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Solar Hot Water


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Based on information compiled by the National Renewable Energy Laboratory and RS Means “Green Building Cost Data” from 2011, small solar water heating systems (like those used for homes) can cost between $187 and $199 per square foot of collector area. Larger, central systems that could be used for agricultural-based purposes can average about $60 per square foot of collector area. For the initial residential example, 52 square feet of collector area x $187 = $9,724 for the complete system. This is a rule-of-thumb estimate, and any available rebates or tax incentives reduce the final cost.

Once you know the system option that will work best for you, determine the purchase and installation costs of several systems you are considering. The “second price tag” takes back-up system fuel costs and operation and maintenance costs into consideration. After calculating yearly operating costs for each system, you can make a complete cost comparison.

Calculating Yearly Operating Costs

To estimate the yearly operating cost, first collect the following information:

Gas back-up

For a gas back-up, determine the cost of the fuel in therms or British thermal units (Btu). Utility bills may show gas prices in units of therms (1 therm = 100,000 Btu) or Dekatherms (1 Dekatherm = 10 Therms). Use the formula: 365 X (0.4105 ÷ SEF) X fuel cost = estimated yearly cost of operation.

Example for a gas back-up system:

365 x (0.4105 divided by 2) x $ 0.98 = $73.42
Where: 365 = days in a year; 0.4105 = formula constant for therms; (use 41,045 for Btus); 2 = Solar Energy Factor; $0.98 (98 cents) = cost per therm

Electric back-up

For an electric back-up, determine how much you pay for a kWh of electricity, then use the formula: 365 X (12.03 ÷ SEF) X electricity cost (kWh) = estimated yearly cost of operation.

Example for an electric back-up system:

365 x (12.03 divided by 3) x $ 0.10 = $146.37
Where: 365 = days in a year; 12.03 = formula constant; 3 = Solar Energy Factor; $ 0.10 (10 cents) = cost per kWh

Back-up system costs and maintenance costs contribute to yearly operation costs. Solar hot water system maintenance costs typically run $25-$30 every 3-5 years.

Once you know the solar hot water systems’ purchase and installation costs and have calculated yearly
operating costs for each, you can compare and determine simple payback.

For example:

Solar Hot Water System Purchase & Installation Cost SEF Estimated Yearly Operating Cost
System A $9,500 2 $170
System B $10,000 3 $120

The additional purchase price of the more efficient (higher SEF) System B is $500 ($10,000-$9,500 = $500), but the yearly operating cost of System B is $50 less per year ($170-$120 = $50). The more efficient solar hot water system will pay for itself in 10 years or less. For any comparison, simple payback is calculated by dividing the system price difference by the yearly operating savings: $500 divided by $50 = 10-year simple payback.

Note: Payback periods decrease when fuel costs increase. And, government and utility rebates and tax incentives can significantly reduce your final system cost further decreasing the payback period.

Other Cost Considerations

When an installer visits your home or building, he or she will consider how the solar hot water system components will be integrated into your home’s structure and tie-in with the existing hot water system. Installation costs can vary based on where collectors are located and the piping distance to the storage tank(s).

Incentives That Lower Costs

There are a variety of federal, state, and local government and utility incentives for energy efficiency and renewable energy. These incentives vary by state and in the length of time they are available. The Department of Energy’s Database of State Incentives for Renewables and Efficiency (DSIRE) tracks available tax credits, rebates and other incentives available to reduce your system’s final cost.

Final Cost with Current Incentives

(Using the $9,724 residential system example)

If you want to compare conventional water heating system costs with solar hot water system costs, visit: http://www.solarrating.org/facts/system_ratings.html, and scroll down to the Comparing System Costs section.


U.S. Department of Energy. (2010, October). Estimating a Solar Water Heating System’s Cost. Retrieved January 19, 2011, from: http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=12910