Even though we’re going to get pretty granular here, let’s start with the big picture: you’re thinking about installing a solar hot water system in California. Since you’re probably wondering how much it costs, you’ll want to know how much the state is willing to pay you in rebates. The California Solar Initiative (CSI) Thermal Program has ample funds that have yet to be tapped, since they only began issuing rebates in May. It’s a great time to get solar hot water in the land of the Governator.

CSI Thermal operates as a “Step Down Program,” meaning that a certain portion of the budget is allocated for rebates at a certain price. As funds are used up and more systems are installed, the rebates available for new systems decrease. Systems that replace natural gas and electric water heaters are funded under separate rebate plans. The majority of systems, however, replace natural gas, and they are funded according to this structure:

What is “therm displaced” you ask? A therm is equal to 100,000 British Thermal Units (BTUs) or, put otherwise, the amount of energy in about 100 cubic feet of natural gas. Basically, under Step 1 here, California will pay you $12.82 for every 100 cubic feet of natural gas you don’t use every year as a result of going solar. The exact amount of natural gas you save depends on your location (ie how much sunlight you get) and compliance with the OG-300 rating for solar water heaters. With those two pieces of information, the Solar Rating and Certification Corporation can determine the exact number of therms that a given system will displace.

That’s a lot of detail to take in, but as a rule of thumb, assume that your rebate will be $1,875 for an up to date, quality solar hot water system that displaces natural gas. This is the maximum allowable incentive, and given that many systems displace enough therms to earn an uncapped rebate of $2,200 or more, it’s safe to assume that most could qualify for the maximum available.

For solar hot water systems that replace electric water heaters, rebate levels are based on kilowatt hours displaced:

This system is very similar since most systems will easily be able to qualify for the maximum residential incentive at each step. As of August 2010, residential systems displacing electric water heaters should qualify for $1,263 in rebates through CSI Thermal.

We will cover more details on the costs  associated with solar hot water in California and the rebates that are available in future posts.

With an ideal climate and helpful incentives, Tucson, Arizona is poised to become a hot spot for solar water heating. The city boasts near constant sunshine and Tucson Electric Power provides generous incentives: a $750 up front rebate and performance based incentive covering $0.25/kWh of avoided electricity use.

Solar water heaters rarely get the attention they deserve from homeowners and the solar community, even though they have lower price tags, relatively short payback periods, and an immediate impact on home energy use. Installing a solar water heater in Arizona makes good financial sense — and doing so in the Tucson is a particularly good proposition. Let’s walk through how purchasing one would impact a family of four.

When a family decides to replace their water heating system, a solar water heater — assuming a gross installed cost of $7,000 — looks pricey compared to an electric one ($600). However, with estimated power prices of $0.10 per kWh in Arizona, according to the U.S. Department of Energy, solar water heaters can be an attractive investment choice. Let’s see how the high upfront cost and annual savings would look over the heater’s lifespan:

• First, the additional cost of the solar hot water heating system is reduced to $6,250 when TEP’s up front incentive comes into play ($7,000-$750=$6,250).
• With an 80 gallon tank and a OG-300 rated system, our family would avoid using 2,700 kWh annually, saving them $270/year on their utility bill (2700 avoided * $0.10/kWh).
• With TEP’s performance-based incentive (PBI) of $0.25/kWh avoided, our family will earn $675 in the first year (2,700 kWh avoided * $0.25/kWh avoided). The PBI would only apply in the first and second year of ownership, since TEP’s rebates per system are capped at $1750. (This works out to $750 for the upfront rebate, $675 for the first-year PBI, and $325 for the second-year PBI.)
• The federal and state tax incentives available would also cut down the capital costs significantly. The federal government provides a 30 percent tax credit that would deduct $1,875 in tax costs, and the state of Arizona’s tax credit (25 percent, capped at $1000) would lower costs by another $1000.
• When all incentives are accounted for, the net cost of installing a solar hot water system instead of a conventional one comes to $3,375.
• Assuming 5 percent annual inflation in electricity prices and TEP’s performance based incentive for solar hot water, the system would pay for itself in roughly seven years.
• Over the 15 year average lifespan of a water heater, the family would save over $6,000 on their energy bills with and fetch a rate of return of 11.4 percent. Note that this 15-year useful life is a fairly conservative estimate. Your system may well be operational for 20 or more years, in which case your return on investment would only get better.

Clearly, the numbers will vary for individual solar homes — shading, hot water demand, and the cost of the particular system you purchase all matter. However, the generous incentives provided by TEP, and many other utilities for that matter, make solar hot water well worth investigating.

**Notes: For this exercise we assumed that the family would be replacing an electric water heater and that they would be able to keep their current system as a backup. The expected annual kWh of avoided use for an 80 gallon OG-300 rated system came from an Arizona installer in the GetSolar installer network. Depending on your situation, there may be additional costs. All rebate information came from the DSIRE database and is also accessible through the solar cost section of our website.

This prime solar state offers an enticing return on investment for solar hot water. First, being smack dab in the middle of the Sunbelt means that owners of solar hot water systems will benefit from some of the world’s most consistent sunlight as well as relatively high temperatures. The high outdoor temperatures are especially helpful, since a low chance of freezing means that simpler solar hot water technology can be used.

Without getting too bogged down in technicalities here, a lack of temperatures below freezing means that residents can opt for less expensive open loop solar hot water systems, which circulate the actual water being heated back and forth to the solar collector. In contrast, the closed loop systems that are needed for colder climates circulate antifreeze fluid, creating a two step process where the heated antifreeze can transfer heat to the water.

Aside from climate and location, Arizona offers some very strong incentives for solar hot water. The state offers a 10 percent personal tax credit for renewable energy in addition to the 30 percent federal tax credit available. Together, these tax incentives offset a significant portion of system costs. Beyond tax incentives, many major utilities offer very attractive rebates. We have more comprehensive information available here, and these utilities include Arizona Public Service (APS), SRP, Sulphur Springs Valley Electric Cooperative, Trico Electric Cooperative, Tucson Electric Power, and Unisource Energy Services.

Depending on individual system needs and the specific incentives available through your utility, solar hot water systems could pay for themselves in 5-6 years, driving long term savings of thousands of dollars.

Sounds nice doesn’t it? We’ll cover the calculations that generate these estimates in a future blog post. Stay tuned.

How do you allocate roof space for both a solar PV system and a solar hot water system? True solar enthusiasts occasionally run into this type of dilemma. It’s most common to see one or the other on an individual roof, but the space requirements for these complementary technologies add another dimension to choosing between photovoltaics (PV) and solar hot water, or going with both.

For PV systems — the sort that generate electricity — a generic rule of thumb is that you need 100 square feet (visualize 10 feet by 10 feet) for each kilowatt (kW) of solar PV panels you install. This means that to install a 5-kW system — which is roughly the current national average — you’d need approximately 500 feet of usable roof space.

When it comes to installing a solar hot water system, the space requirements vary more by region. Location matters for hot water systems more because outdoor temperatures determine how much the water must be heated.

These size estimates are for a family of four, assuming that each person requires 20 gallons of hot water per day. The hot water system is designed to meet 100 percent of summer hot water demand and 40 percent of winter demand. Meeting these specific levels of seasonal demands will avoid wasting energy and incurring excess cost. For more information on this sizing process, refer to this explanation provided by the USDA.

For both solar PV and solar hot water systems, south facing roofs will allow the system to be most efficient, and shading from nearby trees can prove problematic even for those buildings with an ideal roof orientation.

It is certainly possible for an average home to have ample roof space for both systems. Assume a 2,400 square-foot home (40 ft x 60 ft) with a roof pitch of 30 degrees. The half of the roof that faces south would have dimensions of approximately 23 ft x 60 ft, giving you about 1,380 square feet on which to install solar PV and/or a hot water system.

The fight for roof space definitely arises for some buildings nonetheless. Deciding how to allocate that precious south-facing roof area comes down to how much hot water you use and how much you’re willing to spend. Like so many issues related to solar installation, solar roof space is site specific.

Look who’s investing in solar hot water technology. While the rest of us are worrying that solar thermal lacks the trendy appeal of other solar tech and wondering when people will realize how much sense it makes, China is quietly stepping up and installing more solar hot water capacity than anyone in the world.

In this graph from Solar Heating & Cooling Worldwide, the 2010 Edition, you can see that China has installed over 24,000 MW of solar thermal, more than any other individual country in the world. Granted, on a per capita basis, its investment might not seem so radical compared to others. But the Chinese preference for evacuated tube collectors reveals much more about their clean energy investment priorities.

Evacuated tube solar collectors are known for their greater efficiency and suitability for colder climates. In a nutshell, the technology permits the maximum amount of sunlight to be captured because the tubes’ curved shapes make the collector perpendicular to the sun at all times of day. Unfortunately the added complexity this brings makes evacuated tube collectors more expensive than their flat plate counterparts.

The United States has over 20,000 MW of solar hot water systems in operation, but the majority of ours are unglazed flat plate solar collectors, which we use to heat swimming pools. Solar pool heating is relatively common because of the short payback period involved. Despite the benefits of using the sun’s energy for swimming pools, however, our lack of investment in other solar hot water systems, whether flat plate or evacuated tubes, means a much larger portion of our basic water demand could be met with solar energy.

The Chinese are setting a good example here by accepting the high up front costs necessary to spread the most efficient solar hot water technology available. Let’s hope the US — not to mention the rest of the world — can follow suit.

So you’re interested in solar hot water? We’re happy to hear it. Solar water heating is an effective way to lower your utility bill. And, compared to solar electric — or photovoltaic (PV) — systems, solar water heaters are typically less expensive. (For more info on the differences between these technologies, see our post Solar Hot Water vs. Solar PV.)

If you’re trying to determine whether your property is a good candidate for a solar hot water system, consider the following.

All else equal, consumers who use a lot of hot water — and therefore spend a good chunk of their electricity or gas bill on water heating — stand to gain the most by installing a solar hot water system. If people are taking hot showers, washing clothes, or using a high volume of heated water for any other purpose, solar hot water is a great option. Top candidates include:

• Hotels
• Swimming pools
• Laundromats
• Communal living areas, like military camps and bases
• Correctional facilities
• Any residential building– single family or larger

Since commercial candidates are likely to have the largest hot water demands, they stand to benefit most quickly. A huge percentage of a laundromat’s operating costs probably come from hot water, so meeting a portion of that demand via the sun’s thermal energy can provide substantial savings. Homeowners can benefit significantly, too, and in many states – like Hawaii, Arizona, and California — can take advantage of solar incentives to help them install solar hot water systems. (More on these programs to come.)

So, as review: if you’re spending a lot of money heating water — or expect your hot water demand to increase in the future — you may want to consider a solar water heater. If your hot water demand is modest and your electricity bill is high, however — say, because you’re paying a high per-kilowatt-hour rate for your power — a solar PV system may be a better bet. Ultimately, if you’re trying to decide which solar energy technology is right for you, don’t be shy about asking questions!

Finally, it’s worth noting that there’s nothing to say you can’t install solar PV and solar hot water…

When it comes to solar hot water, these are The Little Islands That Could. Hawaii’s strong investment in solar water heating technology has given their state the enviable designation of Solar Hot Water Leader within the United States. It’s also made these water heating systems an even more attractive investment. Check out the size of Hawaii’s market compared to other key states:

Source: Solar Energy Industries Association

Consider the fact that Hawaii’s population is a mere 2.5 percent of California’s, and you can see why the 48th 50th state deserves notice.

Hawaii supports solar hot water with a mix of policies:

• An upfront solar hot water rebate of $750 for residential systems ($125/deferred kilowatt-hour for commercial systems)
• A state tax credit of 35 percent
• The broader 30 percent federal tax credit
• A requirement that all new single-family homes come with solar hot water system installed

Let’s look at what this means for a typical residential customer. Say the initial system cost is $7000 (a conservative estimate — Hawaii Energy Efficiency Program estimates the average initial cost is $6,620). After the upfront rebate of $750, your contractor bill would be $6,250. With the 30 percent federal tax credit, your expenditures would total $4,375. Finally, after the state tax credit of 35 percent, your ultimate costs would come to a mere $2,500. Of course, this is assuming that you have the appetite for these tax credits — check with a tax expert to see if this is the case.

According to some of our partner installers in Hawaii, this incentive system would set the solar hot water “break even” point at two years!

As noted above, for a tiny island state with a population just over 1 million, their contribution to, and example for, the solar hot water market is truly commendable. Many of these efforts stem from Hawaii’s lack of traditional energy resources and the corresponding need to import oil and gas. Their Renewable Energy Policy begins by explaining:

The objectives in the area of Alternate and Renewable Energy are to promote commercialization of Hawaii’s sustainable energy resources and technologies to reduce the state’s high dependence on imported oil, increase local economic development, and reduce the potential negative economic impacts of oil price fluctuations.

So there you have it. Strong motivation to implement renewables lead to strong strategy.

If you were thinking of moving to Hawaii and the weather alone didn’t lure you across the Pacific, their energy policy should definitely convince you!

“OG-300” might sound like something George Lucas invented for a Star Wars movie, but it actually marks a rating designation that’s crucial for solar water heaters.

Many state incentives require the OG-300 designation on new systems in order to qualify for solar hot water rebates, most notably the APS Renewable Energy Incentive Program in Arizona. In most cases, your installer will be well versed in this rating requirement and you won’t be required to know much about it. But for those who are interested, we provide a brief overview:

The Solar Rating and Certification Corporation (SRCC) created the OG-300 rating system for solar hot water systems to verify the system design, reliability, durability, safety, operation and servicing, installation feasibility, and ease of use for each solar hot water system model. This non-profit organization tests sample units of each system in independent labs to verify that they meet all relevant criteria.

As we discussed in a previous post, “Who Killed the Solar Water Heater?,” a spate of shoddy installations in the 1980s dented public trust in solar hot water technology, contributing to the systems’ rapid loss of popularity. As SRCC was founded in 1980, the ratings and certification it provides have helped prevent the kind of sloppy work that makes solar hot water technology underperform.

Ensuring a certain level of output through ratings even helps incentive programs determine their rebate estimates when performance based incentives are based on kilowatt-hours (kWh) saved per year. In doing so, they make the benefits of performance based incentives much easier to project. So despite OG-300’s intimidating name and many technicalities, this rating system is quite useful.

Solar water heating technology — also referred to as solar thermal technology — has been around for ages. But its effectiveness hasn’t lead to broad adoption in the United States. Why you ask?

As a brief review, solar hot water systems don’t generate electricity like a photovoltaic (PV) system does. Instead, they use the sun’s thermal energy to directly heat water, bypassing the step of electricity generation. This has important implications for building energy efficiency. Solar thermal technology can be used for water heating, space heating and space cooling. Solar water heaters, however, are the most common application of solar thermal technology. In a word, they can be great investments: compared to PV panels, solar hot water systems have relatively low up-front costs and often offer shorter payback periods.

Solar hot water systems were incredibly popular in the 1970s and early 1980s, a time that saw the energy crisis of 1973. Partly as a response to rising oil prices, President Carter’s administration established rebates and other incentives to encourage the adoption of renewable energy systems. During this time, there were as many as 500 U.S. manufacturers of solar water heating equipment. This number dwindled to a mere five, however, after the federal government curtailed the incentive programs.

The government wasn’t the only factor behind solar water heaters’ rapid decline. The industry grew quickly and without much oversight, a combination that resulted in a spate of low-quality installations and under-performing systems. As a result, solar water heating got a bad rap for being ineffective. Understandably, a technology that suddenly got less affordable (due to the axed incentives), and was perceived to be less reliable, quickly fell out of favor.

As a result, new systems were rare in the United States until the 2000s, when renewable energy saw increased interest from both consumers and politicians. The few companies who have been in the solar thermal business for the long haul have focused on solar heating for swimming pools, a smaller market that allowed them to weather their industry’s long downturn. Today’s market looks more promising, though, so we’re hoping this great renewable energy option can regain some of its former popularity.

So you want to get solar but haven’t heard much about solar hot water? If you’re a little confused on how this technology compares to photovoltaic (PV) systems, you’re not the only one.  Here are a few points to note:

• Solar water heaters, which make heat, cost significantly less than PV systems, which make electricity

• They offset a specific, smaller portion of your electricity bill, namely what you spend on heating water

• Federal, state, and utility level incentives will lower the costs of both solar hot water systems and PV systems

• The primary uses of energy within your building are the most important factors in deciding whether a solar water heater would be an effective investment.

Solar hot water systems are significantly more affordable than PV systems. Residential solar hot water systems usually cost $6,000-$8,000 after incentives, while PV systems could cost three to four times as much.

Solar hot water systems are designed to supplement conventional water heaters (powered by natural gas or by electricity), so they offset only the portion of your bill that comes from hot water demand. Since PV systems generate electricity, they can cover many other types of energy demands.

From an efficiency perspective, solar hot water technology is notable because it bypasses this step of electricity generation. Most of the time, accomplishing an end-use goal (like heating water) requires obtaining an energy resource (like oil, natural gas, or sunlight), converting it to an energy currency (like electricity) and finally using that currency to accomplish the end use goal. Solar water heaters avoid the middle “energy currency” step: they use the sun’s thermal energy to heat water directly.

As noted above, with the goal of minimizing overall energy use, the choice between solar PV and solar hot water depends on building energy use. All else equal, buildings that use a larger percentage of their electricity on hot water are better off with solar hot water systems. Facilities where this is particularly true include gyms, prisons, and some agricultural facilities. Buildings with low hot water demand, like offices, are much better served by PV.

Everyone’s situation is a little different when it comes to choosing the most effective home energy investments, but solar hot water is a great option that’s often overlooked.

Related, see this post from last year: Active Solar Water Heating vs. Passive Solar Water Heating.