In “Solar Hot Water Primer,” published in Home Power, Issue 84, Ken Olson writes, “An initial investment in a solar water heating system will beat the stock market any day, any decade, risk free. Initial return on investment is on the order of 15 percent, tax fee, and goes up as gas and electricity prices climb.” Although I share Ken’s enthusiasm for solar hot water, his endorsement is based on a comparison of a solar hot water system with a conventional electric storage water heater. Unfortunately, the economics don’t always work out that well and homeowners need to be aware that the economics of the decision depend on many factors.

Let’s start by comparing a solar hot water system with an electric storage water heater. Clearly, as Olsen indicates, a solar hot water system compares quite favorably with an electric storage water heater, especially if you are paying more than eight to ten cents per kilowatt hour. Here’s how the math works out according to Olsen: a typical 80-gallon electric hot water tank serving a family of 4 consumes approximately 150 million BTUs over its 7-year lifetime. If your electricity costs 8 cents per kilowatt hour, hot water will cost approximately $3,600 in US dollars over that period. At the end of its short, useful lifetime, the water heater will need replacement, further adding to the cost. (To be fair, the water heater will very likely last a bit longer than Ken estimates and there are ways to ensure a much longer life span, as noted earlier in this chapter.)

In such instances, solar hot water systems make eminent sense. If you live in a warm climate, you can purchase and install a solar batch heater for much less than $3,600. If you live in a colder climate, you can purchase and install a pump-driven antifreeze system for $3,600 or slightly less—depending on the type of system you select (flat plate vs. an evacuated tube collector). From that point on, you will be getting hot water essentially free of charge.

The economics of a solar hot water system may be even better if you live in a state or city or are served by a utility company that offers financial incentives that offset the initial cost of the system. In many locations, homeowners can receive substantial financial incentives that dramatically reduce the initial cost of a solar hot water system.

Solar hot water systems also make economic sense compared to propane-fired water heaters. Propane is often used in rural settings to heat homes, provide cooking fuel, and to heat water. Although propane is not as expensive as electricity, it is still generally cheaper to generate hot water from a solar system than from a propane water heater, according to Alex Wilson, Jennifer Thorne, and John Morrill, authors of one of my favorite energy books, Consumer Guide to Home Energy Savings.

Because natural gas currently costs much less per BTU than electricity and a bit less than propane, solar hot water systems don’t always make financial sense compared to natural gas fired systems. (Although rising natural gas prices may render this judgment obsolete soon.) When contemplating a SDHW system in an home served by natural gas, contact a local installer who can run the numbers for you. And, as one of Colorado’s premier solar architects, Jim Logan points out, in addition to installing a system to offset high natural gas prices, “you may want to do so to offset carbon dioxide emissions” that are causing devastating climatic changes.

In closing, installing a solar hot water system is generally a smart move, and will very likely make more sense in more places as natural gas prices, propane, and electricity continue their upward spiral. With the information learned in this chapter, you can now proceed with confidence. I recommend that you select a solar system design that will work in your climate, and then shop around. Contact local suppliers/installers. See what they have to offer. Read up on each of their systems before you lay your money down.  ....read more