For promotion of solar water heaters (SWHs) in Taiwan, the incentive programs were firstly initiated in the period of 1986 to 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. A general survey of SWHs’ users indicated that most solar water heaters were mainly used by the domestic sector for hot water production. There were over 97% SWHs with the area of solar collector less than 10 square meters, which is considered as the residential systems. Limited large scale SWHs, in which the area of solar collector is over 100 square meters, were installed each year. To analyze the behavior of the major actors in local market, two questionnaires were developed. One was addressed to sales agencies and other distribution agents while the other one were approached through person-to-person interviews with household owners (over 4000 samples). Other than the cost of solar water heaters and energy price, it is found that the type of housing and completion of housing construction are the main factor in market diffusion. The potential market of solar water heaters in Taiwan is also associated with the climatic conditions, population structure and urbanization. The final manuscript will address the regional market profile. Thus decision makers in the energy sector might make use of it in their decision making process for implementing more compressive programs to promote the installation of SWHs.