Chapter 3: Solar Hot Water Systems

What They Are and How They Work

Solar hot water systems, also known as solar thermal systems, use solar collectors to absorb the sun’s light and change it into heat energy. Solar collectors heat a fluid, which is then used to provide either hot water for household use or heat for the home. Some thermal systems produce warm water that is used to heat swimming pools.

Solar domestic hot water systems use the sun to heat either water or a heat transfer fluid, such as a water-glycol antifreeze mixture. This is done in collectors which are usually mounted on the roof. Once the water is heated, either directly or via heat transfer, it is stored in a tank similar to a conventional gas or electric water heater tank.

With direct circulation systems, pumps circulate household water through the collectors, where it is directly heated by the sun, and then into the home to be used for bathing, laundry, etc. This design is also known as “open-loop” and it works well in climates where freezing temperatures are rare.

With indirect circulation systems, an electric pump circulates a heat transfer fluid through the collectors. The fluid absorbs heat from the solar collector and then passes through a heat exchanger. The heat exchanger, which generally is in the water storage tank inside the house, transfers heat to the water. In this case, water is indirectly heated by the sun; such designs are also called “closed-loop” systems. These are popular in locations where freezing temperatures are common.

In addition to there being two types of circulation systems, there are also two main types of solar collectors for indirect circulation systems that are suitable for Frederick County’s climate: 

Flat-Plate Collectors are the most common collector for residential water-heating and space-heating installations. A typical flat-plate collector consists of an insulated metal box with a glass or plastic cover, called “glazing,” and a dark colored absorber plate. Sunlight passes through the glazing and strikes the absorber plate, which heats up, changing solar radiation into heat energy. The glazing allows the light to reach the absorber plate but reduces the amount of heat that can escape. The heat energy produced in the collector is used to heat the liquid (either water or a heat transfer fluid) as it flows through tubes, in or adjacent to the absorber plate.  

Evacuated-Tube Collectors consist of rows of parallel transparent glass tubes, in place of the absorber plate in a flat-plate collector. The absorber tubes are cylindrical in shape; therefore, the angle of the sunlight is perpendicular to the absorber for most of the day. This enables these collectors to perform well even when sunlight is diffuse, and in areas with cold, cloudy winters. Because air is evacuated from the space between the tubes, the resulting vacuum minimizes heat loss to the outdoors and makes the collector more efficient. As a result, evacuated-tube collectors usually heat water to fairly high temperatures.  While they can achieve higher temperatures and efficiencies than flat-plate collectors, they are also more expensive.

Siting a Solar Hot Water System

The Department of Energy (DOE) provides an excellent web page on Siting Your Solar Water Heating System. While an obstruction-free southern exposure is best for optimal results,  depending on your location and the tilt of your collector, your system can face up to 90 degrees east or west of true south without significantly decreasing its performance. You will need to assess your site's solar resource and the optimal orientation and tilt for your solar collector. The efficiency and design of your system will depend on how much of the sun's energy reaches your roof or property (if the system will be ground-mounted). In addition, both the orientation and tilt of the collector will affect your solar water heating system's performance. The optimal tilt for your solar thermal collector is an angle equal to your latitude; however, installing your collector flat on an angled roof should not result in a big decrease in performance.  

Solar thermal suppliers and installers can perform a solar site analysis for you, usually at no charge. Refer to Contractor Selection Tips and Resources to find and assess prospective installers.

Costs of a Solar Hot Water System

Solar water heating systems typically cost more to purchase and install than conventional water heating systems. A solar water heater can, however, save you money in the long run.  In Frederick County, solar thermal systems typically range in size from two 4'x8' collectors heating an 80 gallon tank, to three 4'x8' collectors heating a 120 gallon tank. They cost approximately $8,400 to $9,600, respectively, before incentives. (Sources: Sustainable Energy Systems, personal communication; U.S. Department of Energy). 

Understanding the Incentives

The information below on incentives is current as of February 2013. For the most up to date information on incentives, visit www.DSIREUSA.org.

The Maryland Residential Clean Energy Grant, the federal tax credits, the sale of Solar Renewable Energy Credits, and electricity savings can reduce first year costs by as much as $4,000. 

  1. State Grant:  The Maryland Residential Clean Energy Grant Program currently offers a $500 flat incentive for systems with a panel area of 10 - 100 square feet. 
  2. Federal Investment Tax Credit: Under current law, solar hot water systems installed prior to December 31, 2016 are eligible for a 30% federal tax credit. At least half the energy used to heat the dwelling's water must be from solar. 
  3. Solar Renewable Energy Credits (SRECs): A Solar Renewable Energy Credit (SREC) is a tradable commodity representing the non-polluting value of 1,000 kWh (1 Megawatt hour (mWh)) of electricity (or the equivalent) produced by a solar system.  A solar thermal system contractor may install a controller that converts British thermal units (Btu) to kilowatt hours (kWh) in order to track the accumulation of equivalent kilowatt hours. A 30-tube evacuated tube system can be expected to produce 3 mWh, or 3 SRECs per year, which in 2012 was worth approximately $420.

System owners have several options for selling their SRECS:

  • A system installer may refer new owners of solar thermal systems to an SREC aggregator/broker who may process required paperwork and trade SRECs on their behalf. This may be the simplest option for homeowners who do not want to be directly involved with extra paperwork and the selling of SRECs.

  • System owners may register and sell their SRECs themselves by applying for certification through the Public Services Commission’s website  and by setting up an account and registering their system with the Generation Attribute Tracking System (GATS). GATS is where SRECs are created, tracked, and transferred to buyers when sold. GATS allows users to report generation data and collect and advertise credits for sale via the  Bulletin Board.

  • System owners may register their system with an auction platform, such as SREC Trade, Inc., which provides public listings of SREC pricing and hosts monthly auctions for SRECs. Alternatively they can register with a trading platform, such as Flett Exchange; it also tracks the kilowatt hour generation of its customers’ systems, and pays customers the current rate for the annual SRECs their systems produce. 

Pro-Formas – Costs and Payback over 5 Years

The charts below compare the costs and impact of incentives on evacuated tube and flat plate systems:

Pro-Formas*
Evacuated Tube Systems

A. 30 Tube, 2” double-walled tubes; sized for 2-4 people (~36,000 Btu)

B. 24-Tube; 4” Single walled tubes; sized for 4-5 people (~52,000 Btu)

C. 60-Tube, 2” double-walled tubes; size for 5-7 people (~72,000 Btu)

Installed Cost

$9,000

$12,000

$14,000

MD State Grant

$500

$500

$500

Federal Tax Credit

$2,550

$3,450

$4,050

Electricity Savings (Year 1)

$504

$756

$1,008

SREC sale (1 SREC = $140) 5 max per year

$420

$700

$700

Total Grants/Credits/Savings (Year 1)

$3,974

$5,406

$6,258

Net Cost to System Owner (Year 1)

$5,026

$6,594

$7,742

Years 2-5 Electricity Savings

$2,016

$3,024

$4,032

SREC 5-yr average

$1,680

$2,800

$2,800

Maintenance (Replacing Glycol at year 3-5)

$300

$300

$300

Net Cost to System Owner (Year 5)

$1,630

$1,070

$1,210

 

Pro-Formas*
Flat Plate Collectors/Drainback

A. 40 sq. ft. sized for 2 people

(25,739 Btu)

B. 64 sq. ft; sized for 2-4 people (35,849 Btu)

C. 80 sq. ft; sized for 4-7 people

(41,280 Btu)

Installed Cost

$7,800

$8,600

$9,400

MD State Grant

$500

$500

$500

Federal Tax Credit

$2,340

$2,580

$2,820

Electricity Savings (Year 1)

$299

$417

$479

SREC sale (1 SREC = $140) 5 max per year

$420

$560

$658

Total Grants/Credits/Savings (Year 1)

$3,559

$4,057

$4,457

Net Cost to System Owner (Year 1)

$4,241

$4,543

$4,943

Years 2-5 Electricity Savings

$1,196

$1,666.92

$1,916

SREC 5-yr average

$2,100

$2,800

$3,290

Maintenance (Replacing Glycol at year 3-5)

$0.00

$0.00

$0.00

Net Cost to System Owner (Year 5)

$945

$76

($263)


* For illustrative purposes only.  A Pro-forma is assumed, forecasted, or informal information. It gives an idea of how the actual finances may look if underlying assumptions hold true.  Actual costs and incentives depend upon site conditions and programs that may or may not be applicable to your situation.  These pro-formas are not guaranteed and are subject to change without notice.  Pro-formas for evacuated tube systems provided by NCP Solar; pro-formas for flat plate collectors provided by Sustainable Energy Systems.

** Electricity costs assume $0.10 per kWh in all years

***Assumes 1 SREC = $140.

You may want to consult with one or more solar thermal installers and compare the estimated annual operating and maintenance costs of several solar water heaters. Such comparisons can help you decide if it is worth investing in a more efficient system.

The pro-formas above illustrate that the payback period for solar thermal systems may be approximately five to six years based on stated SREC and electricity cost rates.  Both the payback period and the return-on-investment (ROI) will vary depending on the cost of the system and the actual price of electricity and value of SRECs over time. If you do not plan to live in your home for the life of your system, you should be careful to calculate payback periods and ROIs using best and worst case scenarios. Your installer may be able to assist with this. Also note, Maryland Statutes and Codes prevent any increase in real property taxes due the installation of solar hot water systems.

Paying for a Solar Hot Water System

If the initial cost of a solar thermal system is an obstacle for your household, the energy and utility bill savings attributable to the system can become a source of funds for making monthly payments on a bank or home equity loan. Alternatively, the Maryland Be SMART Home Complete loan program offers up to $15,000 in unsecured loans at an interest rate of 4.99% for energy efficiency upgrades that include solar thermal systems. This program includes a home energy audit and does require using the program’s approved contractors. They have a limited number of contractors for renewable energy systems; however, contractors can be added on a rolling basis. In addition, the FHA's PowerSaver Program allows eligible owners to borrow up to $25,000 at fixed rates to finance energy efficiency projects and renewable energy projects like solar hot water systems.

According to the U.S. Department of Energy’s web page on Estimating the Cost and Efficiency of a Solar Water Heater, a solar water heater can result in your water heating bills dropping 50%–80%. The amount of savings you might expect depends on the following:

  • Family size and how much hot water you use;
  • How well your system performs;
  • Your geographic location and the extent of solar resources;
  • Available financing and incentives; and
  • The cost of conventional fuels (natural gas, oil, and electricity).

Because the sun is a free energy source, a solar thermal system may also protect you from future fuel shortages or price increases.

If you are building a new home or refinancing your current home, the economics of purchasing a solar hot water system can be very appealing. If you include the cost of a solar water heater in a 30-year mortgage, it may amount to between $13 and $20 more on your monthly payment; however, the federal income tax deduction for mortgage interest attributable to the solar system reduces that by approximately $3–$5 per month.  Therefore, if your fuel savings are greater than $15 per month, the solar investment is profitable right away because you are saving more than you are paying each month.

Deciding if a Solar Hot Water System
is Right for You

A solar hot water system makes the most sense if you can answer yes to the following questions:

  • Do you own your house and expect to remain there for a long time (more than 5 – 8 years)?
  • Is your roof in good condition or do you have an area suitable for a ground-mounted system near the house?
  • Does the location of your solar thermal system provide for good exposure to sunlight in a southerly direction?
  • Will the solar collectors not be significantly affected by shading from trees or other obstructions?
  • Do you have cash available to pay for the system upfront or are you willing to apply for a loan?

Although a negative answer to one or more of these questions does not necessarily mean that a solar hot water system is inappropriate for a property, it does suggest that it may be more difficult to maximize the value of the system or that the financial benefits may be limited.

Installation and Maintenance: Requirements and Expectations

Several permits and inspections (electrical, plumbing, etc.) are needed when a solar hot water system is installed. Additional permits/inspections are needed for ground-mounted systems. Many installers will take care of these steps for you and roll the permit and inspection fees into their estimate and contract. Be sure to ask about this when you get you cost estimates.

If your contractor does not handle these requirements for you, depending on where you live, you will need to check with your municipality or Frederick County Government about the permitting and inspection processes and fees. DOE provides a good list of things to consider on their Building Codes and Regulations for Solar Water Heating Systems web page.

The entire project may take three to four weeks from start to finish, though installation of the system itself will only take three days to a week. Receipt of the $500 Maryland Residential Clean Energy Grant can take up to a month. Following installation, maintaining your system is important to keep it running smoothly. Be sure to discuss the maintenance requirements and options with your installer or system provider. DOE’s web page on Solar Water Heating System Maintenance and Repair provides a good list of do-it-yourself inspections and other recommendations.

 

Contributors: Montgomery County Department of Environmental Protection; Curtis Nelson, NPC Solar; Zayn Bradley, Sustainable Energy Systems. Sources: U.S. Department of Energy