Solar Water Heaters Explained (2023)

A solar water heater can reduce your water heating bills by around 50% to 80%, according to the U.S. Department of Energy (DOE). Plus, a high-quality solar heater can last for around 20 years, whereas traditional gas and electric heaters normally need a replacement after 10 to 15 years. In other words, you can save money on both energy bills and new equipment by investing in a solar water heater.

In this article, we at the Guides Home Team will cover how solar water heaters work, how much a system costs and if replacing your traditional water heater is worth it.

In simple terms, solar water heaters use large collector panels exposed to direct sunlight to warm your water. These collectors are generally installed on roofs and use dark colors to absorb as much solar radiation as possible. When water flows through your system, it absorbs thermal energy produced by the collector panels, and its temperature increases.

Solar water heating systems require zero energy consumption. However, since collector panels are often installed in elevated places such as a roof, homeowners may need circulating pumps to keep water flowing. These pumps consume a small amount of electricity, but the operating cost is minimal compared to the potential heating savings you can achieve.

Although they use the same energy source, solar water heaters and photovoltaic (PV) panels should not be confused. A solar water heater system gathers sunlight directly to heat water, while residential solar panels convert sunlight into electricity. If your property gets decent sunshine, both types of systems can save you thousands of dollars in bills over time.

You can classify solar water heaters into two systems: active and passive. Active systems use circulating pumps and controls to transfer heat from the collector panels to a storage tank, while passive systems operate without these components. Generally, you can use a passive solar heater if your water supply has enough pressure to transfer water on its own. Otherwise, you will need an active solar water heater.

A solar water heater includes one or more storage tanks, equipped with adequate insulation to prevent heat loss. The system may also include a conventional water heater as backup, for times when solar heating is not enough to cover your domestic hot water needs.

According to the U.S. DOE, you can classify active solar water heaters by the following two subtypes:

Direct circulation heaters have a much simpler design but are vulnerable to freezing temperatures. Indirect systems are recommended in cold climates since they can use an antifreeze solution as the heat transfer fluid.

You can classify passive solar water heaters based on their construction:

You can also classify solar water heaters based on the solar collector. There are three main types of collectors:

According to the U.S. DOE, a solar water heater costs, on average, around $100 per square foot of collector area. For example, if your system uses a solar collector that measures 4 feet by 10 feet (or 40 square feet), the average price is around $4,000. Depending on the complexity of your system, the price can range from around $50 per square foot to more than $400.

The U.S. DOE determined that water heating represents 14% to 18% of utility bills, equivalent to $400 to $600 per year. For a homeowner spending $600 on utility bills each year, a solar water heater that covers 50% of hot water demand would save $300. So if you purchased this system for $4,000, your payback period would be 13.3 years.

The above example is very simplified — the actual costs of a solar water heater can vary depending on the type of system and your home's hot water needs. Solar collector prices can range from around $1,500 for small basic systems to over $13,000 for high-end units, according to EcoWatch.

Thanks to the Inflation Reduction Act of 2022, solar energy systems qualify for a federal tax credit equal to 30% of the total cost of your solar water heater. Considering the $4,000 solar water heater example above, the tax credit would be $1,200, which reduces the net system cost to $2,800. Thanks to this incentive, the expected payback period drops from 13.3 years to 9.3 years in this example.

Depending on your location, additional solar incentives may be available from the state government or local utility company. You can check the Database of State Incentives for Renewables and Efficiency (DSIRE) to find rebates and other incentives by state.

The main advantage of a solar hot water system is using a free energy source that reaches your home all year long. Solar collectors cannot heat water at night, but you can solve this by using an insulated tank to store hot water during the day.

Traditional water heaters run using gas or electricity and have the advantage of being able to heat water at any time. However, since these heaters depend on utility services, they can have a high operating cost. The U.S. DOE determined that the typical American home spends $400 to $600 per year on water heating.

There is also an environmental impact when using traditional water heating. Gas-fired water heaters release carbon emissions directly, and electric water heaters result in indirect emissions unless the local grid uses renewable energy.

Solar water heaters have advantages and disadvantages, like any piece of equipment. These systems can save you hundreds of dollars over time, but you should know their limitations.

Solar water heaters can be cost-effective for homeowners who use large amounts of hot water, especially if local electricity and gas prices are high.

Solar panels offer a higher return on investment (ROI) and shorter payback period than solar water heaters in most cases. Solar panels generate electricity that you can use to power any device, while solar collectors can only heat water. You can combine solar panels with an efficient heat pump water heater to accomplish the same role as a solar collector — meaning your solar panels can heat water while also providing electricity.

Solar power systems and heat pumps also qualify for the federal solar tax credit, which means you wouldn't miss out on this benefit. To learn more about home solar panel installation, check out our guide to the top solar providers.

You can find a wide selection of solar water heaters in home improvement and department stores. However, not all products offer the same energy efficiency and durability.

Ideally, you should look for a solar water heater that is certified by ENERGY STAR and the Solar Rating & Certification Corporation (SRCC). ENERGY STAR models are successfully tested under federal standards, and the manufacturer must offer certain warranty conditions established by the program. The SRCC ensures that solar heating systems comply with U.S. regulations and are eligible for incentive programs.

You can use the ENERGY STAR product finder to check which brands and models are certified. The list includes solar water heaters from the following brands, among others:

If you have an ideal installation spot on your property, use high amounts of warm water or live in an area with high electricity and gas prices, a solar water heater can be worth it. A solar water heater can reduce your water heating costs by 50% to 80%. Installing a solar hot water collector can be an attractive investment for homeowners with a suitable area not covered by shadows.

However, you should also consider the alternative of installing solar panels and a heat pump water heater. This combination can often achieve higher energy savings than a solar water heater because you can simultaneously generate electricity and use a solar battery to store excess energy. By contrast, a solar collector only provides water heating.

The main disadvantage of a solar water heater is the high upfront cost relative to long-term savings. Some systems may have a payback period of over 10 years.

In addition, solar collectors cannot heat water when there is no sunlight, but you can fix this by storing hot water in an insulated tank. You can also use a small gas or electric water heater as backup for days with low solar heating.

During winter, you can expect a lower heating output due to more cloudy days and reduced sunlight hours, but your solar collector will continue operating.

Solar PV panels and solar water heaters are different types of equipment. Solar panels generate electricity, while solar collectors heat water directly.

The U.S. DOE recommends 1.5 gallons of water storage per each square foot of solar collector area. Based on this figure, a solar collector that measures 4 feet by 10 feet requires a 60-gallon storage tank (40 square feet x 1.5 gallons per square foot).

Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His energy-efficiency and solar consulting experience covers sectors including banking, textile manufacturing, plastics processing, pharmaceutics, education, food processing, real estate and retail. He has also been writing articles about energy and engineering topics since 2015.

Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York's Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.