Solar Water Heating – the Financial Benefits

At It Won’t Cost the Earth we think that installing Home Cleantech makes sense:

• It’s good for taking control of your energy needs
• It’s good for making sure you’ve always got the energy you need without relying on others or other countries
• It’s good for the planet and for our children
• but really and perhaps as a sound starting point, it’s good for your finances and your pocket!

We believe that installing Home Cleantech – generating your own heat or electricity at home – is a great investment and makes sense on purely financial basis: you will make or save money from doing it.

Solar Water Heating – using solar panels to generate hot water for your home – is no exception. It is a well established technology that is cheaper than most to install and gives good returns from Day 1 and for its whole lifetime – likely to be 20 or 30 years.

How does Solar Water Heating Make You Money?

At the most basic level, solar water heating panels provide your hot water.

• Between March and October, the panels or tubes should provide 70% to 100% of the hot water you need.
• For the rest of the year 30-60% of your hot water should be provided free.

Over the year, around 70% of your hot water will be provided by the power of the sun – essentially, free to you at the point of production.

Each of us uses a different amount of hot water in our homes but the solar thermal system will be sized to take this into account.

How do the economics work?

An average family of 4 may use up to 75,000 litres of hot water per year.

That water costs

• £500 to heat if you use electricity to heat your water

• £310 to heat if you use oil

• £260 to heat if you use gas

So, as your solar thermal panels will provide approximately 70% of your hot water over the year, they will save you:

• £345 if you use electricity to heat your water

• £210 if you use oil

• £180 if you use mains gas

Rather good savings to your family budget for taking control of your energy needs and reducing your carbon emissions.

What about the upfront install cost?

Of course, you do need to invest to achieve these savings.

For the solar thermal system to provide hot water for the family of 4 above, the cost will be around £4000, fully installed and making hot water.

So, £4000 paid, & up to £345 back.

This is a return on investment (or ROI) of 8.6% if you use electricity to heat your water

Or 5.3% if you use oil

Or 4.5% if you use mains gas.

This rate of return is pretty good when compared with rates available at banks today – and better financial return per year than a new kitchen, or any other home improvement!

It’s tax free as well. Even on mains gas, 4.5% tax free is an excellent return for your investment.

Selling your house

Of course if you move house, it is difficult to take your solar hot water system with you. So, if you haven’t earned back the cost of install, you’ll lose money, right?

Wrong.

Energy efficiency is big news. Its going to become bigger news (see Environmental Benefits). And essential for every household to consider.

Insulation and Home Cleantech is becoming common place.

Location, or number of bedrooms will always be more important. But home energy efficiency is rapidly becoming a differentiator just like double glazing or modern bathrooms.

We’ll all pay more for a house that has attractive modern and thermally efficient windows – because we don’t have to pay to replace old draughty windows.

We’ll all pay more for a house that has an attractive modern bathroom. As opposed to a house that has a dated bathroom suite.

The same applies to energy efficiency.

If you are deciding between 2 similar houses – wouldn’t you choose a house that will save you up to £350 per year on hot water, over one that doesn’t?

Or, negotiating the purchase of a house, any known savings on domestic energy costs is money you don’t have to get reduced from the price. As a buyer, you can afford more.

And the effect is that the property with a certified and guaranteed solar hot water system will sell for more money, sell more quickly and generally be more desirable.

What this means is that you will get your money back when you sell.

Either directly in a larger sale price.

Or in a quicker sale.

Or a combination of both.

Energy Performance Certificates & The Green Deal

Energy Performance Certificates (EPCs) are now mandatory if you intend to sell or let your home. They provide information on your home’s energy use and CO2 emissions and a recommendation on how to improve both measures. It is anticipated that EPC’s will become a key part of the Green Deal initiative to be launched in October this year. The Green Deal is a mechanism that will ensure that householders who carry out energy and emissions improvements to their properties will recover the costs through reduced bills. The Green Deal is currently subject to consultation between the government (DECC) and the industry, including energy supplier companies. Initial announcements are expected in the spring.

But for now, as Crispin Holborrow at Savills says “EPC’s have absolutely no effect on value, but energy efficiency in the more practical sense adds value.”

But what about Payback?

Payback is another way to look at an investment to improve your home.

It relies on a simple model that adds up savings, year by year, until the initial outlay is paid off. For solar hot water systems, this would only be meaningful if the system had no value at all to a new buyer of your property.

Payback on Solar Hot water systems, using the figures above, is somewhere between 11 years and 20 years depending on how you heat your hot water today. But only if free hot water has no value to a new buyer!

So we don’t think Payback is the best way to evaluate a purchase of Home Cleantech products.

Financial Prudence

It Won’t Cost The Earth Solar Water Heating systems make perfect financial sense.

Use our FreeQuote Solar Water Heating survey to find out just what a system would cost for your household.