Solar Energy

Published on January 22nd, 2010 | by Susan Kraemer

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California Regulators Trip Magic 3-Year-Payback Tipping Point for Solar Hot Water

January 22nd, 2010 by  

Solar hot water is finally getting the respect it deserves in California. In some well designed and much awaited legislation, the California Public Utilities Commission has decided, after a lengthy cost-benefit analysis, to go ahead with a nearly statewide program to provide financial incentives to encourage the rapid development of the solar hot water industry in California. For most utility customers, this will bring costs down by 51% to 60%, into 3 year payback territory.

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The measure will bring major greenhouse gas reductions to the state, because all buildings that use the sun to preheat 55 degree city water to about 90 degrees before it gets to the tank; can reduce their natural gas use 25% to 90% with solar hot water. And with these incentives, it becomes cost-effective right away.

Californian customers of the state’s three biggest utilities can now get a 30% rebate for solar hot water. If they add the rebate to the new 30% Federal tax credit (signed into law with the Obama administration’s American Recovery and Reinvestment Act in 2009) they are looking at 60% (or if the tax credit is on the after rebate cost – 51%) off a technology that is not only very effective, but is not that expensive to begin with.

Solar hot water for a typical house is between $4,000 and $7,000, so even with a $1,010 limit, after the 30% tax credit and the 30% rebate, a homeowner could wind up paying only $2,000 to $3,500 to get a greatly reduced carbon footprint and utility bill forever.

Apartment owners get a higher limit; up to $500,000 to defray 30% of the upfront cost of the larger (therefor more expensive) systems that multi-family commercial buildings need to heat water. Commercial buildings would get up to $250,000 off (daytime hot water needs in offices are not as high as when lots of people are living in a building).

This is an incentive that is perfectly designed to trip the tipping point to jump-start a solar hot water industry. It has been commonplace among solar industry professionals that there must be a 3 year payback for large building owners to make any investment, regardless of how much their long term savings are; and in this economy, that position has only hardened.

Despite the fact that solar hot water systems can save literally millions of dollars for apartment owners over 20 years compared with continuing to pay for natural gas, many apartment owners have been loathe to invest long term, and unwilling to wait longer than 3 years for payback to get permanently cheap hot water with a low carbon footprint.

The 30% Federal tax credit got payback to 6 years. This does the rest.

By combining the 30% Federal tax credits with this new 30% California rebate, apartment owners would see break-even very quickly. To sweeten the investment, the 30% tax credit is also available as a cash grant for businesses that owe no tax this year, because the economic apocalypse last Fall felled any profits.

Because this tipping point is now reached, this rebate could create a real boom for Californian green jobs, and these are jobs that many unemployed Californians already know how to do. Solar hot water installations require the skills that plumbers and electricians already have, and construction is currently suffering a 17% unemployment rate.

Most solar estimators agree that solar hot water provides the most cost-effective greenhouse gas reduction pound for pound yearly between solar panels and solar hot water. This even more true when it is used for radiant floor heating, not just hot water. Solar companies do custom calculations of savings over time for free.

Tripping the magic 3 year payback math that makes it commercially acceptable should have an enormous impact in the most populous state in the US.

Related stories:

Feinstein Expands Solar Tax Credit to Include Public Swimming Pools

Consider a New Measure of Carbon Footprint

Image: Sun Light & Power

Source: Todd Woody at NYT

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About the Author

writes at CleanTechnica, CSP-Today and Renewable Energy World.  She has also been published at Wind Energy Update, Solar Plaza, Earthtechling PV-Insider , and GreenProphet, Ecoseed, NRDC OnEarth, MatterNetwork, Celsius, EnergyNow, and Scientific American. As a former serial entrepreneur in product design, Susan brings an innovator's perspective on inventing a carbon-constrained civilization: If necessity is the mother of invention, solving climate change is the mother of all necessities! As a lover of history and sci-fi, she enjoys chronicling the strange future we are creating in these interesting times.    Follow Susan on Twitter @dotcommodity.



  • Captain Obvious

    Someday people will do this without tax subsidies.

  • Captain Obvious

    Someday people will do this without tax subsidies.

  • Susan Kraemer

    Agree about KISS, but using fire to boil water to make steam to turn turbines is a simple 18th century tech too – what coal power stations use to make electricity from coal (after destroying mountains and states to get at it, that is).

    Re 3rd world, yeah, and China now dominates the market for solar hot water manufacturers per Renewable Energy World. But it is widespread in Israel and Australia, too, that have been 1st world nations longer than China.

  • Susan Kraemer

    Agree about KISS, but using fire to boil water to make steam to turn turbines is a simple 18th century tech too – what coal power stations use to make electricity from coal (after destroying mountains and states to get at it, that is).

    Re 3rd world, yeah, and China now dominates the market for solar hot water manufacturers per Renewable Energy World. But it is widespread in Israel and Australia, too, that have been 1st world nations longer than China.

  • MD

    Most of the research for these heaters came from people heating their pools… silly yes.

    We make fun of people in 3rd world countries yet most heat their water this way…

    None of this stuff has to be hard, KISS rule wins every time.

  • MD

    Most of the research for these heaters came from people heating their pools… silly yes.

    We make fun of people in 3rd world countries yet most heat their water this way…

    None of this stuff has to be hard, KISS rule wins every time.

  • Susan Kraemer

    Apartments and commercial buildings (and homeowners) qualified as of last Fall for the Federal 30% tax credit, which (for businesses)would be an upfront cash grant if you had no taxes owed (was snuck into the bailout bill) and as long as you did not use it for the apartment swimming pool (the pool exclusion is dumb. Pools use half the gas, and it goes to waste. Most are ornamental.)

    However at the state level, except for a little pilot program in LA, solar hot water got no California Solar Initiative rebate, like solar PV does, through your utility.

  • Charles

    This sounds great. I would love to see more solar thermal in this country.

    I’m not sure most apartments qualify for the federal credit. At least they didn’t before, but I haven’t followed all the changes recently. I’m glad to see California explicitly includes them.

  • Charles

    This sounds great. I would love to see more solar thermal in this country.

    I’m not sure most apartments qualify for the federal credit. At least they didn’t before, but I haven’t followed all the changes recently. I’m glad to see California explicitly includes them.

  • Susan Kraemer

    Apartments and commercial buildings (and homeowners) qualified as of last Fall for the Federal 30% tax credit, which (for businesses)would be an upfront cash grant if you had no taxes owed (was snuck into the bailout bill) and as long as you did not use it for the apartment swimming pool (the pool exclusion is dumb. Pools use half the gas, and it goes to waste. Most are ornamental.)

    However at the state level, except for a little pilot program in LA, solar hot water got no California Solar Initiative rebate, like solar PV does, through your utility.

  • John

    Fantastic news. It sounds as though California is heading down the path of taking solar hot water and solar electricity generation seriously.

  • MD

    “Everything old is new again” – Right back to square one for California.

    Do an online search for “Climax Solar Water Heaters”

    Better yet, look for:

    The Integral Passive Solar Water Heater Book

    Breadboxes, batchers, and other types of simple solar water heaters. By David A. Bainbridge – The Passive Solar Institute.

    ISBN 0-933490-03-8

    Have fun!

  • MD

    “Everything old is new again” – Right back to square one for California.

    Do an online search for “Climax Solar Water Heaters”

    Better yet, look for:

    The Integral Passive Solar Water Heater Book

    Breadboxes, batchers, and other types of simple solar water heaters. By David A. Bainbridge – The Passive Solar Institute.

    ISBN 0-933490-03-8

    Have fun!

  • John

    Fantastic news. It sounds as though California is heading down the path of taking solar hot water and solar electricity generation seriously.

  • “Californian customers of the state’s three biggest utilities can now get a 30% rebate for solar hot water. If they add the rebate to the new 30% Federal tax credit (signed into law with the Obama administration’s American Recovery and Reinvestment Act in 2009) they are looking at 60% off a technology that is not only very effective, but is not that expensive to begin with.”

    Now correct me if I’m wrong, but typically utility rebates are applied at time of purchase, reducing expense directly and the 30% federal tax rebate is usually taken from the out of pocket expense. If it is calculated that way, it would not be a combined value of 60% – more like 51%. Good, yes, but not as good.

    [Hasty post – Fixed that mistake, thanks for catching it! Susan]

  • “Californian customers of the state’s three biggest utilities can now get a 30% rebate for solar hot water. If they add the rebate to the new 30% Federal tax credit (signed into law with the Obama administration’s American Recovery and Reinvestment Act in 2009) they are looking at 60% off a technology that is not only very effective, but is not that expensive to begin with.”

    Now correct me if I’m wrong, but typically utility rebates are applied at time of purchase, reducing expense directly and the 30% federal tax rebate is usually taken from the out of pocket expense. If it is calculated that way, it would not be a combined value of 60% – more like 51%. Good, yes, but not as good.

    [Hasty post – Fixed that mistake, thanks for catching it! Susan]

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