Solar water heating payback vs replacing the hot water tank

Shower headWhen we had a new hot water tank fitted some years ago, we asked the plumber about solar panels for water heating.  The plumber said that while they can cut hot water heating costs, they rarely pay for themselves in a home.  The plumber went on to say that most installers exaggerate solar water heating cost savings to sell a complete package.

Before I start, I am not against solar based water heating and this article is focused on the climate in Ireland.  Indeed, solar is the most environmentally friendly way of heating water, particularly in warmer climates.

Introduction

While excessive immersion use can lead to expensive electric bills, I did some research about solar hot water heating.  Every solar installation either involves replacing the hot water cylinder or strongly recommends doing so.  It soon became clear how such an installation drives down the hot water heating cost.

By replacing the hot water cylinder with a well-insulated one, the actual saving comes from the heat retention.  Most people only use a small portion of the hot water tank each day on average.  One exception would be where a family takes several showers in a single day.  Most older hot water cylinders lose most of their heat after 24-hours, therefore requiring complete tank heating each day.

With a well-insulated tank, the main heating cost will be to just heat the cold water that replaced what was used.  This can easily cut a household’s hot water heating cost in half or lower, without involving solar, let alone any other change in the heating system.

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Immersion running cost

For calculating the hot water heating costs and savings, I am going to base it on 100% immersion costs.  Why?  Most people consider the immersion to be the most expensive way to heat hot water.  This simulates a worst-case scenario where one does not have oil or gas heating.  I will start by basing the math on Electric Ireland’s standard tariffs.  This again assumes one is not taking advantage of any electric provider discount plan or switching offer.

Hot water usage varies widely from household to household.  I am going to assume 100 litres per day average drawn from the cylinder, which is quite a lot.  That is roughly 3000 litres per month just from the hot tap, not taking cold water mixing into account!  Generally, when taking a bath or shower, a 30%-50% mix of cold water is necessary to prevent scalding.

I will base the calculations on the following figures:

  • Electric Ireland standard 24Hr tariff – 17.17c/kWh
  • Copper hot water cylinder – 200 litres
  • Household hot water usage – 100 litres/day average
  • Average cold water input supply: 10°C
  • Hot water thermostat*: 60°C
  • Electric bill interval – Every 61 days (2 months)

Note *: Most older and basic hot water cylinders do not have an adjustable thermostat.  In fact, some may have a fixed thermostat set around 90°C.  Worse still, some passively rely on venting overheated water into an expansion tank or outdoors.  In this case, the immersion will continuously draw power until the user remembers to switch the immersion off!

Existing hot water heating cost

I am going to assume one currently has a 200-litre copper hot water cylinder.  Even with after-market lagging, much of the heat will still escape.  By switching on the immersion multiple times a day to heat or reheat the water, a typical household will generally heat the full 200 litres once a day.  If someone regularly forgets to switch the immersion off, consider adding 30-50% to the pricing.

  • Energy to heat 1 litre by 1°C = 4184J
  • Energy to heat 200 litres by 50°C – 4184 x 200 x 50 => 41,840,000J
  • 41,840,000J / 3600s => 11,622Wh => 11.622kWh
  • Cost per day => 11.622kWh x 17.17c => €2.00 (nearest cent rounding)
  • 2 months billing cost => €2 x 61 days = €132 added to each bill
  • Annual cost => €2 x 365 days = €730 per year

Solar water heating package running cost

Let’s say the household avails of a solar upgrade package for €5000 and saves the stated 75% off their annual hot water bill, the ongoing costs would work out as follows:

No upgrade, based on the above immersion running cost:

  • 5 years – €730 x 5 = €3,650
  • 10 years – €730 x 10 = €7,350
  • 15 years – €730 x 15 = €10,950
  • 20 years – €730 x 20 = €14,600

€5000 solar package, saving 75% (=€182.50/year)

  • 5 years – €5000 + €182.50 x 5 = €5,912.50
  • 10 years – €5000 + €182.50 x 10 = €5,825 (€1,525 saved)
  • 15 years – €5000 + €182.50 x 15 = €7,737.50 (€3,212.50 saved)
  • 20 years – €5000 + €182.50 x 20 = €8,650 (€5,950 saved)

Assuming a typical household was spending €730 each year running the immersion, there is no doubt the solar package will save money.  It will pay for itself within 10 years, assuming no maintenance costs.

However, is it really the solar panels doing the magic?

Let’s look at other options at cutting hot water heating cost, all involving an electric immersion.

Nightsaver (day/night) Tariff

A low cost option would be to get a day/night tariff meter and have an electrician install a timer and thermostat.  This would heat the tank at night during the cheap off-peak tariff.  The user just needs to run the immersion in the evening to top-up for evening time use.

Installation is generally free for a day/night tariff meter.  Let’s assume a €200 total cost for an electrician to install the timer and thermostat.

The Electric Ireland standard day/night tariffs are as follows:

  • Day tariff – 18.33/kWh
  • Night tariff – 9.06/kWh
  • Additional standing charge (vs 24Hr): €52.03/year (Urban)

While the day tariff is 6.7% higher, it is reasonably straight forward for a household to use the night tariff in their favour.  As the night tariff ends at 8am (9am during daylight savings time), just run the washing machine and dishwasher at 7am.  Assuming one makes breakfast before 8am (e.g. before work), the various appliances will be run off-peak.  Similarly in the winter, appliances that run after 11pm will operate on the off-peak tariff.

For the sake of simplicity, we’ll assume that the day/night tariff will lead to an unchanged bill for electrical consumption excluding the immersion.

Nightsaver tariff heating cost

Let’s assume that the full 200 litre tank requires heating overnight and that the user operates the boost immersion for 30 minutes each day.

  • Energy to heat 200 litres by 50C – 4184 x 200 x 50 => 41,840,000J
  • 41,840,000J / 3600s => 11,622Wh => 11.622kWh
  • Night tariff cost => 11.622kWh x 9.06c = €1.05 (nearest cent rounding)
  • 3kW boost Immersion for 1/2 hour => 1.5kWh
  • Day tariff cost => 1.5kWh x 18.33 => €0.28 (nearest cent rounding)
  • Cost per day = €1.05 + €0.28 = €1.33 (nearest cent rounding)
  • 2 months billing cost => €1.33 x 61 days = €81.13 added to each bill
  • Annual cost => €2 x 365 days = €485 per year (nearest € rounding)

Simply changing tariff and installing a timer will save around €245 per year, assuming the same usage.  Adding or improving the cylinder lagging will further help reduce this cost as the overnight immersion will not require as much energy to reheat the remaining warm water.

Now let’s look at the savings over 5-year intervals, factoring in a €200 cost to install the timer:

  • 5 years – €200 + €485 x 5 = €2,625 (€1,025 saving)
  • 10 years – €200 + €485 x 10 = €5,050 (€2,300 saving)
  • 15 years – €200 + €485 x 15 = €7,475 (€3,475 saving)
  • 20 years – €200 + €485 x 20 = €9,900 (€4,700 saving)

Assuming the same usage going forward, the break-even point for a solar water heating package would be extended to over 15 years.  By that stage, there is a higher chance of the solar panels requiring maintenance work, which would further extend the break-even point.

Switching electric provider

As the newspapers often mention during energy price hikes, there are a surprising number of people that are on a standard electric tariff.  For the following calculations, I am going to assume that one switches provider each year.  To simplify calculations, I will assume the energy prices remain the same over the coming years.

Going by Switcher’s online tariff prices, the following is the average price of Energia, Bord Gáis, Panda Power and SSE Airtricity (prices checked 6th September 2017).

  • 24 Hour tariff – 14.44c/kWh
  • Nightsaver tariff day – 15.63c/kWh
  • Nightsaver tariff night – 7.64c/kWh

Let’s take our earlier daily power consumption of 11.622kWh for heating the water.

  • Cost per day => 11.622kWh x 14.44c => €1.68 (nearest cent rounding)
  • 2 months billing cost => €1.68 x 61 days = €102.48 added to each bill
  • Annual cost => €1.68 x 365 days = €613.20 per year

By simply switching electric provider each year, this saves about €117 per year.

Switching provider with nightsaver tariff

Now let’s look at the savings to be made with a Nightsaver tariff.  We will again assume a €200 cost to install an immersion timer and thermostat and 30 minutes of daytime immersion boost usage.

  • Night tariff cost => 11.622kWh x 7.64c = €0.89 (nearest cent rounding)
  • Day tariff cost => 1.5kWh x 15.63 => €0.23 (nearest cent rounding)
  • Cost per day = €0.89 + €0.23 = €1.12 (nearest cent rounding)
  • 2 months billing cost => €1.12 x 61 days = €68.32 added to each bill
  • Annual cost => €1.12 x 365 days = €409 per year (nearest € rounding)

Now let’s look at the savings over 5-year intervals, factoring in a €200 cost to install the timer:

  • 5 years – €200 + €409 x 5 = €2,245 (€1,405 saving)
  • 10 years – €200 + €409 x 10 = €4,290 (€3,060 saving)
  • 15 years – €200 + €409 x 15 = €6,335 (€4,615 saving)
  • 20 years – €200 + €409 x 20 = €8,380 (€6,220 saving)

From our earlier calculation, a €5000 solar water heating package that saves 75% would come to €8,650 total over the 20-year period.  Assuming the same usage and no energy price changes over the 20 years, it would take over 20 years for the solar package to pay for itself compared to switching to a Nightsaver tariff, installing a timer/thermostat and switching provider each year.

A lot can happen in 20 years’ time.  There is a high chance that the solar panels, pumps, etc. will require costly maintenance.  The householder may even sell the house by then.  If the solar water heating package was paid for with a loan, the payback time could be 25 to 30 years, by which time it will likely reach the end of its life.

Hot water cylinder upgrade

Generally, a solar hot water package includes a high efficiency hot water cylinder.  Let’s see what happens if the household replaces their hot water cylinder with a well-insulated one.  We will assume that the cost of the high efficiency 200 litre cylinder, plumbing costs, immersion timer and switches come to €1,000.

Let’s assume that the hot water cylinder retains 80% of its heat in a 24-hour period.  Unlike after-market lagging, these cylinders feature dense factory-sealed insulation to minimise heat loss.  We will take our earlier assumption that the household consumes 100 litres per day.  As is no longer necessary to reheat the water each evening due to the low heat loss, we will assume a 1-hour boost per month.

Insulated hot water cylinder running cost

In this case, a 24-hour tariff will no longer make sense.  So, we will perform calculations based on the Electric Ireland Nightsaver tariff.  We will also calculate the savings in combination with switching providers for the average cheaper Nightsaver tariff.

  • Energy to heat 100 litres by 50°C – 4184 x 100 x 50 => 20,920,000J
  • Energy to reheat 100 litres by 10°C – 4184 x 100 x 10 => 4,184,000J
  • 25,104,000J / 3600s => 6,973Wh => 6.973kWh
  • Night tariff cost => 6.973kWh x 9.06c = €0.63 (nearest cent rounding)
  • 3kW boost Immersion 1 hour => 3kWh
  • Day tariff cost => 3kWh x 18.33 => €0.55/month (nearest cent rounding)
  • Cost per day = €0.63 + €0.02 = €0.65 (nearest cent rounding)
  • 2 months billing cost => €0.65 x 61 days = €39.65 added to each bill
  • Annual cost => €0.65 x 365 days = €237 per year (nearest € rounding)

Now let’s look at the savings over 5-year intervals, factoring in a €1000 cost to install the cylinder and timer:

  • 5 years – €1000 + €237 x 5 = €2,185 (€1,465 saving)
  • 10 years – €1000 + €237 x 10 = €3,370 (€3,980 saving)
  • 15 years – €1000 + €237 x 15 = €4,555 (€6,395 saving)
  • 20 years – €1000 + €237 x 20 = €5,740 (€8,860 saving)

By simply upgrading the water cylinder and heating it on the Nightsaver tariff, it will take just 2 years to pay for itself.  For comparison, a €5000 solar water heating package would take 25 to 30 years to accumulate a similar saving.

Insulated hot water cylinder + cheaper tariff

Now for the maximum saving, let’s assume the same hot water cylinder upgrade and usage, but with the household switching electric providers each year.   We will use the same above day/night discount tariff averages:

  • Nightsaver tariff day – 15.63c/kWh
  • Nightsaver tariff night – 7.64c/kWh

Now let’s recalculate the cost with the average discount Nightsaver tariffs.

  • Night tariff cost => 6.973kWh x 7.64c = €0.53 (nearest cent rounding)
  • Day tariff cost => 3kWh x 15.63 => €0.47/month (nearest cent rounding)
  • Cost per day = €0.53 + €0.02 = €0.55 (nearest cent rounding)
  • 2 months billing cost => €0.55 x 61 days = €33.55 added to each bill
  • Annual cost => €0.55 x 365 days = €201 per year (nearest € rounding)

Now let’s look at the savings over 5-year intervals, factoring in a €1000 cost to install the cylinder and timer:

  • 5 years – €1000 + €201 x 5 = €2,005 (€2,645 saving)
  • 10 years – €1000 + €201 x 10 = €3,010 (€4,340 saving)
  • 15 years – €1000 + €201 x 15 = €4,015 (€6,935 saving)
  • 20 years – €1000 + €201 x 20 = €5,020 (€9,580 saving)

In this scenario, that €5000 solar package cost would pay for the hot water cylinder replacement and 20 years of water heating.  Even with the solar package, it is quite likely it will require maintenance or repair over the 20-year period.

Assuming a best case scenario where the solar panels provide 100% of the hot water heating all year around without any other running cost, it will still take at least 20 years for a €5000 package to finally pay for itself.

One thought on “Solar water heating payback vs replacing the hot water tank”

  1. “Note *: Most older and basic hot water cylinders do not have an adjustable thermostat. In fact, some may have a fixed thermostat set around 90°C. Worse still, some passively rely on venting overheated water into an expansion tank or outdoors. In this case, the immersion will continuously draw power until the user remembers to switch the immersion off!”

    Seriously? I’ve never encountered either thing, and I’ve crawled around and in plenty of old installations. If they did exist, they’re likely long since consigned to the scrap heap, where they belong.

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