Government funding for solar water heating is no longer available. This isn’t necessarily a bad thing. For many people the predicted savings wouldn’t happen in their solar water-heating system’s lifetime. What’s more, some of the claimed “benefits to the nation” may have been overstated.

Detail of a roof-mounted solar hot water heating system.
Detail of a roof-mounted solar hot water heating system.

2 reports on the economics and benefits of solar water heating were published in 2012: one by the Parliamentary Commissioner for the Environment (PCE); the other by the Ministry of Economic Development (MED), now known as the Ministry of Business, Innovation and Employment.

For many people – especially those who’ve already bought a solar water-heating system – the findings of these reports may be a surprise.

Key findings were:

  • On average, a system installed under the government funding scheme would leave its owner just $395 better off over its lifetime.
  • The overall (average) cost to the country is $4766 per system.
  • There are other ways of heating water that are cheaper to install, more cost effective and more environmentally beneficial.

So what's the problem?

For the homeowner, the main problems with solar water-heating systems seem to be:

  • the high initial cost compared with other water-heating options
  • difficulty in ensuring the system’s designed and installed correctly
  • difficulty in telling whether the system is working properly.

New Zealand is different from other countries where solar water heating is promoted and subsidised. So our benefits are not as great.

But it’s not a lack of sunny days that makes the difference. It’s how we generate our electricity (and the carbon emissions we get from that generation) plus how we traditionally heat our hot water:

  • More than three-quarters of our electricity is generated from renewable resources (and the carbon emissions from that generation are correspondingly low).
  • Night rates and controlled tariffs for electric water heating help reduce peak electricity loads, which are when electricity costs and carbon emissions from generation are highest.
  • Night-rate electric water heating is low cost.

Cost versus benefit

With costs generally in the range of $4000 to $10,000 per system, any solar water heater will have to pay itself off by saving a lot of money each year or by lasting for a very long time without the need for repairs.

However, evidence from studies – and from the owners of systems – suggests that in many cases the systems’ cost savings and longevity aren’t enough for solar water heating to be economically viable.

Improving the value of your house is another benefit often mentioned in discussions of solar water heating – and one result of the government funding has been that many people regard solar water heating as up there with good house insulation. But given the doubts about the longevity of these systems (and the expense of repairing them), there’s a good chance an ageing solar water heater will be seen as a liability when people are house hunting.

But what about the other benefits that are often touted? Surely the reduction in carbon emissions, load on the electricity network and increasing use of renewable energy are worth paying the extra money for?

The answer is: they might be, if these benefits existed in any significant way. Using the sun to heat water on summer days does little to reduce peak electricity demand during winter evenings, which is often when carbon emissions from generation are highest.

The net cost to the country of $4766 for each installed system suggests that solar water heating is an expensive way of achieving energy conservation. The PCE report backs up this: “There are ways of heating water that give greater environmental benefits than solar water heaters and are considerably more cost effective.”

Consider your options

If you like the idea of solar water heating – or even if you’re just looking at your water-heating options – think carefully about what you’re trying to achieve.

Your main objective’s to reduce your energy costs? Reducing the amount of hot water you use and minimising any hot-water losses can be much more cost effective than changing to a different system.

Maybe you’re interested in some of the other benefits often associated with solar water heating? Then it might be worth seeing what else you can do that’s cheaper and more effective. For example, you might like the idea that solar water heating would reduce your carbon emissions – but changing your household transport could give you bigger savings for much less money.

See our full report on water-heating options or read the PCE report above.

Where solar makes sense

Despite the problems of solar water heating, there are 2 obvious situations where it makes sense.

A solar water heater paired with a wetback on a woodburner or pellet burner that’s used as a primary heat source over winter can supply the majority of hot water during winter - and the solar unit can take over in the summer.

This system isn’t for everyone. Unless you live in a rural area on a block bigger than 2 hectares, your woodburner or pellet fire needs to meet the National Efficiency Standard when it has the wetback attached. This is something that lower-efficiency models can’t do.

A solar water heater with a header tank, installed against the north-facing wall of your house, that’s plumbed into the pipe feeding into your water-heating cylinder, is a good option because it’s simple and low cost.

This arrangement works as a simple “pre-heater”. Installing the system lower down rather than on the roof reduces installation, consent and other compliance costs – and it has no controllers or other complicated components. When the sun shines your hot-water cylinder won’t need to do much; on cloudy days or in winter you aren’t any worse off than before. And the low cost of the system far outweighs its slightly lower efficiency when it comes to payback time.

The downside is you need a suitable north-facing location for the system – and many houses have their north-facing areas used for gardens or decks.

Not easy, not always reliable

The traditional low-pressure electric hot-water cylinder is a simple thing, easy to install and reliable over many years or decades. Many solar water heaters are the exact opposite.

Not designing or installing a solar water heater properly creates problems. At best its performance won’t be quite as good as it should be; at worst it’ll cost more to run than your old hot-water system did.

We aren’t talking about major design or installation flaws: relatively small problems with plumbing, valves or controllers can have a disproportionately large impact on end performance.

To add to the problem, there’s no such thing as a standard solar water-heating installation. They vary to suit the houses they are going into, and some installations are more customised and complicated than others.

Is it working as it should?

So you’ve had a solar water heater designed and installed by a reputable company, the sun is shining and your water is hot. But how do you know if it’s the sun or your booster system (the element that heats water when there’s not enough sun) doing most of the heating? And just how much money are you really saving?

To check how well the solar panels or tubes are working:

  • During a good sunny spell in summer, turn off your booster system if you can and see whether you run low on hot water over a few days. A well-designed solar water-heating system should provide all your hot water needs over summer, except on very overcast or cloudy days.

Making sure your controller’s maximising the amount of water heated by the sun is trickier:

  • If you have records of your energy use before and after solar was installed, you can compare energy use or see how much your costs have dropped. Ideally you’d compare the same period (such as January before and January after installation). Make sure both months are roughly similar for their weather, the number of people in the house, and the amount of hot water used.

  • Your solar water-heater installer should have given estimates of the savings you’d get. You can check your actual savings against these.

Once you’ve tried one of these tests and think something’s not right with your system, go back to the company or plumber who installed it. They’re responsible for both the installation and the system itself – which includes dealing with the manufacturer if any of the components are at fault.

Tip: The Consumer Guarantees Act covers your home’s solar water heater for a lot longer, and for more things, than the manufacturer’s warranty.

Our view

  • To owners of solar water heaters: Using the majority of your hot water in the evening maximises your use of water that’s heated by the sun. Get your system controller checked to make sure it isn’t boosting your water temperatures at times that reduce the benefit you get from your solar panel – for example, in the early hours of the morning.

  • To owners of electric hot-water cylinders: Heating your water at night rather than “anytime” during the day or night saves money and has significant environmental benefits. Before you make the change, check your hot-water cylinder is large enough to hold enough water for the whole day. You may also need a second meter installed (although many smart meters can handle a second tariff) but this will still be much cheaper and more cost effective than changing the type of system you use for heating your water.

Report by Andrew Smith.