a capacity of 1000 systems per year, which are5 or 6. The second category, which is the vast majority, aresmall or very small firms that employ less than 10employees. These firms are termed as micro-firms accord-ing the EU standards. Most of them are family businessesowning small workshops. These were plumbers andtechnicians who entered this field because of the demandfor SWH products and the fact that the manufacturingprocess of a mediocre system does not require sophisticatedmethods or expensive equipment. All firms in this industrybut in particular the micro-firms share the characteristics ofthe relative geographical isolation and the relatively shortvalue chains, e.g. light manufacturing industry with veryfew local equipment and component manufacturers.According to the most recent available data (2001–2004)

from the Department of Statistics (CYSTAT, 2004), thereis a positive trend in the number of the engaged enterprisesin the SWH cluster presenting a 53% increase compared to

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46

286

453830

265

0

50

100

150

200

250

300

350

2002

Num

ber

of ente

rprises &

Em

plo

ym

ent

Number of enterprises Employment

166

229

Year

2003 20042001

Fig. 3. Number of enterprises and employment for the years 2001–2004

(CYSTAT, 2004).

1,129

0

Gro

ss o

utp

ut,

wages &

valu

e

ad

de

d (

Cy£

00

0s)

Gross Output Value Added Wages14,000

12,000

10,000

8,000

6,000

4,000

2,000

2001

Year

2002 2003 2004

12,753

6,500

4,281

2,443

1,9801,683

2,462 2,6061,935

4,668

6,140

Fig. 4. Gross output, value added and wages of SWH for the years

2001–2004 (CYSTAT, 2004).

C.N. Maxoulis et al. / Energy Policy 35 (2007) 3302–33153306

2001. Additionally we infer that 16 new players entered theindustry. This increase in the number of the engagedenterprises had a significant effect on the number of theemployees in the corresponding industry with a 72%increase. The employment for 2004 totaled to 286 persons,indicating the creation of 120 new jobs in the industry from2001 (see Fig. 3).

3.2. Economic performance of the cluster

As illustrated in Fig. 4, during the corresponding period,the gross output for the SWH cluster was increased by173% (Cy£4.6 million in 2001 to Cy£12.7 million in 2004)2

and the value added was increased by 121% (Cy£1.9million in 2001 to Cy£4.3 million in 2004) (CYSTAT,2004).

The wages were doubled (116% increase) in the sameperiod, mainly due to the recruitment of the additionalworkforce by the new entrants.

The recent boost in the SWH industry can be attributedto a number of reasons. These are the remarkable growthof the construction cluster that comprises the biggestsupporting industry of the cluster under study, the highnumber of decommissioned and replaced units and finallythe introduction of a new subsidy scheme for thepromotion of RES. The growth of the constructionindustry is illustrated in Fig. 5. The growth of the industryfrom 2001 to 2004 was 40% (CYSTAT, 2006).

It is evident from the above analysis that the annualproduction of SWH is closely related to a number offactors which contribute to the economy of Cyprus.Though modest the industry contributes to the nation’sGDP, it offers opportunities for new firms to enter themarket and it creates jobs and added value. Hence, thestalemate the industry has entered has deprived theopportunity for a greater contribution. Having in mindthe latter, it is self-evident that a way, which will lead tosustainable growth in term of annual production, is more

2On November 2006 exchange rate is 1 Cyprus Pound (Cy£) ¼ h1.72.

than welcome since it will benefit both the industry andcollaterally the whole economy.

3.3. Innovation, research and development (R&D), quality

and standards

The limited innovation performance of the SWH clusteris justified by the absence of any patents in the examinedperiod. It must be noted that this limited innovationperformance has a broader application to the wholemanufacturing sector of Cyprus. A more detailed analysisof this phenomenon is given in Dickson and Hadjimanolis(1998), Efstathiades et al. (2000) and Hadjimanolis (1999).SWH manufacturers focus their limited research and

development (R&D) efforts in the improvement of theirproducts with the cooperation of the Applied EnergyCentre (AEC). The AEC, which operates within the EnergyService of the Ministry of Commerce, Industry andTourism (MCI&T) conducts research and demonstrationprojects. With its testing laboratory, it is assisting andguiding manufacturers to improve their products. Testingand certification, reports and any other assistance to themanufacturers is given free of charge as a contribution ofthe State to the industry. Examples of that are thereplacement of the galvanised sheet metal absorbing plateand pipes, used in the 1960s with copper products and theintroduction of modern technology such as ultrasonicwelding, for the welding of riser pipes on the absorbingplate.In terms of quality the products of Cypriot manufac-

turers are currently lacking their European counterparts.The differences though are not so significant. During theintroduction period in the 1960s solar water heatersproducts were problematic due to design errors, inap-propriate materials use and faulty installation (Kalogirou,1997). Since then a lot of improvements were achieved bymanufacturers who were experimenting, gaining expertiseand introducing more sophisticated processes for produc-tion and in the early 1990s the industry produced somevery robust and fairly high-quality systems.

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500

700

900

1100

1300

1997 2001

Constr

uction industr

y t

urn

over

(Cy£ M

illio

n)

1995 1996 1998

Year

1999 2000 2002 2003 2004 2005

Fig. 5. Construction industry turnover for the years 1995–2005 (CYSTAT, 2006).

C.N. Maxoulis et al. / Energy Policy 35 (2007) 3302–3315 3307

The first Cyprus standard for SWH was introduced in1980 by the Cyprus Organisation for Standards andControl of Quality3 named CYS 119:1980-Method of

testing the performance of flat-plate solar collectors. Thestandard was setting a procedure to test the collector of theSWH system. At that time the laboratory was a modernone equipped with state of the art facilities, software,etc. This was followed by the preparation of a secondstandard, CYS 100:1984-Specification for solar water

heaters (Korniotis et al., 1999; Sun in Action, 1996). Thisstandard was specifying the requirements for materials,construction and marking of solar water heaters (SWH)using water as the heat transfer medium. Both standardswere prepared by a local technical committee. Thecommittee was constituted by members representing themanufacturers, the government, academics and the con-sumers. The standardisation activity taking place in theearly 1980s was very important mainly for two reasons.Firstly, it offered a common platform for collaborationand know-how transfer for local manufacturers andsecondly because it introduced scientific methods fortesting the SWHs, it facilitated the local industry toimprove its products.

The next important milestone with regards to standardsfor SWH was the adoption of the international standardintroduced in 1993: ISO 9459-2 Outdoor test methods for

system performance characterisation and yearly performance

prediction of solar-only systems as a national standard in1996. This standard was a more comprehensive documentand it offered a method to test the whole system. It isremarkable to note that the lab owned by the MCI&T wasnever able to upgrade and perform tests based on thisstandard.

3The Cyprus Organisation for Standards and Control of Quality handed

the standardisation activities to the Cyprus Organisation for Standardisa-

tion (CYS) in 2004.

Today, European standardisation sets the state of the artfor solar thermal systems. This task is undertaken by theEuropean standardisation technical committee CEN TC312. The primary scope of this committee is the prepara-tion of European Standards to cover terminology, generalrequirements, characteristics, test methods, conformityevaluation and labelling of thermal solar systems andcomponents.Cyprus as a full member of the European Union was

obliged to adopt the European standards dealing with solarwater systems. These standards are adopted as Cyprusstandards.4 Nevertheless, neither the state lab nor the localproducers tried to utilise these standards and upgrade inorder to conform to the set requirements.It is almost certain that today the Cyprus industry of

SWH is lacking behind in terms of product quality andsystem comprehensiveness, although in the early 1980s thiswas not the case. It must be noted that it was not thesuperiority of SWH systems produced in Cyprus that madelocal producers pioneers but the immaturity of the SWHmarket in Europe at that time. Nevertheless, the existenceof some of the Porter’s diamond acmes facilitated thegrowth of a respectful industry.

3.4. Technical analysis and supplied materials

Almost all solar domestic hot water systems installed inindividual houses in Cyprus are of the thermosiphon type.The theoretical average life of a typical system is about 20years, whilst in practice the lifetime of locally producedunits is around 25 years. Two solar collectors with a totalarea of 3–4m2 are connected in series to a hot water tank,placed at a height above the top of the collectors. Since the

4Technical Standards are voluntary in principle, unless a national or

European law makes them mandatory. The European standards dealing

with thermal solar systems are not mandatory.

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city water supply is not continuous in many places, a cold-water storage tank is located above the hot water tank. Thecold-water storage tank was manufactured using zinc in theearly years. Today the tank is manufactured from hardplastic. The hot water storage tank has a capacity of 160 land is made of copper, insulated with glass wool orpolyurethane. The hot water storage tank is also fitted withan auxiliary electric 3 kW heater which can be operatedmanually or automatically (Enotiades, 2002).

The materials used in the construction of the collectorsare as follows:

�

Casing: Galvanised iron sheets, aluminium. � Insulation: Fibreglass, polyurethane. � Risers and headers: Copper. � Fins: Copper, aluminium. � Glazing: Clear glass, window glass, tempered glass. � Paint on plate: Selective paints, non-selective paints. � Gasket: Rubber.

1.0%(%)

The availability of service and spare parts is verysatisfactory. Thanks to the training facilities in the country,the level of technicians and mechanics is in general high;those working in the solar industry get further training,essentially on the job.

Experience of retailers in installation and service has notbeen satisfactory hence, almost all installations and servicesare presently managed by the manufacturers.

The production capacity of each manufacturer variesfrom 300m2 (100 systems) to 3000m2 (1000 systems). Theaverage quality is acceptable and the solar water heater inCyprus enjoys a very good reputation by the public.

3.5. Cost breakdown of a SWH

The manufacturers are selling directly to the end users.The average selling price of the typical system with astorage tank of 150 l and collector aperture area of 3m2 isabout Cy£500 (h860) plus VAT (15%). This price includesthe cold-water storage tank, which accompanies the solarwater heater. It also includes transport and installation(Sun in Action, 1996).

Breakdown as given by the manufacturers:

tio

0.8%

ut ra

Material Cy£250 (h430) (50% of selling price)

utp

Labour Cy£125 (h215) (25% of selling price)

0.6%

s o

Gross profit Cy£125 (h215) (25% of selling price)

0.4%

/ gro

s

Total

Cy£500 (h860) Plus VAT 15%

0.0%

0.2%

dvert

isin

g

Final cost of atypical systeminstalled

Cy£575 (h990)

2001 2002 2003 2004

A

Year

Fig. 6. Advertising/gross output ratio for the years 2001–2004 (CYSTAT,

2004).

All the material needed for the manufacture of solarheaters is imported in Cyprus. Due to the small productionof each manufacturer, they are usually not able to import

directly some basic materials, so they buy them from localimporters, ex-stock and of course the price is not the lowestpossible.

3.6. Distribution, marketing and after sales methods

As already mentioned, the manufacturers are sellingtheir products directly to end-users. This is reasonable for asmall country like Cyprus, where the largest distancebetween towns is about a 2-h drive.The methods used by Cypriot manufacturers to find

customers are mainly the following:

�

From previous customers who either wish to replace asystem or add another system to their house. � From their circle of acquaintances and the neighbour-

hood where each manufacturer lives or works.

� Some companies have salesmen who travel to the cities

and towns and list the construction sites. They, in turn,try to contact the owners of these construction sites. Thefirst salesman who makes contact has the best chances ofachieving a sale. This is the reason why many solarsystems are sold when a building is still at thefoundations stage of construction.

� Participation to specific and annual state fairs.

From the available data we infer that the advertisingexpenditures remain at very low levels. Fig. 6 presents theratio of the advertising expenditures to the gross output,which in every occasion was kept below 1%. This ratioindicates the limited importance that is given by the side ofthe SWH manufacturers to the promotional efforts.

3.7. Imports and exports

Exports are occasional and in very small numbers. Theyare estimated to be, on the average, 200 systems per year(600m2 of solar collector area per year). This figure istranslated to the 2% of the local market.Imports are made mainly from Greece, Israel and

Australia and amount to about 700 systems per year

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(2000m2 of solar collector area per year). This figure istranslated to the 5% of the local market (Sun in Action,1996; Enotiades, 2002).

The export record of the local industry is very poorcompared to the implicit potentials. This suggestion can bejustified by simply examining the performance of anindustry which shared similar characteristics with theCypriot one; the Greek solar thermal industry. In less ofa decade the Greek industry managed to export somewhatof 40% of the local solar collector production, startingfrom very low percentage (less than 5%) in 1991 (Argiriouand Mirasgedis, 2003; Kaldellis et al., 2005). Morespecifically, the Greek industry managed to attain asustainable growth and in 2004 has reached a capacityproduction of 257,000m2 of which almost half is attributedto exports.

4. Diamond analysis of the Cyprus solar water heating

cluster

Porter (1990) uses the diamond model as the basis of aframework to illustrate the determinants of nationaladvantage. The diamond represents the background thatcountries establish for their industries. The model is basedon 4 interlinked factors that affect the companies inspecified clusters. These factors are explained in Section1.1.

The diamond model of the Cyprus Solar Water HeatingCluster is illustrated in Fig. 7. In what follows we willanalyse each one of the factors separately in order to have abetter picture of the variables affecting positively ornegatively the cluster.

In the factor conditions, as advantages can be deemed: (a)the presence of suitable climate and weather conditions due

Context forStrategy

Rivalr

Factor (Input) Conditions

Related aSupportiIndustr

+ Suitable climate & weather conditions (solar radiation)

+ Good technological base + Know-how legacy - Dependence on imported raw

material - Limited R&D efforts - Lack of professional

management - Limited access to capital

+ Satisfaction o+ Strong compe

equal players+ 5 industry lea- Lack of profes- Lack of ambit- Limited mark-Limited R&D

+ Industry association+ Support from const+ Support from gover- Limited collaboratio

and marketing to pe- Limited collaboratio

Fig. 7. Diamond of the Cyprus

to the abundance of solar radiation which create favour-able conditions for the exploitation of solar energy, (b) thepresence of good technological base that provides the firmsthe required infrastructure to operate in the industry and(c) the know-how that consigned over the years from thecontinuous action of the firms in the respective industry.On the other hand, as disadvantages can be considered:

(a) the dependence on the imports of the required—formanufacturing—raw material due to the absence of naturalresources, (b) the limited Research and Developmentefforts either by the side of the manufacturers or thesupporting institutional organisations, (c) the lack ofprofessional management as it is a common practice forthe firms to promote friends and relatives over professionalmanagers and (d) the limited access to capital and financingby the financial institutions.In the demand conditions as strong points can be

considered: (a) the intensified local demand of solar waterheaters, as a result of the construction boom and the‘‘traditional’’ customer preference on this kind of solutionand (b) the existence of standards in the industry.As weak points account the following: (a) the majority of

the customers cannot be classified as sophisticated ordemanding, thus the imposed pressure to the firms is mild,(b) the export intensity is in general limited (compared tothe local demand), mainly due to the inefficient promo-tional activities and the vision of the industry, (c) incontradiction to the high level of local demand in domesticlevel, the penetration of the SWH in commercial users(hotels, apartments, factories, etc.) is still limited as theindustry’s specialisation is mainly concentrated on smallscale domestic solutions.In the related and supporting industries factor we have

identified as strengths: (a) the presence of industry

Firm and y

Demand Conditions

nd ng ies

+ Intensified local demand + Standards exist - Non sophisticated

customers - Limited export intensity- Limited penetration in

industrial applications

f local demand tition between 40

(family firms) ders sionalismion eting activities activities

exist ruction cluster nmental institutions n in R&D & know-how dissemination netrate foreign markets n between universities & industry

Legend: + sign = Strengths- sign = Weaknesses

solar water-heating cluster.

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association (Cyprus Union of Solar Energy Industrialists)that is responsible for the promotion of the commoninterests of the member companies, (b) the support from anumber of governmental institutions such as the AppliedEnergy Centre and the Institute of Energy, (c) theinteractive support of the construction cluster that keepsthe demand at high level and stimulates the competitionbetween the SWH players.

As weaknesses we can consider: (a) the limitedcollaboration between the industry players in terms ofR&D spending and know-how dissemination and (b) thelimited collaboration between firms and universities inresearch.

In the context for firm strategy and rivalry factor aspositive points are regarded: (a) the ability of themanufacturers to satisfy the local demand and the extendedmarket coverage, (b) the presence of 50 equal rivals (familybusinesses) that follow the same pace which intensifies thecompetition, (c) the existence of 5 industry leaders enablesthe set of quality standards in the market that the rest areobliged to follow.

It is worth noting that during the last decade 31 newplayers entered the industry, 16 remained (including the 5big players) and 13 exited.

The negative points include in general, the lack ofessential business activities such as the professionalmanagement, marketing and R&D. If we combine thisdeficiency with the lack of strategic ambition and thegeneral amateurish attitude of the rivals then a relativemediocre performance in the rivalry is created.

M

PHYSICAL INFRASTRUCTURE

PORTS

LOCAL TRANSPORTATION

SWH IMPORTERS & DISTRIBUTORS

CONSTRUCTION CLUSTER

GOVERNMENTEDUCATIONAL INSTITUTIONS

Fig. 8. The Cyprus solar

5. Institutions for collaboration

The industry under investigation does not exist in avacuum. It is interlinked and influenced by a number ofother factors. Fig. 8 is an alternative view of the diamond.It illustrates the relationships between the solar thermalindustry and its surrounding environment. The group offactors illustrated to the bottom of Fig. 8 present theinstitutions for collaboration. These institutions play avital role and create a favourable or unfavourableenvironment where the industry may excel or fail,respectively.The growing demand for solar thermal systems and the

growth of the national industry drew the attention ofgovernmental and academic institutions, which aimed tocollaborate and facilitate the further growth of theindustry. Parallel to this, a local federation of solar thermalindustrialists was established.The major institutions for collaboration involved in the

SWH industry are introduced and their role is brieflyelaborated here. The Applied Energy Centre (AEC) holds afundamental role in the SWH industry development. It isthe institution, which owns the solar test lab, and the onethat took many initiatives in order to nurture and supportthe industry in its early steps. The AEC together with theCyprus Institute of Energy, which aims to develop andpromote and use of RES on the island are the two keygovernmental institutions, which are collaborating closelywith the SWH industry. Another key collaboratinginstitution is the Higher Technical Institute (HTI), which

SWH ANUFACTURERS

TRADE ORGANIZATIONS

MARKETING & PROMOTION

R&D

INSULATION (FIBER GLASS,

POLYURETHANE)

GLAZING (CLEAR & TEMPERED GLASS)

RENEWABLE ENERGY SOURCES

CLUSTER

CASING & FINS MATERIAL

(ALUMINIUM, IRON, STEEL & COPPER)

PLATE PAINTS

INDUSTRY GROUPS

water-heating cluster

Page 10

ARTICLE IN PRESS

0

2

4

6

8

10

12

14

16

18

1985 1990 1995 2000 2005

Cum

ula

tive s

ola

r park

in E

U

(mill

ion s

q.

mete

rs)

0

1

New

ly insta

lled c

olle

cto

rs in E

U

(mill

ion s

q. m

ete

rs)

Cumulative solar park

Newly installed

Year

1.8

1.6

1.2

1.4

0.8

0.6

0.4

0.2

Fig. 9. Cumulative solar park and newly installed collectors in EU for the years 1985–2005 (ESTIF, 2005; Sun in Action, 2003).

C.N. Maxoulis et al. / Energy Policy 35 (2007) 3302–3315 3311

has a dual contribution to the industry. Firstly, HTI is theacademic institution, which conducts, applied research inthe field of solar thermal applications. In addition to this,the HTI was the cradle of technical engineers whoeventually would take the reins of the local industry.Another key collaborating institution was the CyprusOrganisation for Standardisation (CYS). CYS in the 1980sformulated two technical standards for solar thermalsystems, which served as a basis for benchmarking amonglocal products, which were tested by the AEC test lab.Finally, a core institute of the cluster is Union of SolarEnergy Industrialists of Cyprus (SEI). This Union had therole of a collaboration platform between its members andthe industry link to the government and the academia.

All institutions and in particular the ones with thebiggest involvement to the cluster share a parallel history.These institutions had a strong presence and contributed tothe clusters’ development and growth in the early 1980s.Analogously, the collaboration among them was growingand consequently this favoured the further development ofthe industry. Unavoidably, these links were getting weakerand weaker as time went by. This led to the today’ssituation of stagnation. It seems that everybody is satisfiedwith the clusters’ past achievements. The fact that the localmarket has matured and showed saturation signs combinedwith the unsuccessful internationalisation is one possibleexplanation why the industry was driven in the today’sstalemate.

6. The solar thermal market in Europe and globally

The European solar thermal industry has reachedmaturity, after 20 years of technical development. High-quality products are available, solar systems are reliableand their productivity can be guaranteed. The market grewfrom almost nothing to a remarkable figure of 16 millionm2 of installed collector area. The average market growthin the 1990s, showed an average annual growth rate of18%, mainly attributed to the tremendous growth of the

German and Austrian markets. Nevertheless, all signspoint that some other national markets will follow to someextent this growth (Sun in Action, 1996, 2003).Since 2000, the solar thermal market in the EU has

clearly overcome the mark of 1 million m2 newly installedper year and currently this figure has climbed to 1.6 millionm2 per year. An even more encouraging thing is that thereis a highly positive trend for newly installed systems. Themarket has doubled compared to the mid-1990s and it isthree times bigger than in the late 1980s. The cumulativeinstalled capacity of SWH systems and the rate of newlyinstalled systems are illustrated in Fig. 9.Except for other complimentary renewable energy

sources, no other energy sector has grown faster thansolar thermal in the last decade. Nevertheless, even thoughthe growth is considerable, it is still moderate according tothe Commissions’ set targets. That is because the sector didnot reach the rate needed to meet the European Commis-sion objectives. These objectives are stated in the WhitePaper on Renewable Energies (European Commission,1997). According to this document the commission expectsthat 100,000,000m2 of solar collectors are to be installed inEurope by the year 2010 to facilitate durable andenvironment-friendly energy. It seems that this target wasquite optimistic and will not be met. Nevertheless, themagnitude of this figure highlights the big potential of solarthermal technology.The European Solar Thermal Industry Federation,

ESTIF prepared four scenarios in order to predict themarket growth of SWH systems in Europe. These scenariosgive an indication of the range in which the solar marketcould develop (Sun in Action, 2003).

Scenario No. 1: If the current average level of supportfor solar thermal is retained, the 100 million m2 target,planned for 2010, will not be reached before 2022.Scenario No. 2: The 100 million m2 can be achieved by2015, if proactive policies to support solar thermal areimplemented throughout the EU.

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Scenario No. 3: If solar thermal grew at the same rate aswind energy did between 1990 and 2001, the installedcollector area in operation would grow to more than 1billion m2 in 2015, getting relatively close to thetechnical potential of 1.4 billion m2.Scenario No. 4: To assess the impact of strongregulation, the residential sector was analysed sepa-rately: binding regulations to install solar thermalsystems in residential buildings would increase thismarket segment to roughly 47 million m2 per year. Inthe residential sector alone, 199 million m2 of collectorswould be in operation in 2015. Even the morepessimistic scenario shows a significant growth for solarthermal applications.

A closer look into individual markets within Europereveal that the principal national markets have movedaway from Southern Europe and present market develop-ment is mainly found in Austria, Germany, Denmark andGreece, the Southern European exception. There are also,dynamic small solar thermal markets in Spain, France,Italy and the Netherlands. The market growth ofcharacteristic European markets is illustrated in Table 1.

The recent market growth in the Northern countries ofEurope stems from the environmental consciousness of thepopulation. Furthermore, as the market grows, solarapplications are becoming increasingly cost effective. InSouthern Europe, environmental problems appear to beless of a vital issue and this is one of the reasons for thelargely unexploited solar potential in Italy, France, Spainand Portugal.

The European market is also changing from a series ofisolated national markets, supplied by many small localmanufacturers, into a well-organised European Industry.Certain manufacturers are developing export trade and thedistributors of solar systems are playing an increasinglyimportant role in local market development. Neverthelessthis transformation is slow and incomplete. Modernproduction methods are rare; even in the fast-growingGerman market; only 10% of solar collector production ismanufactured on automatic assembly lines.

Table 1

Market growth in selected countries (Sun in action, 2003)

Country Newly

installed in

year 1995 (m2)

Newly

installed in

year 2000 (m2)

Average annual

growth

1995–2000 (%)

Spain 9800 40,487 33

Germany 193,000 620,000 26

France 7700 23,500 25

Italy 17,850 45,249 20

Netherlands 12,850 27,661 17

United Kingdom 7596 11,850 9

Greece 169,000 181,000 1

Cyprusa 30,000 30,000 0

aThe data presented in the study for Cyprus are a proxy. The numbers

illustrated in Fig. 3 are more accurate.

Research projects have also changed; moving away frombasic research on solar applications to research anddevelopment projects more closely related to the needs ofthe industry. Another change in hand is the preparation ofcommon standards for solar thermal collectors andcomponents. This has become essential, not only forensuring the high quality of solar products, but also forovercoming the barriers that prevent free trade throughoutEurope.With regards to the global market up until the

millennium, Europe shared the lion’s share of installedcollector capacity. In the recent decade though, the worldsolar thermal scenery has changed. The reason was theemergence of a giant both in terms of cumulative capacityand newly systems installed. This giant is China. China isby far the world’s largest solar water heater manufacturerand user. The accumulated installed area of solar domestichot water systems in China is above 40 million m2.Clearly driven by the state strategy of sustainable devel-opment, China today has a well-established solar thermalindustry with over a thousand manufacturers producingand selling solar thermal systems. During recent years, inparticular, solar water heater manufacturing technologieshave become increasingly mature under the policy of‘‘striving for industrial scale, high technological level,quality products and standardised market’’. Thanks tojoint efforts by research institutes, universities and en-terprises over the past 20 years China’s solar energyindustry has made great progress—especially during thelast 5 years. The report Sun in action II states that mostChinese SWH systems are products of inferior quality.Nevertheless, it is only a matter of time for them to catchup. China’s production for the time being satisfies only thedomestic demand, which is huge. It is certain that wheneverChina’s manufacturers pursuit an aggressive exportingpolicy their European counterparts will face a lot ofdifficulties.

6.1. Pinpointing Cyprus SWH industry in the European map

The Cyprus solar thermal industry is cited as a successstory. The reason for this was the remarkable number ofcollector area installed per inhabitant. This number is0.82m2/capita which, as shown in Fig. 10, is way ahead ofleading SWH manufacturing countries, i.e. Greece or theEU average (Kalogirou, 2003).A more detailed breakdown of the EU SWH market is

presented in Fig. 11. Cyprus is the leader in terms ofinstalled capacity per capita. The number 820m2/1000capita is translated that more or less every Cypriothousehold is equipped with a SWH. It must be noted thatthe SWH market in Cyprus reached to maturity a long timeago, since this remarkable penetration of SWH systems(0.8m2/capita) was reached in the early 1980s. At that timethe European market for solar thermal systems was shylymaking its first steps.

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ARTICLE IN PRESS

0

1

CY GR

Insta

lled s

ola

r colle

cto

r

per

inhabitant)

0.8

0.6

0.4

0.2

EU25

(m2

Fig. 10. Installed flat plate solar collector area per inhabitant (2005)

(ESTIF, 2005).

Fig. 11. Installed capacity of SWH per capita in Europe in 2004 (ESTIF,

2005).

C.N. Maxoulis et al. / Energy Policy 35 (2007) 3302–3315 3313

In terms of absolute numbers Cyprus with an installedcapacity of 600,000m2 collector area is still a respectfulmarket. It must be noted that Cyprus installed capacity iscomparable with the capacity installed in France or Italy.In the recent years Germany and Austria showed aremarkable growth in terms of installed systems. Germanyhas the biggest solar park in operation5 in Europe with acapacity of 5.66 million m2, followed by Greece with amarket of 3 million m2. Austria is a catching up country.Austria showed a huge growth in the last decade and fromnearly nothing, it now hosts a solar park of 2 million m2.

Regarding the newly installed systems, Cyprus showed aproduction capacity of something more than 40,000m2 in2004. That made the contribution of the local productionper annum to the European whole to 4%, which is arespectful figure. These newly installed systems correspondto the installation of SWH in new dwellings e.g. it satisfies

5Solar park in operation ¼ cumulative capacity installed.6The EU market statistics used here concern only the flat plate

collectors (majority of the installed capacity) and do not take into account

the vacuum tube ones.

internal demand since Cypriot industrialists were not ableto implement successful exporting strategies. As aforemen-tioned, Cyprus has reached this annual production in theearly 1980s. At that time Cyprus was one of theundisputable leaders both in relative (installed collectorarea per capita) and absolute statistics (total installed area,production per year).

7. Reasons restraining the growth of the industry

Almost everybody agrees that the solar thermal marketin Cyprus is a success story. Moreover it is unquestionablethat the local industry gets to a large extent the credit forthis remarkable high penetration of thermal solar systemsin Cyprus. Eventually, the local solar thermal industry canbe examined by two different angles. The first one is thecontribution the industry had to the Cyprus energy mix.With respect to the latter as elaborated previously there isno doubt that the industry was successful. This is easilyjustified by the fact that the solar thermal energy is the onlyRES which is exploited in a satisfactory extent in Cyprus.This contribution can be translated into money saved, sincethe 4.5% contribution in the energy system of Cyprus istranslated into 86,500 tons of oil equivalent (TOE) and intoenvironmental benefits, since the use of solar thermalenergy contributes to a reduction in the atmosphericpollution by approximately 260,000 tons of CO2 per year.The other angle is the purely commercial one. Though

modest the local industry contributes to the gross domesticproduct, it creates demand and therefore activity to anumber of related enterprises and finally it creates jobs. Ofcourse these two angles are closely correlated and it is selfevident that the commercial success of the industry willbenefit and extent the penetration of solar thermal energyfor industrial applications or for state of the art applica-tions like solar cooling (Papadopoulos et al., 2003), an areawith high but unexploited potential.The upgrade of the industry in the next level, which is the

production of more sophisticated large scale products, theimprovement of the already manufactured ones, in terms ofboth technological and aesthetical aspects and the acquire-ment of know how and technical competence to extent itsscope into solar cooling products and space heatingapplications needs huge initial investments. Having inmind that the state subsidies and grant schemes cannot bythemselves support the effort of upgrading the industry, itis evident that the local industry should self finance thisendeavour. This highlights the importance of the commer-cial success of the industry. In this aspect the industryunderperformed compared with its implicit potentials. Ifwe take into account that the local market for domesticsolar thermal applications is saturated for the last 15 yearsit becomes evident that the export failure is one of the mostsignificant pillars that the industry underperformed. Thisphenomenon can be partly explained by the lack ofambition and complacency of the local industry. Addi-tionally, this phenomenon is a broader one and applies to

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all SMEs in Cyprus. It was only natural to presume thatthe maturity of the product and the saturation of the localmarket would enable the manufacturers to expand theiractivities and become more export oriented. Unfortunately,the majority of local manufacturers did not actively pursuitan export orientation. It must be noted that the leadinglocal manufacturers have made attempts to export theirproducts but these were individual and lacked strategicorientation and focus. This conclusion is drawn by the factthat the exports figure never boomed although the solarthermal market in Europe expanded threefold from theearly 1990s until today. It seems that local producerstargeted countries of the eastern Mediterranean basin,where the basis of competition was price rather thanquality (Houri, 2006). Hence, timing and selection of whichmarkets to penetrate might have been an important reasonfor the export failure. The countries of the easternMediterranean region enjoyed low oil prices and solarthermal applications were not very attractive. Since theEuropean market is non-homogenous in terms of size andgrowth, strategic decisions for expansion concerningsegmentation as well as tactical issues are of greatimportance. Unfortunately these managerial issues are aweakness for the local producers.

International marketing is another major issue. In orderto export you must set up and implement an internationalmarketing strategy. Branding, market segmentation andactively participating in international trades and conferencesis a must. International marketing requires huge budgetsand long pay-back periods. In particular the local industrylacks experience in marketing even in the local market. Thatis because the structure of the local market did not favourthe development of marketing techniques since the productwas perceived as a commodity. With regards to goinginternational, it is almost certain that no SME firm in anyindustry can afford the burden of international campaignsand this applies also to the respective Cypriot firms. Thelimited collaboration efforts among industry players topenetrate foreign markets led to the phenomenon ofindividual and therefore, sparse and not focused attempts.Another unexploited collaboration opportunity was theprocurement of raw material. If local industrialists coop-erated in this field they would have increased theirbargaining power and would ensure lower prices.

Finally, one should consider the problem related to theexport of relatively heavy and cheap products like theSWH. This is intensified in the case of Cyprus, which is anisland and transportation of these products needs to bemade either by sea or air, which is expensive, that evidentlyraises the pressure for efficiency improvements, andinnovating ways to overcome this disadvantage.

7.1. Suggested remedies

In order to safeguard a sustainable growth for theindustry all stakeholders must focus on initiatives andactivities which will nurture and turn round the weakness

of the local industry’s diamond and develop and accentuateits strengths. The diamond for the local industry revealsthat one fundamental weakness is the low efforts in termsof R&D. In order to mitigate this weakness bothgovernmental institutions together with SEI and the otherstakeholders must redefine their R&D strategy. A unifiedresearch agenda must be agreed in terms of productdevelopment and extend their know how in the new andemerging technologies, like the solar cooling one (Papado-poulos et al., 2003). In light of the above it is self-evidentthat the modernisation of the state owned solar test labbecomes a high priority. The lab should get accreditation,should be capable to perform test according to the newEuropean technical standards and be able to award thesolar keymark (Nielsen, 2003). Finally, the creation of alaboratory for applied solar applications in the newlyestablished Technological University of Cyprus becomes aprerequisite and will assist the overall attempt to upgradethe R&D efforts.Another key weakness illustrated in the industry’s

diamond is the lack of collaboration among local firms interms of R&D dissemination and in the quest to penetrateforeign markets. The low levels of collaboration could beexplained by lack of collective export appetite and mistrustamong companies due to fierce competition for the localmarket. Furthermore, the high local penetration of solarthermal systems provided a sense of comfort and securityto the participant firms who didn’t see the need forexpanding and tab foreign unexploited markets. In order toremedy this weakness both managers and policy makersmust recognise the importance of collaboration amongeach other and find ways to built relationships of trust.These relationships will allow firms to jointly identifyinternational opportunities and develop strategies of howto exploit these opportunities which will benefit everybodyin the industry but particularly the weaker firms which donot posses the required resources. Eventually, this will helpall companies upgrade their skills by learning from theirpeers. In addition, this level of collaboration and focusexerts pressure on supporting institutions to competentlyplay their part and add more value to the industry.Finally, another weak point is the level of professional

management among the local players. Internationalisationand success across the boarders requires in addition of theproduction of an exportable product the mastery of certainsofter skills. These skills deal with issues of strategic andtactical decisions, formulation of alliances, collaborationfor foreign market penetration, development of sales anddistribution channels, attractiveness of foreign investmentand many others. Sequentially the local managers shouldbe educated and learn to deal with softer managerial issues,which are prerequisites for the commercial success beyondthe boarders of Cyprus.Eventually, the most significant and key need is the

creation of a bold vision or ambition on behalf of theCyprus solar industrialists to become export championsand safeguard a sustainable growth, which will benefit all

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stakeholders, because without this all previous steps havelittle or no value at all.

8. Conclusions

The phenomenon of globalisation has undoubtedlychanged the scenery of the market place worldwide. Newopportunities and threads arise every day. We live in ahighly competitive market and it is essential that we shouldexploit all legacies and competitive advantages we mightenjoy in order to develop and create wealth for the firmsand consequently for the national economy.

Cyprus shared some favourable diamond conditions thatfacilitated the development of a pioneering industry ofsolar thermal products. The characteristics of the clusterwere getting deeper and stronger as the solar industry wasgrowing locally. The inability (or not sufficient willingnessor ambition) of the industry to internationalise andsuccessfully export led to an inevitable saturation andstagnation of the cluster.

The local industry transformation from local success tothe internationalisation and therefore achievement of asustainable growth is not easy, it requires bold moves,speed, focus, collaboration, professionalism but mostimportant change of culture.

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