Is solar thermal worth it?

As you might expect, there has been a huge spike in interest in Solar Thermal with the introduction of the Green Homes Grant Voucher Scheme. The scheme, announced in July, has been introduced to drive the uptake of carbon saving technologies and solar thermal was just one of several ‘low carbon heat’ technologies the Government included.

How does the grant scheme work? Well, essentially if you are a homeowner, you can get a grant up to a maximum value of £5,000 towards the cost of installing the measure. There is a part contribution from the household though – typically (unless on certain Government entitlements) the homeowner will need to pay 1/3 of the costs. Take for example a solar thermal system that cost £4,500 – the homeowner would therefore need to cover £1,500 while the grant would cover the remaining £3,000.

So, in the following blog we look to answer the question is solar thermal worth it?

Solar thermal is cheaper than solar photovoltaic (PV) and coupled with the fact it takes up less room on the roof, for many customers it is their preferred option (you can find out the benefits and downsides of the two technologies here). Whilst payback for Solar PV is around 8-10 years, and is fairly consistent across properties, the payback for solar thermal is much more variable from house to house.

Below we give you an idea of the potential payback periods for solar thermal.

Cost of the system

We asked Giles from The Small Solar Company to give us an approximate cost for a new solar thermal system. Whilst he said that every home is different, with its own challenges, a pretty standard benchmark price is about £3,000 for a 3m² solar thermal system, while a larger 6m² system might cost nearer £4,500.

Savings

Much of the payback rate of the solar thermal system is down to the energy savings the solar thermal system creates once it is installed – if the savings are big, the payback is fast and vice versa. The savings here relate to producing hot water for free (from the Sun), rather than firing up whatever normally creates the hot water in your home (typically a gas boiler).

Unfortunately, the energy savings associated with solar thermal are more modest than solar PV, although it does depend on how much hot water you get through. The two key factors are how many people live in the property, and what sort of heating system you currently use.

For those on oil and LPG heating systems, savings are larger, because the per unit cost of fuel is higher. For those on electric off peak heating, savings are more modest because night rate electricity is fairly cheap. Gas systems offer savings somewhere in between. For a small system in a 2-person household, expected yearly energy savings range between £50 – £150. For a 4 bed house with 4 or 5 people and a 6m square system, savings will be much bigger – around £200-400.

RHI return

The good news is that it isn’t only the energy savings that drive the return on your solar thermal system.

Solar thermal systems are eligible for the Renewable Heat Incentive. This is a Government backed payment, which gets paid on a quarterly basis over 7 year period from when the system gets commissioned.

The good news is that you can claim both the Domestic RHI and the Green Home Grant when you install solar thermal. In order to do this, you must claim the Green Home Grant voucher first and then notify Ofgem that you have used it when you apply for accreditation to the Domestic RHI. The Green Homes Grant will then be deducted from your Domestic RHI payments.

So how is the RHI calculated for Solar Thermal?

Well, the amount of hot water produced by the solar thermal system is measured in kWh, and this number can be found on the MCS report. To calculate your RHI payment – you can simply multiply this kWh number by the RHI rate for solar thermal (19.2p / kWh) and this will give you your annual payment.

How the MCS installer arrives at the kWh number is far more complicated, but includes things like the number of occupants in the house (a larger number results in a higher payment), the efficiency of the existing boiler, whether or not electric showers are present in the property, the area that you live in (and the amount of sunshine you get) as well as the efficiency of the cylinder.

Typical RHI payments for solar thermal

A typical small 2m square system for a property with 1 occupant will pay just over a £1,000 over the 7 years. For a 6 person property with a large 6 meter square panel, you are looking at a payment in excess of £3,000.

The return from your Solar Thermal System

Given these guideline figures, we have produced a little table giving you a rough idea of the return on your investment!

Remember the figures in the table don’t include the Green Home grant you will be eligible for. Also, this is just a rough estimate, it doesn’t take into account maintenance costs, inflation, changing costs of fuel and many other minor influences on the rate of return. It does give you a pretty good idea of how long a system will take to pay back however.

System Size	Cost	Occupants	RHI (7 yrs)	Est. Savings	Return
Small	£2,500	1	£1,100	£50	28 Years
Small	£2,500	2	£1,350	£100	11 Years
Mid	£3,500	3	£1,850	£150	11 Years
Mid	£3,500	4	£2,350	£200	7 Years
Large	£4,500	5	£3,000	£250	7 Years
Large	£4,500	6	£3,250	£300	6 Years

What if you use less hot water?

The RHI is based on the installed system, so whether you use your hot water much is irrelevant to that payment.

The savings figures however will of course vary depending on how much and how efficiently you use your hot water. If you only shower once a week, your savings figure will be a fair bit lower!