Calculating a Solar Water Heater’s Price and Energy Performance

In comparison to traditional water heating systems, solar water heating systems are more expensive to buy and install. On the other hand, a solar water heater typically costs less over time.

Your ability to save money will depend on the following:

  • How much hot water you consume.
  • Performance of your system.
  • Your location and available solar resources.
  • Finance options and incentives.

The price of the traditional fuels your conventional water heater would normally use (natural gas, oil, or electricity)
If you install a solar water heater, you should see a 50%–80% reduction in your water heating costs on average. Additionally, you are safeguarded from future fuel shortages and price increases because the sun is free.

The economics are significantly better if you’re refinancing or building a new house. The monthly cost to include a solar water heater in a new 30-year mortgage typically ranges between $13 and $20. Mortgage interest due to the solar system is subject to a $3–$5 monthly deduction under federal income tax law. Therefore, the solar investment becomes lucrative right away if your fuel savings exceed $15 per month. You are saving more each month than you are paying.

Calculating a Solar Water Heater's Price and Energy Performance

Determining a Solar Water Heater’s Energy Efficiency

Use the solar energy factor (SEF) and solar fraction to determine a solar water heater’s energy efficiency (SF).

The energy delivered by the system divided by the electrical or gas energy input is known as the solar energy factor. The more efficient the system is, the higher the number. The range of solar energy factors is 1.0 to 11. The most prevalent systems have solar energy factors of 2 or 3.

The sunlight fraction is an additional indicator of solar water heater effectiveness. The percentage of the entire conventional hot water heating load that is accounted for by solar energy (delivered energy and tank standby losses). The solar contribution to water heating increases with the solar portion, lowering the energy needed for the backup water heater. The range of the solar fraction is 0 to 1.0. Solar fractions typically range from 0.5-0.75.

The Solar Rating and Certification Corporation publishes the Solar Energy Factor and Solar Fraction for approved solar hot water systems at This certification also specifies how much heat (in kWh or Btu) the system will produce each day under various sun and temperature conditions.

Don’t pick a solar water heating system purely on the basis of how energy-efficient it is. It’s crucial to take size and cost into account when choosing a solar water heater.

Estimating yearly operating costs

Before making an investment in a solar water heating system, think about the yearly operating costs and evaluate different solutions. You can use this to calculate the energy savings and payback period of an investment in a more energy-efficient system, which will likely cost more up front.

Before you can select and compare the costs of various systems, you must first determine the system size required for your home.

The following information is required to determine the annual operating costs of a solar water heating system:

  • The system’s solar energy component (SEF).
  • The cost and the auxiliary tank’s fuel type (gas or electric) (your local utility can provide current rates).

Then utilize the formulas below:

Determine how much energy is required to heat the required number of liters of hot water or depending on fuel use.



Therms are a common unit of measurement for selling fuels like natural gas. One (1) therm is equivalent to 100,000 BTUs (Btus). Examine your utility bills to determine how much fuel you use during the summer, when gas is not typically utilized for space heating. You might wish to take roughly 60% of that summer total as the energy used to heat the water if you have gas for cooking and the clothes dryer.

The Uniform Energy Factor (UEF), which measures the quantity of hot water generated per unit of fuel spent in a standard test, measures the energy efficiency of a typical water heater. The efficiency of the water heater increases with the UEF number. UEF is calculated using the test procedure provided by the Department of Energy in 10 CFR Part 430, Subpart B, Appendix E. A UEF of at least 0.64 is required for residential gas water heaters. Since all of the electricity used in electric heaters is used to heat the water, the UEF is assumed to be 1.0.

(Fuel used in the summer months)EF0.6/ = Daily Water Heating Energy (number of days in summer months)

Temperature and water usage both affect the amount of fuel utilized. In order to raise one pound (lbs) of water by one degree Fahrenheit, the amount of energy needed is known as a Btu (F).

Daily Water Heating Energy = (gallons of hot water per day) * (1 btu/lbs/F) * (8.35 lbls/gallon)

(Chilling water temperature – hot water temperature).

The DOE test process for hot water heaters considers that the incoming water temperature is 58°F, the hot water temperature is 135°F, and the total amount of hot water produced per day is 64.3 gallons, which is the typical use for a home of three persons. This results in a Daily Water Heating Energy of 12.03 kWh per day for electricity or 0.4105 therms/day for natural gas.

Instead of sizing a solar system based on current consumption, which is dependent on the changing number and behavior of inhabitants of a house, it is frequently wise to make your decision on benchmark loads or the number of bedrooms in the home.


The Daily Water Heating Energy, the efficiency of the conventional heater, and the price of fuel all affect the annual cost of fuel for conventional heating.
The anticipated yearly cost of operation is calculated as follows: Annual Water Heating Cost = (365 days/year) * (Daily Water Heating Energy therms/day) 41,045 UEFSEF Fuel Cost ($/thermBtu).
As an illustration, let’s use our benchmark values of UEF of 0.64 and a natural gas price of $1.10/therm:
OR Fuel Cost (therm) = $257.52/year (365 days/year) (0.4105 therms/day) (0.64 USEF) ($1.10/therm) Estimated Annual Operating Cost
Example: 365 x 0.4105 x 1.1 x $1.10 (assuming the SEF is 1.1 and the price of gas is $1.10/therm) = $149.83
The DOE test procedure for hot water heaters, which assumes an incoming water temperature of 58°F, a hot water temperature of 135°F, and a total hot water production of 64.3 gallons per day, which is the typical usage for a household of three people, is the basis for the energy usage per day in the equations above.


You must be aware of or convert the cost of electricity in units of kilowatt-hours (kWh). In the United States, the average electricity rate in 2021 was 10.42 cents per kilowatt-hour. Hawaii’s average electricity cost of 30.55 cents per kilowatt-hour is the highest. The lowest average electricity price is 7.01 cents per kilowatt-hour in Louisiana. An illustration of the annual water heating costs for an electric water heater with a UEF of 1.0 and an electricity price of $0.1042/kWh is as follows: Annual Water Heating Cost = (365 days/year) 12.03 kWh/day (1.0) SEF ($0.1042) = $457.54/year.
This illustration demonstrates that, as is frequently the case, electricity is more expensive than natural gas.

Comparing Prices and Estimating Return on Investment for a Solar Water Heating System

Now that we are aware of the price of conventional heating, we must project what it would be lowered to and deduct that amount in order to project the fuel savings associated with a solar water heater. The SEF calculation takes into account the power needed to run pumps and controllers.
Daily Hot Water Energy (therms/day)*(365 days/year)((1/EF)-(1/SEF)) = Annual Solar Energy Savings.

For instance, a solar power system with a SEF of 2.5 would save on natural gas consumption by

The annual savings from solar energy are equal to (0.4105 therms/day)*(365 days/year)((1/0.64)-(1/2.5)) = 174 therms per year

Natural gas costs vary widely depending on location and month. The US average in May 2021 was $1.776/therm, a huge increase from prior months. We shall use the $1.50/therm average between 2011 and 2021 as our example. The corresponding Annual Solar Cost Savings are:

($1.50/therm) * (174 therms/year) = $261/year

The annual energy and cost savings for an electric water heater with UEF=1.0 and an electric price of $0.08/kWh would be:

Savings from solar energy over a year are equal to 12.03 kWh/day*365 days.


2634 kWh per year

And these would be the associated annual solar cost savings:

($0.1042/kWh) * (2634 kWh/year) = $274.46/year

Costs of Operation and Maintenance

The savings on fuel would be reduced by any costs related to system repairs. Residential solar hot water systems are made to run autonomously, and reliability has increased to the point where O&M expenses ought to be low. Even so, O&M expenditures are estimated to be under 1% of the initial cost, based on years with negligible O&M costs interspersed with sporadic costs for things like fluid replacement. Hail damage is typically covered by homeowner’s insurance. If you wish to include installation and maintenance costs, get estimates from the manufacturer(s) and a skilled contractor. These prices will differ between system types and occasionally even between different water heater models.

To calculate the payback on our solar investment, we must first figure out the solar water heating system’s annual running costs and purchase price. We must then compare these costs to those of conventional water heating systems.

Cost Installed

Household-sized solar water heaters are estimated to cost around $100/sf ($1000/m2). The price depends on the type of collector, the configuration of the system, and local market variables. This cost may be average for an area with strong local suppliers and competition. The reported costs range from $50 per square foot for an unglazed swimming pool heater to $424 per square foot for a system that includes evacuated tube solar collectors. For instance, in a housing area, 62 units with two 4 ft x 8 ft solar collectors each were installed in 2003 at an average cost of $4,000 per system, or $62.50 per square foot.

Payback Period (Years) = Annual Cost Savings ($/Year) / (Initial Cost ($)

For the purposes of our continuing example, let’s compare:

(15.3 years) = ($4000) / ($261/year)

In relation to electricity:

(14.5 years) = ($4000) / ($274.46/year).

The majority of installation activity takes place in places where energy costs are greater than what is projected here since there are lower paybacks there. These include locales with high energy costs, like Hawaii and California, as well as those where more expensive fuel oil is used since low-cost natural gas is not readily available.

Other Expenses

You should compare solar water heating systems’ installation and upkeep prices as well. Some systems could be more expensive to install and keep up.

To assist with estimating these expenses, speak with the manufacturer(s) and a skilled contractor. These expenses will differ between system types and occasionally even between models.

Calculating a Solar Water Heater’s Price and Energy Performance Ratings

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