Economics of Solar Thermal Energy

November 30th, 2009 | Categories: News | Tags: none

There are essentially three main reasons why a consumer or commercial customer will adopt solar thermal solution:

1. Reduction of carbon dioxide emissions (Environmental)

2. Reduction of ongoing fuel costs (Financial)

3. Improved reliability of energy supply (utility independence)

I would like to focus on the financial reasons and how one determine whether solar thermal offers an advantage. We believe the most suitable metric for measuring economic or financial viability of solar thermal is to conduct a comparative study of alternatives such as electrical heating, natural gas etc. For the purpose of this post, I will compare a simple 150 Liter solar water heating application of solar thermal technology versus installing an electric water heating system.

Please see our calculations in the following document “Financial comparison between domestic solar water heating versus electrical water heater“.

The key metric we look at is total cost of ownership over the life cycle of the product. We we have found is that the difference is significant over a twenty year time period. According to our calculations, solar is R74,000 cheaper over time due to the reduction in electricity use.  This seems to offer quite a convincing picture in favor of solar. So why isn’t everyone putting solar on their roofs? In our opinion, consumer awareness is low and often the information published in the media is confusing causing consumers to delay their decision. As the electricity prices in South Africa rise, more and more consumers are looking at their utiliity costs and realizing that if they want to keep money in their pockets they’re going to have to save somewhere and energy costs are the most natural place to start. To hear some interesting insights into the financial benefits of solar thermal water heating and latest trends in the market see this video: Solar Thermal Round Table Discussion.

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