Confused by the ‘Cost of Solar Water Heaters ’ – What Does it Really Mean?
It should be simple to understand, but when it comes to solar renewables, particularly solar water heaters, and to a lesser extent rooftop solar PV, the question of what it ‘actually’ costs seems to get lost. Almost always the first question is ‘What does it cost?”. End consumers and even government tenders are fixated by the ‘sticker’ cost, in much the same way as looking at a car in the showroom, or even a utility item like a washing machine. The wrong question is being asked. The far more meaningful question is “What is the Return on the Investment”.
The majority of consumers both domestic and business will only really consider consumer renewables in the form of solar water heaters and solar rooftop PV, if they are connected to the grid, on the basis that it can save them money.
1 litre of hot water (assuming it is the same temperature), irrespective of whether it was made over a fire, in an electric kettle or an electric geyser is still 1 litre of hot water.
In the same way 1 kWh generated by Eskom or solar PV farm or wind power is still 1 kWh. 1 kWh of energy saved through a solar water heater is still 1 kWh of energy and 1 kWh generated by rooftop solar PV is still 1 kWh.
The difference is that with transmitted power there will be efficiency losses, meaning that 1 kWh used by the end user will have required more than 1 kWh put down the line.
Although this is simplistic and obvious, solar water heaters, while being relatively simple technology are surprisingly complex to evaluate from a Return on Investment (ROI) perspective. In contrast rooftop solar PV, which is arguably more complex from a technology perspective, is simpler in that its performance rating is given in watts or kilowatts.
This blog post will concentrate on solar water heaters ROI, and a subsequent one for Rooftop solar PV where there are traps waiting for the unwary.
Solar Water Heaters and the Return On Investment (ROI)
The simple concept of catching the heat from the sun, or insolation, converting it into hot water and storing it for later use is straightforward enough. It can be done using numerous different types of solar collectors and the insulated tank to store and retain the heated water is similar to a thermos.
The starting point for calculating the Return on Investment has to be the power output of the system(s). The specific heat of water formula enables this to be calculated by taking the temperature rise in the tank (volume × temp rise ÷ 860 = kWh). When done over a number of days and with no water being drawn off, starting at cold and measuring at the end of the day, the (deemed) kWh output can be determined.
With the kWh output and applying a monetary value to the kWh saved, the total savings per day, or year, or over a number of years can be calculated.
Taking a number of systems and doing the same exercise on each enables a comparison and one factor of the ROI to be determined.
The table below is illustrative of a simple analysis.
Exercise 1 – Cost per kWh per day, year, number of years, by taking the kWh output and dividing the cost by the kWh’s saved.
Exercise 2 – The output of the SWH in kWh multiplied by the cost of the kWh being saved per day and divided into the cost of the SWH system to arrive at the payback point.
The Return on Investment can be determined in the tables above, and in Table 1 and Table 2 System C is the winner, although System A was the cheapest ‘on the sticker price”. Projecting forward over a number of years, increasing the cost of electricity each year, enables both IRR and ROI calculations to be done.The graph below is illustrative of this:
- It is assumed that the warranties or guarantees on the systems are the same.
- The life expectancy of all the systems, assuming that they are serviced and maintained is also the same, which should be at least 20-25 years or more.
The ROI however also needs to take into account a number of other factors. The most important of these is: does the system produce hot water that is useable for washing?
On a purely financial basis (ROI) System C was the winner in the illustrative analysis, but as can be seen in Table 3 (below) the temperature increase in the tank from cold with 10 kWh output will only raise the cold water at 11 °C start temperature by 28,67 °C to 39,67 °C.
As most people wash at 40 °C System C which was the winner (on a pure ROI basis) fails in the objective of heating water to a temperature that is useable, unless electrical back up is used.
One can therefore conclude that if all the factors are taken into account, System D or System B are the best buys, and System C may be the best ROI for many months of the year (but not in winter), and the cheapest System A on the sticker price, is the worst.
Guidelines for Buying Solar Water Heaters
Making an investment in a solar water heater is without doubt potentially a fantastic return on investment. However choosing a system is open to sales speak, and being influenced by the sticker price. It is also unreasonable for a buyer to understand all the factors outlined above, (there are others too).
The questions a buyer should be asking rather than “what is the cost?” or “what is the price for the solar water heater” are:
- “How much hot water (at 40° C) will this solar water heater generate each average day for washing with?”
- “How many kWh of energy will this SWH save each day?”
- “How much money will this SWH save me?”
- “When do I recover the cost of this investment?” (the payback point)
- “What are the projected financial savings?”
- “What is my projected return on Investment over, 5, 10, 20 years?”
If the sales people can provide these answers, with supporting evidence, the potential purchaser can then buy with confidence. If not, the probability is that the expectations of reductions in electricity bills of 40% or more will not be achieved and the consumer will be disappointed.
It really is no different to buying a car. If you don’t ask the questions, fuel consumption, how fast, service periods, warranties, depreciation, you may end up disappointed.
Solar Water Heaters Without Electrical Back Up
When the return on investment is done on solar water heaters without electrical back up even greater attention is required.
The South African government’s worthy holistic socio economic uplift program for the roll out of solar water heaters to low income homes, which stopped at the end of 2012 had many problems, but the one which only came to light later, was that most homes didn’t actually get hot water from the installed systems.
This was partly down to bad installations, but the reality was that the performance of the majority of LP SWH, did not have the necessary solar water output to generate hot water in winter, when the days are shorter and the cold water is colder than in summer.
Effectively government was spending money on SWH systems that was akin to buying cars without wheels. The lower sticker cost was a motivating factor while ignoring what it actually could do or rather couldn’t do.
Solar waters heaters that do not have electrical backup, as those supplied to low income homes, require a solar power output that is adequate to ensure that hot water is available. Using winter months when cold water is at 11 °C and when days are shorter, the required output is as shown below.
What is the Price of the Solar Water Heater? – Conclusion
A simple question can result in a complex answer. Solar water heaters are not the same as an electrical geyser that heats water up on demand. It needs to be sized correctly to the user’s requirements. The performance of the system needs to be looked at in its entirety, not the solar collector or tank in isolation.
From an investment perspective the overall Return On Investment needs to be taken into account. Ask the right questions and you will end up making the right decisions. Don’t ask and you are likely to be disappointed.
A general guideline in solar thermal is that bigger is better, as long as it is sufficiently powerful in kWh output.
As the government is in process of implementing a new revived solar water heating roll out, tenders were recently announced for Social Facilitation and Technical Feasibility, the chosen panel of service providers really do need to understand the ROI equations and the minimum hot water heating outputs.