The Economics of a Solar Water Heater

Solar water heating systems usually cost more to purchase and install than conventional water heating systems. However, a solar water heater can usually save you money in the long run.

How much money you save depends on the following:

The amount of hot water you use
Your system's performance
Your geographic location and solar resource
Available financing and incentives
The cost of conventional fuels (natural gas, oil, and electricity)
The cost of the fuel you use for your backup water heating system, if you have one.

On average, if you install a solar water heater, your water heating bills should drop 50%–80%. Also, because the sun is free, you're protected from future fuel shortages and price hikes.

If you're building a new home or refinancing, the economics are even more attractive. Including the price of a solar water heater in a new 30-year mortgage usually amounts to between $13 and $20 per month. The federal income tax deduction for mortgage interest attributable to the solar system reduces that by about $3–$5 per month. So if your fuel savings are more than $15 per month, the solar investment is profitable immediately. On a monthly basis, you're saving more than you're paying.