The Economics of Solar Water Heating

The financial payback of a Solar Domestic Hot Water (SDHW) system is based on a comparison to the expected cost of fuel consumed by your existing system for the same amount of energy that a SDHW system will provide over its life expectancy. By adding up the savings and subtracting all of the costs over the life time of the SDHW system, and then “discounting” that Cash Flow to today’s dollar value, you can get a realistic value of your investment to help you make a decision.

The key measurements are:

• Net Present Value (NPV) indicates the overall value to you for making the decision, if the NPV is positive it indicates that you will save money, if it is a substantial amount compared to your original investment then it is a good investment. Plus it is non-taxable!
• Return on Investment (ROI) indicates the average annual savings as a percentage of the original investment. You can compare this number to the interest or dividends paid by your other investments. Again, remember that these are savings which are tax free.

The chart below indicates that the decision to invest $5,143 in a SDHW, a 2-panel EnerWorks system, produces a profit of at least $2,007 (compared to NG) in today’s dollars. It averages 8.2% annual return on your investment for 25 years.

If you heat with Natural Gas it is a good investment. If you heat with anything else it is a great investment! Where else can you invest your money and get a tax free return of more than 15% for 25 years?

And remember that the cost of solar energy is free and will not rise!

Solar Savings Compared with Existing Hot Water Systems

These figures have been calculated for a household of 4 people using an average of 60 litres of hot water per person per day. Current fuel costs used are actual prices for an equivalent amount of energy delivered by the solar heating system. Discount rate of 6%, Energy escalation rate of 3% below the 7 year average (12% for NG, Oil, and Propane, 8% for Electricity). Inflation rate of 2.0%