The share of indigenous energy supply continuously decreases over the last two decades in Taiwan. The development and use of renewable energy sources and technologies are becoming vital for the management of energy supply and demand. For promotion of solar water heaters. the incentive programs were firstly initiated in the period of 1986-1991 and re-initiated from 2000 to the present. These programs create an economic incentive for the end users and have a drastic effect on the popularization of solar water heaters. To further promote solar water heaters during the current incentive program period, several key factors are addressed. In addition to the cost of solar water heaters and energy price index, the potential market of solar water heaters in Taiwan is associated with the climatic conditions, population structure, urbanization, building type of housing and status of new construction. (c) 2007 Elsevier Ltd. All rights reserved.