Guests at the Golfhotel Woerthersee, a health spa in Carinthia, the sunniest and southernmost part of Austria, enjoy the best of both worlds – fresh mountain air by a lake in the Alpine foothills combined with balmy Mediterranean warmth in summer. Heat and water are plentiful, which is one reason why the hotel's manager, Hannes Zvitkowits, decided to combine the two with a solar thermal system in 2006. 'The sun is free of charge,' he says.

The hotel's solar thermal system, neatly laid out like dark blue dominoes over its rooftop, is the biggest of its kind in Austria – 330 sq m. The idea is remarkably simple – the panels absorb the sunlight, heating water in the pipes below, which then can be passed to taps, radiators or even swimming pools, just like a normal boiler.

But while the sun may be free, the panels were not – costing €100,000 but cushioned by a 30% refund from the Austrian government, which has given the strongest support for the sector in Europe. Zvitkowits believes the venture has been worthwhile: 'We have gas in the area but the building dates from 1936. We'd have had to do some reconstruction work to put in gas. So we used heating oil,' he explains, adding that 250 litres of it are now saved every month through the investment

Having put in the solar collectors, Zvitkowits thought that the outlay would pay itself back within nine years but found he had more warm water than he needed for swimming pool, health and bathroom use, so he channelled the warmth into room heating, too. Hence, payback day is now due by 2012 at the latest.

It is a success story and one that has been repeated at different locations across Europe, especially in the tourism sector where demand for hot water is intensified in large hotel buildings.

Success is even more likely in cultures where the public readily accept government expenditure on green energy. When they developed a renewable energy policy in the 1990s, most politicians forgot about heat. They concentrated on power, so that photovoltaic (PV) panels – usually containing silicon and much more expensive than solar thermal collectors – are often the first things that spring to mind when we think of solar energy. Repeated motions against the Temelin nuclear plant in the neighbouring Czech Republic testify to the passions of the Austrian people on green issues, which might also explain the 26% growth in the solar thermal sector in that country in 2006.

As a more mature industry than solar PV, solar thermal stands a good chance of competing sooner with conventional sources without incentives or subsidies. According to Raffaele Piria of the European solar thermal organisation ESTIF, most systems would pay themselves back within a maximum of 20-25 years without support whereas solar PV, which currently benefits from stronger policy support, might take over a century. In Greece, he points out, despite waning political help in the last decade and steadily reduced incentives, enough critical mass has gathered in the industry locally to allow it to run on quite low subsidies. 'Even if any policy support were to stop, it would survive.'