Solar Hot Water or Solar PV?

One of the questions we get asked a lot is what is the most cost effective way of producing hot water and am I better off having solar PV or hot water or both?

First of all the question is location and demand specific, as some areas have higher hot water demands than others. For example, if you live in Melbourne you may have under floor heating driven by hot water and therefore have a large demand. However, if you live in Brisbane, Ipswich, or on the Gold Coast, then your hot water requirement is probably quite low.

So like anything its site and demand specific.

How do we assess the best option? Well, everything comes down to cost in today’s modern age as just about nobody has time, so as an example lets look at a typical family of 4 with a normal electric storage system. We will assume that this family is considering investing in renewable’s to save money and that they are looking at solar hot water, heat pumps and solar PV.

First of all, we need some average installation costs to the consumer after any incentives. A typical solar hot water system will cost roughly $3.5K fully installed vs a heat pump at roughly $3.5K vs a standard storage system at roughly $2K. All of these systems could be said to have the same initial lifespan of 10 years with a potential lifespan of 20 years.

So to answer the question of which is best we have to look at installation costs, combine them with running costs and then do a comparison – phew! So lets table the installed costs for these systems and throw in some gas comparisons for good measure. We need to once again remember that costs will vary depending upon the quality of equipment, which will therefore effect lifespan. So please take it all with a grain of salt. With that in mind here are the figures!

Solar Hot Water Install Costs

INSTALLED COSTS  1-2 People2-3 People3-4 People5-6 People
Electric Storage Peak$1,500$1,750$2,000$2,250
Electric Storage Off Peak$1,500$1,750$2,000$2,250
Electric Storage and Solar PV$3,525$4,450$6,050$6,975
Heat Pump Peak$3,000$3,250$3,500$4,000
Heat Pump Off Peak$3,000$3,250$3,500$4,000
Solar Electric Boosted$3,000$3,250$3,500$4,000
Solar Gas Boosted$3,500$3,750$4,000$4,250
Solar LPG Boosted$3,500$3,750$4,000$4,250
Gas Instantaneous$3,000$3,250$3,500$4,000
LPG Instaneoous$3,000$3,250$3,500$4,000

How much do they cost to run? It once again varies upon several factors including site, environment, and usage. Over the 10 years, our family of 4 can expect dramatically different running costs, which will have a huge impact on where their wallet ends up in 10 years time. Let’s take a look.

Solar Hot Water Running Costs

   1-2 People2-3 People3-4 People5-6 People
Electric Storage Peak
Electric Storage Off Peak
Electric Storage Solar
Heat Pump Peak
Heat Pump Off Peak
Solar Electric Boosted
Solar Gas Boosted
Solar LPG Boosted
Gas Instantaneous
LPG Instantaneous

So back to the Question – Solar Hot Water or Solar PV?

With all that in mind, we have the answers to our questions! The table below shows the total of installation costs plus the running costs over 10 years. For solar PV it is simply the installation cost of both.

Solar Hot Water Comparison

TOTAL COSTS OVER TEN YEARS  1-2 People2-3 People3-4 People5-6 People
Electric Storage Peak$8,070$11,605$15,140$18,675
Electric Storage Off Peak$6,099$8,649$11,198$13,748
Electric Storage and Solar PV$3,525$4,450$6,050$6,975
Heat Pump Peak$5,738$7,356$8,975$10,844
Heat Pump Off Peak$4,369$5,303$6,238$7,422
Solar Electric Boosted$4,095$4,893$5,690$6,738
Solar Gas Boosted$4,230$4,845$5,460$6,075
Solar LPG Boosted$4,960$5,940$6,920$7,900
Gas Instantaneous$4,752$5,878$7,004$8,380
LPG Instaneoous$6,833$8,999$11,165$13,581

As you can see the combination of a trusty old storage system with solar PV is EXTREMELY cost effective. In fact, if you already have storage you would be crazy to change to anything else. If you’re looking at a new build you may be slightly better off with solar hot water, but it’s so close to being almost negligible. It’s also important to remember that the power from your PV system can be used for anything and if it’s not used it can still be exported. So overall our recommendation is solar PV~!

How did we reach our solar PV costs?

Solar PV costs are slightly different in that the larger the hot water system, the larger the solar system required to drive it. To determine the size of solar system required we used our design theory of 4.15kWhr produced per kW installed and factored that against the number of kWhr required to heat a certain body of water. We then applied a figure of $1.35/W installed to give us the total cost. To reach the figure of 0.08c one looks at how much power a solar PV system will produce over 10 years and divide the system cost by that kWhr figure. You’re welcome to pull out the trusty old calculator, but we can assure you that most systems will come in at around 0.08c per kWhr.

*edit – several people have asked about electric hot water running costs with solar PV during rainy days. Whilst there will be costs associated with this they will be offset by high production PV days so we have assumed them to be nil.

*edit – since publishing this article there have been further developments in the way we can switch hot water systems from either an SMA or Fronius PV inverter, or by using a third-party add-on such as the Immersun, or Sunmate.  These devices switch the hot water element based on either a level of production, or on a level of export.  In the case of the Fronius, this is built into the unit whereas the SMA requires an additional multi-function relay card.

Once these items are installed, the homeowner can tell the hot water system to switch on when a PV system hits say 3kW in output.  There are also hysteresis settings available to ensure the hot water system gets a minimum amount of run time.

6 thoughts on “Solar Hot Water or Solar PV?

  1. Thanks Nick. I believe youre saying that if the SHWU were not boosting across the year that the running costs would be zero and therefore not included. That is correct, but I cant say we see that in the field. Its normal for customers to report boosting during the winter months – hence the operating costs.

    The electrical running costs for the solar PV with storage are not added because they are purchased up front within the price of the solar PV system. When you purchase a hot water system, you purchase an energy liability. When you purchase a solar PV system, its either an energy asset or an energy revenue stream depending on which way its calculated. Either the install cost is factored in cap ex and the future cost of energy (from the PV) is zero, or the install cost is spread over the period and an LCOE (levelized cost of energy) number is used.

  2. I see what Dave is saying – the running cost of $175 per year for electric storage solar for 1-2 people is not added to the install cost of $3525 to give $5275 as a total. Whereas for all other types the total cost is: install costs + running cost x 10. The same for 2-3 people, 3-4 people and 5-6 people.
    Does that mean that for 1-2 people the $175 per year is only in the case of requiring boosting? If not, where does this running cost come from and why isn’t it included in the total cost please?

  3. Im not sure what you mean there Dave. When using an electric storage system with PV, the element is run off the PV during tday time hours only. There is no boosting. I have had a few large families that have had to ‘boost’ for an hour during winter at say 4AM, but the majority require no boosting at all. It all relies on having a large storage cylinder really – its like a thermal battery.

    More than happy to discuss, analyze and tweak.

  4. How come you added in the electric booster running costs fot the solar electric boosted and every other one you added in running costs but the Electric Solar and Solar PV you didn’t when in reality you have to add these costs. The taables result are skewed. The number should be 1-2 people $5,275, 2-3 people $7,080, 3-4 people $9,550 & 5-6 people $11,355. Those numbers show different story and more accurate comparrison of costs.

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