Today we will do a cost comparison of solar hot water and electric hot water in eastern Ontario. This is the second part of the Should I Install Solar Hot Water? series.
Currently in eastern Ontario, you can have a solar hot water system installed for about $4000-$4500 after all of the rebates and incentives. While this is a huge discount from the roughly $9000 regular cost, does a solar hot water system actually make sense financially?
On average, 25% of your total household heating costs are for heating water. In eastern Ontario, solar hot water systems can produce an average of 50-60% of your household hot water needs.
The typical solar hot water system (EnerWorks 2 panel system) we have been using in this discussion can produce about 2800 kWh/year of hot water here in eastern Ontario. This of course is when it’s installed in an ideal location/orientation.
According to the ACEEE, an electric hot water tank is 95% efficient at converting electricity into heat.
The current combined price of electricity in Ontario is approximately $0.095/kWh. This price is the base $0.055/kWh plus all of the other charges that are billed on a per kWh basis.
Therefore, the 2800 kWh of hot water that the solar system can produce will replace approximately 2950 kWh of electricity per year. At $0.095/kWh that is a grand total of $280.25/year in potential savings over a typical electric hot water tank. If you are reducing your electric bill by $280.25/year, it will take you between 14.27 to 16.1 years to recover the costs ($4000 – $4500) of the solar hot water system and start saving real money.
Of course, that is using current electricity pricing which is extremely low.
So, should I never install solar hot water?
Hell no! I’m all for solar hot water and I’m still a little sad that it doesn’t make economic sense given the current market pricing. Now, if the combined electricity price jumped to $0.15/kWh then we would get the approximately $444/year savings required for a 9 year payback of a $4000 investment. Will the prices get to that level? I’m willing to bet it’s going to happen, just not this year. Probably not next year either.
Electricity costs are going to rise. At the same time, as electricity costs rise and more people start to demand solar hot water system, the initial cost of a solar hot water system will likely drop.
Would you install a solar hot water heater if electricity prices went over $0.15/kWh?
No. Unfortunately (well, fortunately) I don’t heat my water with electricity. I use natural gas. Using natural gas to heat is quite a bit cheaper than electricity and that makes the payback period even longer.
Next we are going to look at solar hot water vs natural gas hot water.
Image Credit – Yellow.Cat