With the new power price, solar geysers are almost – but not quite – starting to make financial sense
- Solar geysers save on electricity and cold showers during load shedding – but due to high upfront costs haven't always made financial sense.
- With newly-hiked electricity prices, and more big power price increases already pencilled in, that is changing – but not quite as rapidly as you may think.
- We calculated how much electricity you'll be able to buy over the next five years for the price of a solar geyser, and how much the electricity you save will be worth.
- Unless you have access to cheap money, or you're replacing a burst geyser, it is probably not yet time to rip out the electric one.
With a big electricity price increase hitting municipal users from the middle of this year, and more big price increases already planned for 2020 and 2021, solar geysers are starting to make a lot more financial sense – but not yet enough to replace a working all-electric model.
Installing a high-capacity solar geyser, and financing the entire cost of doing so, remains a serious investment. Over a long enough investment horizon that investment will save money. However, that kind of horizon requires knowing you will be in your home for more than five years (or being sure you can sell your home for a price that includes the cost of the solar geyser) plus taking the risk that your 5-year-warrantee solar geyser lasts the potential "working life" of 15 to 20 years.
Manufacturers and installers have for some time claimed that solar geysers pay for themselves within three to eight years, but that is on the assumption that a household has more than R20,000 in cash lying around, and nothing better to do with it.
Other calculations relied on numerical gymnastics such as idealised use, where families would change their bath and shower times to maximise solar heating of water, or were based on cheaper geysers with tanks too small to be effective.
Factoring in the cost of money, even relatively cheap money, solar geysers do not make quite as much financial sense.
We started our calculations with four different options for switching to solar water heating: buying off-the-shelf geysers from Builders Warehouse, two fully-installed options from Solar Guru and SunTank, and an installed conversion of an existing geyser from 4Solar.
Each option is for a larger-than-usual 300 litre tank, which experience shows holds enough hot water to get a small family through large parts of a Johannesburg year without needing to turn on the electricity to the geyser.
We then worked out the monthly repayment that would be due for each option if it were fully financed over five years at the current prime interest rate. (Existing home owners who have paid off a significant portion of a home loan should be able to borrow at a better rate than that, but the rate for a personal loan or similar will typically be higher.)
Finally, we calculated how much electricity that monthly repayment amount would buy over the next five years, using the current municipal electricity rate in Johannesburg as it is due to escalate over the coming years and a 3% inflation increase in price for 2022 and 2023.
This is what the resulting numbers look like:
Our calculations show that by 2023, the monthly payment on a loan to install a solar geyser today will buy somewhere between 180kWH and 250kWH of electricity.
That is less than you can expect an electricity-fired geyser to use.
How much electricity a traditional geyser users varies wildly from house to house, influenced by everything from the efficiency and installation of the geyser to how hot water is used. But estimates based on actual usage and general data vary between 246kWH and 300kWH per month.
That would mean the solar geyser is cheaper than an electric one – as long as the solar geyser never needs to draw on backup electricity.
As a rule of thumb solar systems are assumed to save around 50% on water heating costs, and real-world testing in South Africa has corroborated that number.
Assuming that a normal geyser uses 300kWH per month, and the solar geyser uses 150kWH per month, here is how much each of our test geysers will cost measured against the monthly loan repayments for each:
This year the cheapest option, the solar conversion, will cost around R150 extra per month, with that cost ratcheting up quickly as you move to more expensive options. That may be a bit high for some people, the benefit of possibly having hot water during load shedding notwithstanding.
Over time the difference in cost dwindles to between R90 and R250 per month.
Although most solar geysers and installations come with a five-year warrantee, their total usable lifespans are estimated at between 15 years and 20 years. Experts also expect electricity prices to exceed current forecasts, which will make solar geysers more attractive than these numbers suggest.
Still, if you assume that the cost of solar water heating systems and installation will decrease in real terms, measured against inflation, it seems worth hanging back on ripping out an existing traditional geyser.
Unless, of course, you can borrow money more cheaply than the prime interest rate, or can kick in an insurance payout after an electric geyser bursts.
For more go to Business Insider South Africa.
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