Solar Payback Times

Savings from the installation of a solar thermal system will vary depending on fuel costs and can be difficult to assess into the future. The individual system cost and whether the installation is new build or retrofit has a large impact on the simple payback time. The concept of fuel hedging as a selling technique has been successful. The investment in a solar thermal system with capital 'upfront' and 'free energy' thereafter is hedged against the cost of acquiring that future energy from other increasingly expensive fuels.

A 6m2 collector area and a 300 litre storage solar installation will produce about 2000 kWh of energy in a year. Replacing an un-insulated cylinder with a high efficiency correctly installed cylinder will save towards another 2000 kWh. The total annual savings of 4000 kWh would require the equivalent of about 500 litres of oil per annum, if a heating system efficiency of 75% is assumed.

The payback can then be thought of in terms of the amortised cost of this oil over a number of years, assuming a particular inflation rate. Energy inflation and thus future energy prices are very difficult to estimate, so an easier way for customers to grasp the potential savings, is to imagine that they are effectively buying 500 litres of oil per year, for the life time of the solar installation and assess this against the initial capital cost.

Regardless of future energy prices, the following benefits exist;

1. More hot water is available during the summer.
2. Better energy rating for the dwelling and higher house value
3. Lower CO2 emissions
4. Fuel cost savings of up to 25%.

As water heating equates to about 1/3 of the total heating energy a house requires. A solar system typically supplies between 50% and 70% of the water heating energy, giving overall fuel savings of up to 25%.

From the perspective of governments, it is generally agreed that huge energy inefficiencies exist within the national housing stock, making it a very attractive target to reduce national energy use.

For 2006, residential thermal energy in Ireland accounted for 17.5% of the total energy use. As we have seen about 1/3 of this is estimated to be water heating so in other words, 5.8% of the total national energy requirement is used to heat residential water. A similar percentage is claimed for the UK.