Info Request

 

	Savings are about money - fuel savings minus all expenses and are usually considered per year. I have named below nine (!) possible variable as inputs to this calculation.
	Payback is about time - how long before the buyer breaks even, so four more variables, often with assumptions, may get put into the equation, bringing their total to thirteen, so there is even more scope for error. (Nevertheless such calculations can still be useful.)

 

Internal valuations look only at the financial payback to the customer, not to wider social or environmental issues. This primer looks only at the financial balance sheet, not at the environmental one. External valuation looks at how the environment benefits and how this might be translatable into money terms.

Social (or total environmental best value) payback combines both of these on the same balance sheet, thus paying back faster. I have ignored these social payback issues in this paper. Including them would dramatically shorten payback.

 

	The estimate of the energy delivered by the system as hot water at the taps (not just by the panels, which will be higher) Units are usually kWh per year. 800-1200 kWh for a 2.8 sq m Solartwin is within our expected range for most of UK.
	The total energy efficiency of the hot water system, such as a boiler, at producing hot water. (This is not merely its combustion efficiency!) This may be a percentage in the range 35%-60% if a gas boiler is used, but closer to 70% with electric immersion heating if it has typical storage and distribution losses. Bear in mind that many gas and oil boilers tend to operate at low efficiency when working below their peak rated load - which is what tends to happen when they are heating only water for washing and bathing in summer. It is also important to factor in the fact that reducing the use of a boiler often means slightly lower electricity bills as well as gas/oil bills since it will be pumping (and maybe also using flue fans) less.
	Dividing the first figure by the second gives the fuel displacement potential in kWh of solar. This can be calculated by dividing the system (not panel) delivery of the solar water heating system in terms of hot water production at the cylinder divided by the efficiency of the hot water system at producing hot water if fuels such as gas or oil are displaced. Whether this efficiency figure is chosen to be 35% (as in Sutherlands tables for hot water at the taps rather than at the cylinder) or a higher figure, can have a huge bearing on the final environmental and cost effectiveness figure for solar. So this fuel displacement potential is usually far, far higher than the estimate of the energy delivered by the system.
	However this displaced energy figure probably needs to be reduced by a usability fraction. Not all homes are occupied 365 days a year. And even if they were, perhaps not all of the energy in the solar hot water would be used. So this percentage will rarely be 100%. Perhaps it might be 90%?

 

This calculation depends on the fuels displaced and tariff(s) at which they are bought. For example a fuel displacement potential of say 2500 kWh of low cost mains gas displaced at say 2p a kWh is worth £50. But with bottled gas the figure may be over £100.

A further reduction needs to be applied to this figure for alternative systems other than Solartwin because of the cost of the energy used by parasitic mains powered equipment: such as the pump, controller motorised valve, etc. It is important to deduct rather than ignore the energy and fuel use impacts of the parasitic electricity use of other systems since their usage can be significant and may well exceed 5% of the claimed cost-benefits of a 2 square meter tube system and over 20% of its environmental benefits. In general:   Mains electric solar circulating pumps run at around 30-90 W for an average of a few hours a day. You may need to estimate or calculate the cost of running one. (You may also want to reduce this figure a bit, since some of their energy probably ends up in the solar hot water. On the other hand, large un-insulated metal pumps can act as heat dumps. Controllers run at around 3-10 W, usually 24 hours a day. Use the figure inclusive of the transformers they use at 230 V, not just the low voltage transformed figure. Deduct this cost along with any pump running cost.

 

Further reductions to any remaining savings may need to be applied due to   maintenance charges, and costs of antifreeze all or part of the cost operating water hardness control systems if relevant, unless their use is regarded as a general benefit rather than cost

 

On the other hand, if a boiler is being used less as a result of having solar, a boiler life extension of say £10 can be added to the figure. After all, if a boiler is being used, say 20% less, it may be reasonable to expect it to require less maintenance and to last rather longer. Say a £1000 boiler was normally expected to last 12 years, but were instead to last 14 years because of solar, then the annual write-off of the capital sum of £1000 would be reduced from £83 to £71. So a further saving of £12 can thus be attributed to having solar.

 

	If the money spent were invested or in a bank account or elsewhere, how much might it be earning there?
	If the panel is bought using borrowed money, at what rate of interest?
	This gives you a negative cost of finance figure to set against your savings.

 

	Initial cost (Say £2499)
	The sum if any, of this which adds to the capital value of the home if it were to be sold (Say £1000)
	The difference between these is the net capital balance to be repaid via a payback calculation. Include the deduction above unless the owner thinks that solar payback must, uniquely, happen twice! (In this example £1499)

 

	Estimate an annual percentage price rise (or drop) for the fuel(s) which you are displacing by using solar.
	Decide whether to apply a simple or compound interest to these price changes.
	Now calculate the actual payback horizon calculation in years: divide the net capital balance to be repaid each successive year by the previously calculated savings (with an annual fuel price inflator built in), to calculate what is the break-even threshold to your particular solar water heating system.