Sunday, February 13, 2011

The Solar Water Heater Investment

Most of you, who know me will know that I am a tree hugging idealist which is rather ironic when one considers that I am presently employed by the largest contributor of carbon emissions in the world. Although I have tried to convince (and failed to convince) many people on why now is the time to invest in a solar water geyser, I have hypocritically (not until now that is) found the time to install one myself. I always found some excuse to delay the installation and honestly the cost of the installation was always a factor in the back of my mind. It is easy to go around talking green and using CFL globes at home but when it comes to actually making a R20 000 investment, excuses to delay are easy to come by.

Fate decided to force my hand when I awoke one morning to find my geyser with a minor leak. My insurance said they would pay for it to be replaced and I hastily made the decision to replace my geyser with a solar water geyser.  The time just seemed right so with little shopping around I called a company I had made contact with previously and ordered my new solar water geyser. Since I was driving solo at the time, I started to think about my decision and whether it was the correct choice financially. A few simple assumptions and I was be able to dispel the myth (propagated by most plumbers), "That it is just too expensive and makes no financial sense".


Modern day solar water heaters are not an eyesore and the unit comes supplied with a geyser blanket for the tank and 8m of thermoflex piping which will insulate the first few metres of your hot water piping. The price quoted of R18 500 is all inclusive incl. the electrical installation and accompanying certificate of compliance. The keypad installed in your home allows you the opportunity to manually over-ride the system, set the minimum temperature required and observe both the temperature of the water in the geyser and the water in the exposed pipes. As may be observed, one can expect temperatures in excess of 60 degrees celsius on a hot Durban day.

In my calculations below I was very conservative, so in reality, I believe that the payback time will be even sooner than indicated by my calculations. I assumed a monthly electricity bill of R700 and a geyser consumption of 30% (which is the lower end of the range which goes up to 50% in some studies). I have also conservatively assumed that Eskom would be granted a 20% increase in MYPD3 (this is the agreement between Eskom and NERSA that determines the electricity price increase from 2013 to 2015). I believe this to be conservative because Eskom was granted a 25% increase during MYPD2 and this was before Eskom accepted a R1,5 Billion loan from abroad. Since Eskom earns revenue from electricity sales, tariff increases are the only viable means of repaying those debts in the future. If anybody deisagrees with my assumptions, I would love to hear form you as my aim here is to promote understanding and not sell solar water geysers.

I also understand and appreciate that this is not an entirely accurate financial justification because it did not for example take into account things like  'Future Value' and 'Net Present Value' but I hope that someone with a better understanding of these concepts than I have could rework these and let us know the results. All I know is that in a relative short period of time, I will be getting a return on investment. TAX FREE! The normal calculation is shown below. It shows that you should expect to start seeing a return on investment in around 3.5 years time.


Total Cost
R 18,500.00

Eskom Rebate
R 6,098.00

Amount remaining
R 12,402.00






Average Electricity Bill
R 700.00

Percentage due to Water heating
30

Price increase MYPD2
25

Assumed price increase MYPD3
20







Year 1 Year 2 Year 3 Year 4
Monthly savings R 210 R 263 R 328 R 394
Annual Savings R 2,520 R 3,024 R 3,938 R 4,725
Capital repayment R 9,882 R 6,858 R 2,921 R-1,805


The calculation below shows the return on investment period for a situation like mine, when you can also factor in the geyser replacement payment from the insurance company. I assumed an amount of R5000 for this payment as a typical geyser replacement would cost in the region of R6000 with an additional R1000 being deducted for a rebate. This shows that you would pay back your initial capital investment in about 2 and a half years.



Total Cost
R 18,500
Eskom Rebate
R 6,098
Geyser replacement cost
R 5,000
Amount remaining
R 7,402




Average Electricity Bill
R 700
Percentage due to Water heating
30
Price increase MYPD2
25
Assumed price increase MYPD3
20





Year 1 Year 2 Year 3
Monthly savings R 210 R 263 R 328
Annual Savings R 2,520 R 3,024 R 3,938
Capital repayment R 4,882 R 1,858 R-2,080
 
I hope that these calculations give you the necessary clarity to wade through the bullshit next time you discuss this topic with anyone. I went with a company called SOLARIZE (031 579 2043) and I found them to be very efficient and professional even taking the time to help us with the rebate application. All that we effectively had to do was insert our details, affix a postage stamp and post. There are other companies registered with the Eskom rebate program and you can obtain the details for a regional supplier from www.eskom.co.za/dsm or call the solar programme help desk (011 800 4744).

 

6 comments:

  1. check out

    http://all4women.co.za/green/solar-geysers.html

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  2. Thanks Nerville

    That is a great article but I believe it was written in response to the chinese solar geysers that were making an appearance in the market at that time. The equivalent chinese solar water geyser for me would have cost in the region of R6000 for a top of the range system. The dangers listed in the article are warning consumers about buying products that have not been certified by SABS.

    Any geyser that qualifies for the Eskom Rebate meets with SABS standards and requires a Certificae of Compliance from a registered electrician before it can be claimed. This removes a considerable amount of the dangers posed in the article.

    On a personal note we have had 2 very hot days in Durban and the temperature of the water in my geyser never exceeded 57 degrees Celsius.I have never heard of a study (not saying that it is not out there) that stated that the probability of injury or death is increased after the installation of a solar water geyser. Logic states that the probability would increase after the poor installation of a solar water geyser but in much the same way as it would increase after the poor installation of a conventional geyser.

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  3. agreed just thought it was info to keep in mind when looking for one of these. Make sure you go with the approved stuff

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  4. Ironically, I was quite surprised the other day when we got home from holiday and I found the overflow pipe had operated. I thought something was wrong but it was just the safety mechanism. If you do not use the hot water in the tank then it will continue to heat so at a certain temperature the system is designed to expel some hot water and introduce some fresh cold water into the system.

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  5. So its been a few months now.
    Can you give us an update on what the actual savings have been?

    I would like to see how it compares to your initial assumptions.

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  6. Hi Nerville

    The problem is I installed it in the middle of my estimation cycle (February), so I cannot accurately determine how much I am saving. I received my actual usage form Jan to Apr (3 months ) (3502.1 kWh). If this appears high it is because it is for two families (My parents and sister live in a separate building on the property). Comparing the most recent measurement to one form last year will be pointless since my parents only moved in, in December.

    I am currently doing research into heat pumps as I am preparing a proposal for Child Welfare. I also heard that Eskom has stopped the rebates on solar heating in SA so this justification is not currently up to date.

    It is like I always say. You cannot expect Eskom to do a good job at getting people to use less electricity. This should be the job of another entity in the Dept of Energy or another state owned enterprise in the Dept of Public Enterprises.

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