Payback - How Much Does Domestic Water Heating Cost?

Every home spends on average 25% of it’s combined energy bills on water heating. If you live in a newer home or one that has good quality roof insulation, cavity wall insulation and double glazing, the percentage of your bills for water heating will be higher.
Solar energy is a free source of energy, unlike fossil fuels. You only pay once for the system which provides you energy, not for the energy you use.

Payback

People always ask “what is the pay back for solar thermal systems”. Well first and foremost it does have a pay back. If you buy coal, oil or electricity or gas, the supplier does not offer you any pay back at all. No matter how much you buy or no matter how long you buy it for, you never get your money back. You have to service, maintain and renew your boiler.

If you take a real view of payback, you have to factor in future energy increases, take account of inflation, and the savings made due to the boiler been used less and lasting longer.

Doing the sums properly most thermal systems offer a pay back of between 6 and 15 years, depending on the fossil fuel displaced, the future fuel inflation factor you use and the amount of hot water you use.

Although payback is one way of looking at the costs, it is perhaps more accurate to look at the return of investment that solar thermal offers. Typically the financial savings of a good solar thermal system will be equivalent to a tax free return on investment of between 8% and 12%.

Assumptions

Fuel inflation: 15%
General inflation: 4%
Performance: 70%
Water heating as percentage of fuel bill: 25%