SOLAR HOT WATER SYTEMS

"You pay for a solar hot water system whether you buy one or not."--Tom Lane (2004), author of Solar Hot Water Systems, Lessons Learned 1977 to Today

Solar energy has two basic applications: 1) photovoltaics to produce electricity, and 2) solar thermal or solar heating. The latter is primarily about heating water and sometimes applications to heat air. This page is concerned with water heating of what we call dhw (domestic hot water) or sdhw (solar domestic hot water). This is, for most homes, the water that is used for the dishwasher, food preparation, laundry, showers, and baths. How much of this hot water can a solar thermal installation in southwest Colorado realistically supply? Easily 70% over a year's time and up to 100% in the summer. That would make solar the primary source of heat with electricity or natural gas or propane as the secondary backup.

How reliable, efficient, and maintenance free are these solar thermal systems? Let's put it this way: they are not the systems of your father or grandfather. From 1977 to 1986 the solar thermal industry enjoyed a 40% tax credit. Many large corporations introduced systems that didn't work for long--they had design flaws, were too complex or too expensive. A few were effective and are still working today. However much has changed since the solar boom years that ended in 1986 when, seemingly, the energy crisis of the 70's was forgotten and oil was again king and cheap. No more worries. Till now. There is a growing appreciation that fossil fuels on planet earth are not infinite or cheap to access; and while coal, the direct competitor with most solar applications, is in abundant supply for now, there is a growing concern for its true cost in pollutants and CO2 emissions. In short, no more boom and bust for solar as in 1986 when the tax credits were canceled. And now that the solar thermal industry is in its second generation, it has grown slowly and steadily in a sensible manner without all the lack of quality problems that went with the aforementioned boom period. Today's solar thermal technology has come a long ways and is truly reliable, effective, and low to no maintenance depending on the type of system.

So, can we afford to buy one? Here is a hypothetical but realistic example to help you decide. But first consider a few facts:

1) The Dept. of Energy says that electricity costs grew 24% in Colorado over the four years before the recession. This is about 5% inflation per year compounded.

2) LPEA says a sdhw system will cost somewhere in the range of $7000 to $12,000. $9500 is a good median number.

3) There is a federal solar water heating tax credit of 30% of the system cost and you can roll it over from one tax year to the next until you use it up.

4) The magazine Journal of Appraisal says that for every dollar saved annually in energy bills with a solar system, $20 should be added to the value of the home. If, for example, you save $500 per year in utility costs, then at a multiple of $20 your home is worth $10,000 more. The rationale behind this is that if you save a dollar in utilities you can afford to spend a corresponding dollar on your home mortgage or $20 added to the borrowed amount. This is the standard currently recommended for real estate appraisers.

Sample system and cost analysis:
Family of 4, annual consumption of 14,650,000 btu's; electricity @ 11¢ per kwh. Water heater efficiency 86% for an annual cost of $549.00

Solar system: 2 ea. 4x8 flat plate collectors and a 120 gallon solar storage tank, providing 73% of the annual hot water heating. Total cost materials and labor: $9500.00

$9500.00 x 30% federal tax credit = net cost of $6750.00

$549 annual fossil fuel cost for electricity x 73% (solar contribution) = $401 (1st yr. savings with solar)

Savings over 20 years with electricity price increase of 7% per year compounded = $9689.00

Home equity increase @ 20/1 appraisal ratio = $401 x 20 = $7,983.00. Since this is more than the net cost of $6750 you shouldn't have to worry about losing your money if you have to sell your house early on.
Return on investment is 5.9% or equivalent of 6.8% profits in the stock market since there is no capital gains tax on the energy savings. This is better than most investment vehicles and you have made a meaningful contribution to the health of planet earth, a matter of unquantifiable value.

What about commercial applications? The tax credit is 30% and the MACR accelerated tax depreciation method can be utilized over 5 years so that the sum of the two could realistically be the equivalent of a 50% savings off the initial cost of the solar system. So to use our $9500 example, instead of knocking 30% off the cost we now deduct 50% or $4750. Of course commercial applications are usually bigger than a residential installation. If you own a car wash, laundromat, restaurant, hotel, motel, or institution you probably use a lot of hot water. A solar hot water system could really be the smart thing for you.

What about tankless water heaters? These are growing in popularity and it seems that just about everybody asks about them as an alternative. Tom Lane, author of Solar Hot Water Systems says: "Tankless water heaters do save space, but not much energy. Numerous tests by independent third parties, have shown only 10% savings versus conventional electric water heaters and 15% to 20% savings versus energy efficient conventional gas water heaters over a 24 hour period. Most manufacturers of these expensive water heater systems exaggerate the savings. Daily savings quotes of 25% or higher versus modern electric or gas water heaters are simply not true. In 2004, hot water manufacturers were required to add additional insulation to all water heaters, making instantaneous water heater savings more insignificant. Tankless water heaters have serious problems with scaling in hard water areas." So when the true percentage savings of the instantaneous tankless heaters is compared to the 70% for solar, then solar is usually the obvious choice. But if you can't do solar for whatever reason or need to save space and don't have hard water, then a tankless heater might be right for you. A tankless heater could also be the backup for solar.

So there you have it, and the quote at the top of this page makes perfect sense. If we don't buy a solar hot water system, we have as good as paid for one with never ending utility bills and the money that could have gone to our pocketbook is given to the utility company instead. So if you think a solar hot water system will work for you, please give us a call or use the contact page to email us and we will be happy to set up an appointment for a solar site analysis to see what kind of installation is possible.