Solar water heating systems = Solar panels + photovoltaic solar energy. Solar thermal: PV solar power & solar hot water. CECB RHI Solar Keymark Solar Panels. How do solar panels work financially?
Solar panels? Why Buy Solar Energy? Savings and Payback FAQ
Is my money earning the best interest rate in a bank account – or invested in a solar panel?
Please note figures will change under the Renewable Heat Incentive (RHI). The global banking crisis is stimulating people to consider new and better ways to invest and save. Here’s some information which I have written in response to some frequently asked questions on the financial (and other) savings which come with using solar hot water systems. Solar is not free to buy but it can be low cost to operate. I hope this solar financial information is interesting – Barry.
Want to save money and go solar with solar panels such as the Solartwin solar water heating system? First, a few points of information on how solar panels can save you energy:
- Solar savings and solar payback are very different. Solar savings are less complex to calculate because:
- Solar savings are about money – fuel savings from installing solar panels, minus all expenses. Solar savings are usually considered per year. I have named below nine possible variable as inputs to this solar savings calculation.
- Solar payback is about time – how long before you break even, if you buy solar panels. This adds four more variables, often with assumptions, to the equation, bringing this total of variables to thirteen, so there is even more scope for error.
(Nevertheless such solar payback calculations can still be useful!)
- Valuations can be internal or external or both
- Internal valuations only look at the financial payback to the customer, not wider social or environmental issues. This primer looks only at the financial balance sheet, from vahing solar panels, not at the environmental one.
External valuation looks at the environmental benefits of using solar thermal, and how this might be translatable into monetary terms
- Social (or total environmental best value) payback combines both of these solar valuations on the same balance sheet, thus paying back faster. I have ignored these social payback issues in this section. Including them would dramatically shorten solar payback.
Using solar panels to let sun save money while we all go off to work sounds easy, but how much money will using solar panels save? Accurate calculations are needed.
Some of the variables in solar savings (rather than solar payback) calculations follow
1.1. The estimate of the solar heat energy delivered by the solar water heating system as hot water at the taps (not just the solar energy collected by the solar panels, which will be higher) Units are usually kWh per year. 800-1200 kWh for a 2.8 sq m Solartwin is within our expected range for most of UK.
1.2. The total energy efficiency of your domestic hot water system, such as a gas or oil boiler, at producing hot water. (This is lower than its combustion efficiency or SEDBUK percentage!) This may be a percentage in the range 25%-60% if a gas boiler is used, but 70% plus with electric immersion heating if it has typical storage and distribution losses. Bear in mind that many gas and oil boilers tend to operate at low efficiency when working below their peak rated load – which is what tends to happen when they are heating water only for washing and bathing in summer. It is also important to factor in the fact that reducing the use of a boiler often means slightly lower electricity bills as well as gas/oil bills since it will be pumping (and maybe also using flue fans) less.
1.3. Dividing the first figure by the second gives the fuel displacement potential by solar energy, in kWh. This can be calculated by dividing the system (not panel) delivery of the solar water heating system in terms of hot water production at the cylinder divided by the efficiency of the hot water system at producing hot water if fuels such as gas or oil are displaced. Whether this efficiency figure is chosen to be 35% (as in Sutherlands tables for hot water at the taps rather than at the cylinder) or a higher figure, can have a huge bearing on the final environmental and cost effectiveness figure for solar. So this fuel displacement potential is usually far, far higher than the estimate of the energy delivered by the system.
1.4. However this displaced energy figure probably needs to be reduced by a usability fraction. Not all homes are occupied 365 days a year. And even they were, perhaps not all of the energy in the solar hot water would be used. So this percentage will rarely be 100%. Perhaps it might be 90%?
2. Now convert this displaced energy figure into money savings.
2.1. This calculation depends on the fuels displaced and tariff(s) at which they are bought. For example a fuel displacement potential of say 2500 kWh of low cost mains gas displaced at say 4p a kWh is worth £100. But with more costly bottled gas the figure may be over £200. These are hypothetical figures. Please use your own figures. You will usually find these on your fuel bills as a price per kWh or “unit”.
2.2. A further reduction needs to be be applied to this figure for alternative systems other than Solartwin because of the cost of the energy used by parasitic mains powered equipment: such as the pump, controller motorised valve, etc. It is important to deduct rather than ignore the energy and fuel use impacts of the parasitic electricity use of other systems since their usage can be significant and may well exceed 5% of the claimed cost-benefits of a 2 square metre evacuated tube system and over 20% of its environmental benefits. In general:
2.2.1. PV pumped solar thermals systems use no mains electricity – but most systems are not as thrifty as this. Mains electric solar circulating pumps run at around 30-90 W for an average of a few hours a day. You may need to estimate or calculate the cost of running a solar pump. (You may also want to reduce this figure a bit, since some of their energy probably ends up in the solar hot water. On the other hand, large uninsulated metal pumps can act as heat dumps.)
2.2.2. Solar differential controllers run at around 3-10 W, usually 24 hours a day. Use the figure inclusive of the transformers they use at 230 V, not just the low voltage transformed figure. Deduct this cost along with any pump running cost.
2.3. Further reductions to any remaining savings may need to be applied due to
2.3.1. solar panel maintenance charges, (relatively low with Solartwin) and
2.3.2. costs of solar antifreeze and its regular replacement (not needed with Solartwin)
2.3.3. all or part of the cost operating water hardness control systems if relevant, unless their use is regarded as a general benefit rather than cost
2.4. On the other hand, if a boiler is being used less as a result of having solar, water heating a boiler life extension of say £10 might be added to the figure. After all, if a boiler is being used, say 20% less, it may be reasonable to expect it to require less maintenance and to last rather longer. Say a £1000 boiler was normally expected to last 10 years, but were instead to last 12 years because of solar, then the annual write-off of the capital sum of £1000 would be reduced from £100 to £83. So a further saving of £17 might thus be attributed to having solar.
2.5 Add any possible renewable heat incentive payment (RHI) for example £150 per year is a figure which has been derived from suggested in government consultations n 2010.
3. The cost of the finance for your solar water heating system is also extremely important.
3.1. If the money spent were invested or in a bank account or elsewhere instead of purchasing solar, how much might it be earning there? Less tax.
3.2. If your solar panel is bought using borrowed money, at what rate of interest?
3.3. This gives you a negative cost of finance figure to set against your savings from having a solar panel.
4. Now tot these numbers up to get a final figure for the savings/losses you have incurred by having solar water heating. (Now also tot up how many assumptions you have made!)
Variables are shown in italics above! Some will be known accurately, others will need to be estimated. That calculation was only about possible savings in one year, not payback.
Payback for solar water heating is another multi-input time calculation based on the above money figure, plus even more data. It is a bit like climbing mount Everest Solar payback calculations, to be accurate, mean that all factors need to be considered. These include:
1. Capital/revenue issues.
1.1. Initial cost for yoiur solar water heating system (Say £3799)
1.2. The sum if any, of this which adds to the capital value of the home if it were to be sold (Nil? £1000? £5000?) Again this figure cannot be verified at present. Sorry. Wait until HIPs analyses give this answer with rigour.
1.3. The difference between these is the net capital balance to be repaid via a payback calculation. Include the deduction above unless the owner thinks that solar payback must, uniquely, happen twice! (In this example £2699)
2. The fuel price inflator issues.
2.1. Estimate an annual percentage price rise (or drop) for the fuel(s) which you are displacing by using solar water heating.
2.2. Decide whether to apply a simple or compound interest to these price changes.
2.3. Now calculate the actual payback horizon calculation in years: divide the net capital balance to be repaid each successive year by the previously calculated savings (with an annual fuel price inflator built in), to calculate what is the break-even threshold to your particular solar water heating system.
This will give you an estimate of how many years (if ever) the solar hot water system might pay itself back. After this period an accountant may consider you to be profiting from the fact that you decided to buy solar energy rather than having your mney in the best savings account. Yes, solar savings and cost benefit analysis is hairy stuff – and there is the separate issue of what legacy willl you want to leave the world. We will not discuss inheritance isuees here except to say that we want to make a lasting impact.
Our ambition for Solartwin be well ahead in terms of price-performance (since this is the main reason why people donÃ¢â‚¬â„¢t buy solar) and thus to help to grow the UK solar heating market.
The best solar payback usually combines high fuel costs, a properly positioned panel, high hot water use and ironically, sometmes also an inefficient boiler!
Dear money saving experts, I hope this page on solar savings was thought provoking. There are a few solar sharks about who make ludicrously inflated savings claims regarding solar energy, but if you want to hear some plain speaking or to speak with someone who is already a Solartwin solar panel user, do just call us now on UK 0344 567 9032.