Robert Heinlein coined the acronym TANSTAAFL (There Ain't No Such Thing As A Free Lunch) in the book The Moon is a Harsh Mistress (see addendum below) . You can pick out the concept in various modern expressions such as cost/benefit analysis, proactive risk assessment, & risk management. Yet all the expressions embody that same basic principle, TANSTAAFL, that Heinlein coined more than forty years ago. As I've said in the past, as an engineer I have a bone deep appreciation of this phrase, it's almost on the order of a fundamental physical law. Certainly though it is an economic law in the construction industry. Nothing is ever free and any decision you make in building design is about tradeoffs.
How it Works, Very Briefly
Solar collectors for domestic hot water come in two flavours, Evacuated Tube Collectors (ETC's) and Flat Panel Collectors (FPC's). Evacuated Tube Collectors are about twice the cost of Flat Panel Collectors but enjoy greater efficiency particularly in zones with snowy climates. Solar energy is collected on the roof and rejected to the hot water tank via a heat exchanger with a solar loop and a hot water tank loop. Two small circulation pumps drive water through the heat exchanger based on the water temperature in the two loops. Generally in cold climates the solar loop will be charged with glycol to prevent freezing or drained during the winter months. There are various other ways to do this but this is a basic example that illustrates the concept.
Is Solar Energy Free?
On first glance solar collectors seem like free energy, free hot water seems to violate my firmly espoused principle of TANSTAAFL. Let's apply the TANSTAAFL concept to solar pre-heat systems for domestic hot water (translates to solar panels on your roof to heat hot water for your home).
Where's the cost of a solar hot water system, well you have to buy the system which is an upfront capital cost and ETC's are about twice the cost of FPC's, plus you still need a second source of heat since in colder climates and on cloudy days you can't depend on achieving comfortable water temperatures by solar collection alone. However for the purpose of comparing solar collection to the more normal type of domestic water heating the second source of heat is a sunk cost since you need to provide domestic water heating regardless of the method you choose. The only additional cost will be the capital cost of the solar system & running the two circulation pumps which is not all that great. As a side note, if your house has in floor radiant heating then you can actually use the boiler to heat domestic hot water and realize some cost savings.
As best I can determine from the various manufacturers it will take about 7 years for the savings to pay for additional capital cost of the system, I've also seen figures as high as 14 years. The life cycle of the system is on the close order of 20 years. None of the figures I researched included interest paid on the original system since most building owners have to finance the construction of their building.
The hidden costs of free solar energy are in the increased capital costs of purchasing and installing a solar hot water system. The average family of four spends about $30 per month on natural gas for a hot water tank. To install a solar hot water system is going to cost about $5000 in new construction and more in existing houses. Assuming a cost savings of 75% over six months (summer) and 50% over six months (winter) we will see a monthly average savings of 62.5%. That translates to saving $18.75 per month using a solar collection system supplemented with gas hot water heating to achieve useful temperatures. Do the math, I got just over 22 years to payoff the system. But above I noted that the manufacturer's are saying 7 years. Why the discrepancy? Government rebates are factored into the figures that the manufacturers publish. I look at it differently, the government is going to take money out of my pocket and put it back into my pocket so that I can hand it over to a manufacturer. Sorry the figure of 22 years stands in my analysis. Twenty-two years you should note is right on the close order of the lifetime of the system, I don't see much savings there.
As a side note, one of the problems with rebates is that it doesn't encourage manufacturers to do any research into improving solar collectors to the point that they are actually cost competitive with conventional systems. I prefer to see things with the cold clear light of reason without the distorting busybody finger of government. Another example of green-washing marginal technologies to make them mainstream and it's our own government doing the green-washing. That's not to say that you shouldn't take advantage of the rebates nor fail to let them influence your decision, but see things clearly and realize that the technology has been green-washed.
Addendum (19 Aug 2009)
The analysis assumes north temperate weather conditions (snowy conditions in the winter).
RA Heinlein didn't coin the term TANSTAAFL according to a few internet sources. RAH certainly popularized the expression in this form among the Sci-Fi crowd anyway. I've corrected the attribution in the sidebar accordingly but I've left the error in the original post above.
You shouldn't erase your errors just acknowledge them an move on. No revisionist history here. Well I may have corrected some spelling, punctuation and grammatical errors without acknowledgment but that's minor stuff.
Addendum (24 Aug 2009)
I visited with my father on the weekend and we talked about solar hot water heating, which he is likely going to install. Dad made a good point in favor of installing solar hot water heating, which bears repeating here. Dad is approaching retirement and retirement means a reduced income, given that fact, using solar hot water heating to reduce his costs improves his cash flow. Cash-flow is more important during retirement than the invested capital is. So in a situation in which cash-flow is more important than capital some of these green-tech's make cents.