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When Does Solar Hot Water Make Sense? Part 2

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The answer to the title’s question depends on and varies by household. The main determinants are: hot water requirements, fuel cost, solar opportunity AND your personal goals and how you make decisions.

But first what do we mean by “Make Sense?” This has to do with your goals and how you make decisions. To eliminate the use of fossil fuels, the environmental/solar extreme would say nearly any cost is justified. While I agree emotionally, I can’t agree “rationally” only because there are many opportunities where we can invest our money to save energy, accrue environmental benefits, AND amazingly those opportunities will pay for themselves! Therefore, the rational extreme would say that eliminating the use of fossil fuel makes sense whenever the investment pays for itself over the investment’s lifetime. The rational economic would want to look at all such opportunities and pick the one to implement first that saves the most energy relative to its cost.  

The next factor is supplemental fuel cost. The more fuel costs per BTU delivered to heat the water, the more likely you are to benefit from solar. Just like when we consider fuel costs for heating, we need to normalize the cost of the fuel for both BTU content per unit of measure (i.e., 3412 BTU/kWh and 139,000 BTUs per gallon of oil) and the various devices’ efficiency of delivering BTUs (i.e., On-demand water heaters are very efficient ~93+% and tank water heaters are less efficient ~ 60%).

In all cases, I assume the distribution system (pipes from the water heater to the various faucets) is fixed and thus will be the same for any system. Obviously, the better insulated they are the more efficient is the system – insulate your pipes!

Another factor is your decision timeframe – not how long you take to make a decision, but rather how long the investment should function. Solar and on-demand water heaters last longer than tank water heaters, typically 25+ years for solar and 20+ years for on-demand; both need some maintenance!

The final question is, “How much hot water do you need?” Carl McDaniel and his wife need only 3,000 gallons a year! This is incredibly little. Our family of four (two younger children) use about 13,000 gallons a year. Most families use much more. I am not the one to say how much hot water is needed, but I do believe our family is still using too much.

Please do not think, “The national average is X gallons for a family our size, and we are using X – 2000 gallons or whatever, so we are doing well.” Think more along the lines of Zero-based budgeting, “I need Y gallons for what we feel is appropriate use of hot water (and the energy to make it hot).”

Also remember, using less hot water is the most cost effective way to save energy!

Break-even Analysis

Solar energy is free, but a significant investment is required to utilize it - the cost of installing and operating a SDHW system. Supplemental fuel is expensive and pollutes. There is a point at which the lower operating costs of using the sun for energy accumulate enough savings to pay for the greater investment; this is the break-even point. By fixing the time period to the nominial life of the investment, I arrive at the amount of hot water you need to need annually to justify the solar investment financially. I do not consider interest costs in this analysis. So, given we control how much hot water we use and can reasonalbly estimate how much that is, and that several local installers commented that hot water requirement was key to financial effectiveness, I have provided a guideline to help you make your decision - If you need more hot water than shown for the fuel type you have access to, then solar hot water may make sense for you (there are still other details, like solar access and installation specifics, to consider). 

Here are the resulting guidelines.

Water use breakeven3

For example, if you have access to natural gas, then an on-demand water heater is probably your best bet. Unless you have a large household (6 or 7 with a bunch of teenagers?). It is important to estimate your hot water needs.

Propane in interesting at this price point, most two member households and many three member households probably "need" less than 12,540 gallons, so a propane on-demand water heater would be more cost effective; however, if the price goes up "just" 30%, which propane uses have seen from time to time, then the decision becomes more difficult.  One assumption you can count on an that is the price of sunshine will not go up anytime soon!

If you don’t have access to natural gas or propane and your family needs more than 7,600 gallons of hot water (pretty much every household of two or more), then you probably should invest in solar hot water. "Probably," because there are assumptions in my calculation that you will need to confirm you can meet or exceed in order for the above to hold true - very likely.

The second line shows the effect of considering higher energy costs that might be expected on average over the life of the investment. Here is another area where peoples’ opinions/assumptions may differ and the result would be a different “answer.” For this example, I analyzed a 30% higher average cost over the next 25 years than current prices. My personal feeling is this is a very conservative estimated increase;  others may have a different opinion.


Good solar access means you have a sloped roof that is oriented toward solar south. Ground mount systems are more expensive. If you have poor solar access (lack a good place to effectively place your collectors), then invest in an on-demand water heater and insulate your pipes!

This analysis assumes you will use SDHW or an on-demand water heater. An on-demand water heater is clearly the most cost effective if you can’t make adequate use of the sun. I included traditional oil-fired, tank water heater because a lot of people in our region use oil and, from energy efficiency and environmental perspectives, it is better than using nonrenewable grid electric. Please see Marvelous Electricity – Ah, but the Cost! Because of the other costs associated with oil, I do not recommend installing oil only for hot water! But if you have it and use very little hot water, it may make sense keeping.

The most technical assumption is the Solar Fraction (SF). This is the percent of net energy from the sun the system uses to heat your water. SF is not a constant; it is a function of: seasonal temperatures, solar resource, solar access, collector surface area, collector type, pump efficiency, controls, system design, tank size, insulation levels, supplemental fuel, water usage, water usage patterns, etc. Carl McDaniel calculated his evacuated tube system’s SF in Oberlin, OH to be 8%. I calculated the SF for my used flat-plate system in Ballston Lake, NY to be someplace between 54 and 62%. NREL, the national laboratory of the U.S. Department of Energy, Office of Energy Efficiency & Renewable Energy in their report, Break-even Cost for Residential Solar Water Heating in the Untied States: Key Drivers and Sensitivities estimated the SF for their base-case system in upstate NY at 64% for homes using natural gas as the supplemental fuel and 60% for homes using electric. For this analysis, I used 60%.

The analysis has a lot of other assumptions; please see RESOURCES for a worksheet of my analysis. Installed system cost is one of the most variable assumptions – it can vary for many reasons, including: how your house is built (distance and access to the roof); brand of products used; basement situation; etc.  If you see any mistakes or question any of the assumptions, please comment and let me know.

If you have access to natural gas, you benefit from very cost effective energy. Still that does not mean you should use more hot water than a similar household that only has access to electric!

After solar access, the main issue in evaluating whether or not solar makes sense for you is to determine how much hot water you use and need to use. First you probably don’t have any idea how many gallons of  hot water you are actually using or need in a year; if you don’t know how much you need, then it is impossible to say whether or not solar is best.

I figured this wasn’t rocket science and that with a little painstaking effort I could work up a reasonably accurate estimate. I did, and you can too!

When I started looking at hot water as a problem in 2006, I was the same as everybody else – I had no idea! As a matter of fact, recently after reading that Carl McDaniel and his wife use just 3,000 gallons a year, I took my first guess at how many gallons we used. I figured the four of us probably used around 6,000 gallons. After all, we had a low flow shower head and took short showers when needed, not necessarily every day! We ran the dishwasher only when needed; typically two or three times a week. We used almost no hot water for clothes washing; probably just one hot load ever two or three weeks. Three out of four of us are out of the house most of the day, five or six days a week, so we use less hot water for hand washing, etc. What else could we do to use less? But in reality, I didn’t know, with any level of confidence, how many gallons of hot water we were actually using! So I started analyzing – measuring and timing and estimating.

The results surprised me, to say the least. I estimate we use between 10,300 and 15,500 gallons of hot water annually, more than twice what I had “guessed.” See my worksheet in RESOURCES. Now, my “best guess” is that we used 13,000 gallons of hot water during the last year.

Note: When working up your estimate as the basis for a twenty plus year investment, you should consider “future demand” if you expect to use more or less in the future for some specific reasons. For example, I expect we will use more, as the children get a little older and then a lot less when they fly the coop.

Also keep in mind that if you aren’t into doing the details needed to estimate your hot water usage, a good SDHW contractor can help do even a better job, based on his/her experience estimating and by having a better estimating tool than I have provided here. But remember, a contractor will first want to assess your solar access to see if you are a good candidate for solar and solar incentives.

Your comments and experiences are always appreciated!

Dan Gibson is the Reporter and Chief Coordinator of Our Energy Independence Community (www.OEIC.us). Previously he performed home energy audits for five years in NYSERDA’s Home Performance program and new home ratings in the New York ENERGY STAR Home program. He is currently building a 100% Solar Home. He can be reached at DanG@OEIC.us


PDF Document :   Break-even Analysis Details

PDF Document:   Our Family Hot Water Estimate Details

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