A new study finds evacuated tube solar hot water often pays for itself quicker than typical solar electricity systems, writes SunWiz MD Warwick Johnston.
In part 1 of this article, we found that in most cases for a typical household, evacuated tube solar hot water (SHW) has a quicker payback than PV. In part 2 we will more closely examine why this is the case. We’ll also see that combining both technologies can produce the best outcome for a household.
Use both SHW & PV for combined benefits
The most popular PV system size is now about 5 kW, though 3 kW systems are also popular. 1.5 kW systems are no longer common. Consider that for about the same price as a 5 kW system (around $7,500), you could retrofit your hot water system and almost have enough change left over to buy a 1.5 kW PV system. SunWiz’s analysis showed that evacuated tube SHW was often more financially favourable than PV, but in circumstances where heating hot water was cheap due to low-priced off-peak electricity or natural gas, a small PV system would have a better financial outcome than a solar hot water system.
With this in mind, a household might be best served by buying an SHW unit and devoting the rest of the roof (or budget) to solar PV. In most cases, this would maximise the savings on energy bills.
To illustrate this point, the chart above compares the electricity savings from installing a 5 kW PV system to those of installing a 1.5 kW system and converting off-peak electric water heater to SHW. The chart illustrates that the savings are comparable.
However, one important caveat applies to all of this. While SHW has in-built storage, if you’re not using much hot water, most of the solar energy will be wasted. It is therefore important to choose a suitably sized solar hot water unit to match your usage.
Likewise, if you’re a frugal electricity consumer, you might expect high export levels from even 3 kW of solar power. In other words, individual circumstances are the key.
Detailed results
As mentioned, the study covered a large combination of inputs to reflect the wide range of individual circumstances. Below we provide summary analysis by location, combined with a complex chart that allows individual circumstances to be examined.
First, however, the results are best introduced by way of example. We’ll use Sydney as our example. Referring to the table below, columns show the system price, bill saving in year 1, payback, and Internal Rate of Return (IRR) over 10 years. Rows show the outcomes for a selected retrofit or replacement SHW unit compared to a range of PV system sizes for households with a consumption profile away during the day, or home during the day.
From the table we can see for Sydney:
The Apricus evacuated tube SHW payback ranges from 5.0 to 11.0 years depending on whether it is replacing an electric (peak) hot water system, a gas system or an electric (off-peak) hot water system (respectively).
The PV payback ranges from 5.9 years to 8.2 years, depending on whether householders are home during the day and install a small system or away during the day and install a large system (respectively).
Apricus SHW systems have quicker payback in the following circumstances (compared to all PV options):
- Replacement of natural gas hot water system
- retrofit of a natural hot water system, unless the householder is home during weekdays and installs a PV system 2 kW or smaller.
Extending these results to more locations, we encounter the complexity of the myriad of combinations and permutations. For those of you who hate graphs and just want the easy summary, you can find it below. For those of you who love graphs, the chart here
compares the 10-year IRR from a range of PV system sizes (lines representing different consumption patterns) with those of solar hot water (retrofit or replacing water heaters – large or small dots respectively) fuelled by electricity or gas (green or purple dots respectively).
To interpret the graph, look for the combination that most closely represents your circumstances: first find the location, then find the dot that matches your hot water situation (purple = gas, green = electricity; small dot = replacing a broken water heater, large dot = retrofitting solar to an existing hot water unit). Then you can compare the IRR for SHW to the range of IRRs for different sized PV systems depending on the consumption profile (home during the daytime = blue line; away during daytime = orange line). Note that the Victorian results don’t incorporate VEECs, which provide an additional discount that improves the financial outcome for SHW.
Bearing in mind that individual circumstances may cause significant variation from the statements below, here are the take-home messages for typical households in each location:
NSW metro: if your hot water is gas-boosted, SHW has quicker returns in most cases. If your water heater is electric boosted, PV has quicker returns.
NSW regional: if your hot water is gas-boosted, SHW has quicker returns. If your water heater is electric boosted, PV has quicker returns in most cases.
QLD metro: SHW makes quicker returns than a PV unit in most circumstances, though in some circumstances you can get the quickest returns from a small PV unit.
QLD regional: if you’re using LPG to heat your water, you’ll get quicker returns from an SHW unit than a PV system. If you’re using off-peak electricity, PV or SHW may pay for itself quicker, depending on your circumstances.
SA metro: in most cases a PV unit will pay for itself quicker than an SHW unit. Consider SHW if you’re using gas-boosted hot water, especially if your hot water tank is reaching the end of its life.
TAS metro: if your hot water tank has reached the end of its life, SHW makes good sense in most circumstances. Otherwise, PV pays for itself sooner.
VIC metro: PV pays for itself quicker than SHW in most circumstances, but if your hot water tank has reached the end of its life then SHW combined with a small PV system is the optimal combination. VEECs may mean retrofitting SHW to an existing tank can offer comparable economics to PV.
VIC rural: if you’re using LPG to heat your water, SHW pays for itself sooner than PV. If you’re using off-peak electricity to heat your water, combining SHW and a small PV system is the optimal combination when your water heater reaches the end of its life, particularly if the additional discount offered by VEECs is factored in.
WA metro: if you’re using gas to heat your water, SHW pays for itself quicker than PV if your water heater has reached the end of its life. Otherwise PV offers quicker payback, though it’s best to combine a small PV system with SHW if you’re using gas-heated water.
You can download the full report here.