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 5kW, though 3kW systems are also popular. 1.5kW systems are no longer common. Consider that for about the same price as a 5kW system (~$7500), you could retrofit your hot water system and almost have enough change left over to buy a 1.5kW 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 better financial outcome than a solar hot water system.
With this in mind, you may be best served by buying a SHW unit and filling up the rest of your roof (or your budget) with PV. In most cases, this would maximise the savings on your energy bill. To illustrate this point, the chart below compares the electricity savings from putting on a 5kW PV system to those of installing a 1.5kW system and converting your off-peak electric water heater to SHW. The chart illustrates that the savings are comparable.
One key caveat applies to all of this however; 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 3kW of solar power. Individual circumstances are the key, and we encourage you to either use SunWiz’s free export calculator, or for tailored results PVsell allows you to tailor your advice to the homeowner and upload metered data or use a library of real load profiles.
As mentioned, the study covered a large combination of inputs to help indicate outcomes for the wide range of individual circumstances. Later in this article we will provide summary analysis by location, combined with a complex chart that allows individual circumstances to be examined. First, 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, whether householders are home during the day and install a small system or whether they are 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 weekdays and installs a PV system 2kW or smaller;
Extending these results to more locations, we encounter the complexity of displaying the myriad of combinations and permutations. For those of you who hate graphs and just want the easy summary, you can find it beneath. For those of you who love graphs, the chart below 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 the location (horizontal panes), then investment timeframe (upper or lower pane), and 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), and compare the IRR for SHW to the range of IRRs for different sized PV systems depending on your consumption profile (home during the days = 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.
Remembering 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, in most cases SHW has quicker returns. If you’re water heater is electric boosted, then PV has quicker returns.
- NSW Regional: if your hot water is gas-boosted, SHW has quicker returns. If you’re water heater is electric boosted, in most cases PV has quicker returns.
- QLD Metro: SHW makes quicker returns than a PV unit in most circumstances, though in some circumstances you can get quickest returns from a small PV unit.
- QLD Regional: If you’re using LPG to heat your water, then you’ll get quicker returns from a 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 a 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 make retrofitting SHW to an existing tank has comparable economics to PV.
- VIC Rural: If you’re using LPG to heat your water then SHW pays for itself sooner than PV. If you’re using off-peak electricity to heat your water, then 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, then SHW pays for itself quicker than PV if your water heater has reached the end of its life. Otherwise PV offers quicker payback, though best to combine a small PV system with SHW if you’re using gas-heated water.