Are Solar Water Heaters Worth It? Costs, Savings and Payback Math

Water heating eats about 18-20% of a typical US home’s energy, roughly $600 a year.

That figure comes from the SolarReviews cost guide, as of March 2024, and it’s the bill a solar water heater goes after.

So are solar water heaters worth it for your home?

Here are the real prices, the payback math most guides skip, and when a heat pump or panels win instead.

When Is a Solar Water Heater Worth It?

A solar water heater is worth it when you live somewhere sunny, have an unshaded roof and use a lot of hot water. Rheem, which sells both solar and heat pump models, says owners in sunny climates such as Arizona, Florida and Nevada “win at saving year around.”

That’s because solar water heating only pays when the sun does the work.

Here’s a quick checklist:

• You live in a sunny state with mild winters.
• Your collectors would face the sun with little or no shade.
• You’re replacing an electric water heater.
• You plan to stay long enough to reach payback.

If you tick all 4 boxes, a solar water heater is a strong investment.

How Much Does a Solar Water Heater Cost?

A solar water heater costs $2,500 to $9,000 installed in the US, according to installed cost data from SolarReviews. Your system type and climate decide where you land.

A passive batch system for warm climates runs $2,500 to $4,500.

An active glycol system for cold climates, with vacuum tube collectors and a 150-gallon storage tank, runs $7,000 to $9,000.

The difference? Passive systems use no pump, while active ones pump fluid between the solar thermal collectors and the tank.

Since the job mixes rooftop work and plumbing, installing a water heater yourself carries real risks here.

How Much Does a Solar Water Heater Save Per Year?

A solar water heater saves $150 to $450 a year and cuts water heating energy consumption by 50-80%, depending on the climate zone, SolarReviews reports.

Australian maker Solahart says the biggest bill savings come when a solar unit replaces an electric water heater.

Manufacturer energy savings claims run higher, too, and the same maker says its systems can “save up to 65% on your energy consumption.”

That figure comes from modeling its own 302L system against an electric heater.

What Is the Payback Period for a Solar Water Heater?

A solar water heater pays for itself in about 6 years at best, based on the lowest price and top savings SolarReviews reports. Mid-range systems on average savings take far longer.

Here’s the math:

• Best case: $2,500 ÷ $450 a year = about 6 years.
• Middle of both ranges: $5,750 ÷ $300 a year = about 19 years.
• Worst case: $9,000 ÷ $150 a year = 60 years.

That spread is huge.

So run your own numbers. Multiply your yearly water heating cost by 0.5 and by 0.8, then divide your installer’s quote by each result to get your payback range.

Is There Still a Federal Tax Credit for Solar Water Heaters?

No, the federal residential solar tax credit has expired, as the SolarReviews incentive update confirms. Older pages still quote a 30% credit, so leave it out of your budget.

Utility rebates still exist in some areas. For example, Hawaii Energy offered $750 rebates to people who put in a solar water heater.

Here’s what to ask your utility: “Do you offer rebates for solar or heat pump water heaters, and which models qualify?”

Is a Solar Water Heater Better Than a Heat Pump Water Heater?

A heat pump water heater is the better pick for most homes outside the Sun Belt, at $3,600 to $6,500 installed, per Rheem. A heat pump pulls heat from the air, so it works in any weather.

In most northern states, where sun is short, the company says an energy-efficient heat pump water heater cuts power use by 50 to 70% a year.

In its own verdict, Rheem calls the heat pump “the most cost-effective and practical of the two,” with solar winning in sunny climates.

Should You Get Solar Panels or a Solar Water Heater?

Solar panels paired with an electric water heater are the most cost-effective option for most homes, according to SolarReviews. The panels also feed electricity to the rest of your house, cutting what you pull from the power grid.

Solar water heaters still win on efficiency. Their collectors turn up to 80% of sunlight into heat, versus about 20% for photovoltaic panels.

So they need much less roof space than a full solar system.

In other words, go with solar thermal when roof space is tight. Otherwise, go with photovoltaic panels plus one of these 50-gallon electric water heaters.

Do Solar Water Heaters Work in Cold or Cloudy Climates?

Solar water heaters work in cold weather with an active, freeze-protected glycol system, which SolarReviews prices at $7,000 to $9,000. Passive batch systems are built for warm areas without freezing winters.

Even partial shade can reduce output by 20-40%.

Every system also needs a backup for long cloudy spells, such as a gas tank or an electric tankless water heater.

Freezing weather can reach that backup tank too, so learn how a water heater can freeze and how to stop it.

What Are the Disadvantages of a Solar Water Heater?

The biggest disadvantages of a solar water heater are upfront cost, a required backup heater and a heavy roof load. Some batch-style tanks, called integral collector storage, weigh over 400 pounds.

Your roof can take a hit, too. Rheem notes wood roofs can rot over time and slate roofs can crack during installation.

Upkeep adds up as well, since the panels need regular cleaning and the pump and valves need service now and then.

What Size Solar Water Heater Does a Family of Four Need?

A family of four using 60-80 gallons of hot water a day needs 40-80 square feet of collector area and an 80-gallon tank, SolarReviews advises.

Check how often your current tank runs out. If it’s often, size toward the top of that range.

So, Are Solar Water Heaters Worth It for You?

A solar water heater pays off in sunny homes that use lots of hot water and now heat it with electricity.

This week, get one solar quote and one heat pump water heater quote, then run the payback math above on both.