Before purchasing a solar water heating system, you can estimate its annual operating cost and compare it with other more and/or less efficient systems. This will help you determine the energy savings and payback period of investing in a more energyefficient system, which will probably have a higher purchase price.
Before you can choose and compare the costs of various systems, you need to know the system size required for your home.
Calculating Annual Operating Cost
To estimate the annual operating cost of a solar water heating system, you need the following:
 The system's solar energy factor (SEF)
 The auxiliary tank fuel type (gas or electric) and costs (your local utility can provide current rates).
Then, use the following calculations.
With a gas auxiliary tank system:
You need to know the unit cost of fuel by Btu (British thermal unit) or therm. (1 therm = 100,000 Btu)
365 × 41,045/SEF × Fuel Cost (Btu) = estimated annual cost of operation
OR
365 × 0.4105/SEF × Fuel Cost (therm) = estimated annual operating cost
Example: Assuming the SEF is 1.1 and the gas costs $1.10/therm
365 × 0.4105/1.1 × $1.10 = $149.83
With an electric auxiliary tank system:
You need to know or convert the unit cost of electricity by kilowatthour (kWh).
365 × 12.03/SEF × Electricity Cost (kWh)= estimated annual operating cost
Example: Assuming the SEF is 2.0 and the electricity costs $0.08/kWh
365 X 12.03/2.0 X $0.08 = $175.64
Comparing Costs and Determining Payback
Once you know the purchase and annual operating costs of the solar water heating systems you want to compare, you can find the costs associated with conventional water heating systems and compare the two.
Use the table and calculations below to compare two solar water heating systems and determine the cost savings and payback of the more energyefficient system model.
System Models 
System Price 
SEF 
Estimated Annual Operating Cost 
System Model A 



System Model B (higher SEF) 



Additional cost of more efficient system model (Model B) 


Price of System Model B  Price of System Model A = $Additional Cost of Model B 
Estimated annual operating cost savings (System Model B) 


System Model B Annual Operating Cost  System Model A Annual Operating Cost = $Model B's Cost Savings Per Year 
Payback period for Model B 


$Additional Cost of Model B/$Model B's Cost Savings Per Year = Payback period/years 
Example:
Comparison of two solar water heating system models with electric backup systems and electricity costs of $0.08/kWh.
System Models 
System Price 
SEF 
Estimated Annual Operating Cost 
System Model A 
$1,060 
2.0 
$176 
System Model B 
$1,145 
2.9 
$121 
Additional cost of more efficient model (Model B) 


$1,145$1,060 = $85 
Estimated annual operating cost savings (Model B) 


$176$120 = $56 per year 
Payback period for Model B 


$85/$56 per year = 1.5 years 
Other Costs
When comparing solar water heating systems, you should also consider installation and maintenance costs. Some systems might cost more to install and maintain.
Consult the manufacturer(s) and a qualified contractor to help estimate these costs. These costs will vary among system types and sometimes even from model to model.
