HOT WATER HEATING

"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 the Durango area 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. You see them all over Durango and La Plata County. How many are still working is anybody's guess, but it is clear to the trained eye of the solar technician that many of them are not. This is unfortunate, but 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 energy industry is in its second phase, 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.

How affordable is it? Or maybe we should ask: how does its cost compare with the alternative of fossil fuel powered systems where we pay the utility company every month for the life of our home or business? First we need to know a few things about solar energy: (If you are not a math person and financial analysis is unimportant, feel free to skip the following and go straight to save the planet and buy a solar hot water system. For the rest of us who need to see the money consider the following.)

1)Hot water is typically 25-30% of a household's monthly energy bill.

2)The fuel, sunshine is free. Currently (2008) LPEA electricity is 10 cents per KWH, liquid propane is about $2.40 per gallon, and natural gas is about $.90 per ccf, counting taxes and facility charges. This is roughly one therm, or 100,000 btu.

3)According to Tom Lane, author of Solar Hot Water Systems, liquid propane @ $1.60 per gallon, natural gas @ $1.71 per therm, and electricity @ 10 cents per KWH, with typical water tank efficiencies, are equal. Obviously these numbers are not necessarily the actual costs, but if you know the real cost of one of the fuels you can then use that value to come up with a solar comparison to the other two fuels as has been done in the example below.

4) A two person household uses about 20 gal. of hot water per person per day or 40 gal. total. Each additional person uses 15 gal. per day, so a family of four uses 70 gal. per day since there is an economy of scales with more people.

5)The cost of the solar sytem is in addition to the cost of the installation for one of the other three fuels since one of them is needed for backup. Remember, the sun doesn't shine every day.

6) The solar hot water system will provide about 70% of the annual heating.

7) The Dept. of Energy says that electricity costs have grown 24% in Colorado over the last four years. This is about 5% inflation per year compounded.

8) An sdhw system that costs $7500 is a median number. It could be more or less depending on features purchased and the complexity of the installation.

9) There is currently a federal solar thermal tax credit of 30% of the system cost, capped at $2000. This is due to expire Dec. 31, 2008. Will it be renewed? Probably.

10) The magazine Journal of Appraisal says that for every dollar saved 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.

So what's a good starting point to do a quick and simple financial analysis? While no method for calculating it is super precise, they are all good enough for our purposes. Sometimes you can start with your utility bill. In my case, the owner of Solar Today and Tomorrow, my home has natural gas for space heating and dhw. Since we don't use the furnace during the summer months the summer bills will be for dhw only. It averages very close to $25 per month or $300 per year for a family of two. This is the equivalent of $525 per year for a family of four. Multiply by 70% to arrive at $368. This is the total annual savings that a solar hot water system provides for a family of four using natural gas. Now take the median cost of $7500 and subtract the $2000 tax credit for a total cost of $5500. Divide $5500 by an annual utility cost of $368 per year to get the figure of 14.5 years. Now if you factor in 5% compounded annually for inflation the 14.5 years decreases to about 11.5 years for the so-called "payback" period in which the initial cost of the solar hot water system is equal to the natural gas utility bills you would have paid over that time period, but didn't pay because you had a solar system. Additionally your home has had an equity increase of $368 multiplied by $20 to arrive at an increase of $7360 for your home's value. Now the "payback" time period is a negative number and you are saving $368 per year counting from day one! How many other investment vehicles are that good?

A similar approach with electricity will yield a "payback" period of about 6.8 years and liquid propane will yield a period of about 4.9 years. But keep in mind that this is without factoring in the home value increase. The annual money to be saved for electricity with a family of four using the equality relationship in item #3 above is $700 per year and $1050 per year for propane.

What about commercial applications? The tax credit is 30% without any cap 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 $7500 example, instead of just knocking $2000 off the cost to $5500 we are now down to 50% or $3750. Of course commercial applications might be bigger than a typical residential installation. If you are a car wash, laundromat, or restaurant 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.

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 been saved is paid to the utility companies. So if you think a solar hot water system could be right for you, please give us a call and we will be happy to set up an appointment for a solar site analysis to see what kind of installation is possible.