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Costs and benefits of solar hot water

Last updated 11/19/2018

Investing in solar hot water is a sound financial decision. As soon as your installation is complete, your solar hot water system starts producing free heated water from the sun’s energy. The result: instant returns, in the form of much lower utility bills. 

Over its long lifetime, your solar hot water installation will eventually pay for itself and then some. Solar hot water systems typically last for around 20 years, and some systems will work for even longer. In addition to the monetary benefits, installing solar hot water reduces your use of greenhouse gas producing fossil fuels, making it a good choice for the environment, too.

Cost of solar hot water systems

What might a solar hot water installation cost you upfront? On average, a full system will cost approximately $9,000 before rebates and incentives. When you factor in savings from the 30% residential investment tax credit (ITC), you’re looking at an estimated price of $6,300

Importantly, the price you pay depends on the quality and size of system you purchase. For example, installing a solar hot water system designed to support a large family home will cost more than a system meant to support one or two residents.

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Installing a solar hot water system in your home will cut your monthly bills, but the exact amount you save depends on the amount of hot water you use, your local weather and solar potential, and available incentives & rebates. 

In most cases, your monthly water heating bills will immediately once you install solar hot water. This is because the majority of your hot water will now come from free solar energy instead of from fuels like electricity, gas, or oil – all of which cost money each month. 

Even better, by getting your water-heating energy from the sun, you are insulating yourself from the trend of rising energy prices. Instead of living with your utility’s rates, you can generate the majority of your hot water energy from the sun, which will always have a price tag of $0.

Financial benefits of solar hot water

Calculating “payback period” for solar hot water

The payback period for a solar hot water system can vary greatly depending on how you currently heat your water. For example, the payback period for a system that replaces natural gas will be longer than one replacing electricity or gasoline because natural gas is a comparatively less expensive fuel.

Solar hot water rebates & incentives

There are national, state, and local financial incentives available for property owners interested in installing a solar hot water system. In the U.S., the Residential Renewable Energy Tax Credit(also known as the Investment Tax Credit, or ITC) offers a credit equivalent to 30 percent of the total cost of installing solar hot water. (It also applies to solar photovoltaic systems.) 

Many states also offer incentives that can further bring down the cost of a solar hot water installation. One example is Massachusetts’ Residential and Small-Scale Solar Hot Water program, which provides a rebate for 40 percent of the installed cost of a solar hot water system (up to $4,500). 

There are even a few local and utility programs available. In Texas, CPS Energy’s Solar Water Heater Rebate offers a maximum of $2,000 for the installation of a solar hot water system to residential customers of the utility.

Environmental benefits of solar hot water

By upgrading your home with solar hot water, you are making an environmentally-conscious decision. Heating water takes a significant amount of energy, and when you use energy from the sun to heat your water, you are avoiding traditional fuels like oil and natural gas which contribute to air pollution when they are burned. 

A solar hot water system is also usually better for the environment than an electric water heater, because the electricity you buy from your utility was likely generated from coal or natural gas. With solar hot water, you can be certain that you’re using a zero-emissions renewable resource.

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