In sunny, warm locations, where freeze protection is not necessary, a batch type solar hot water heater can be extremely cost effective. In higher latitudes, there are often additional design requirements for cold weather, which add to system complexity. This has the effect of increasing the initial cost (but not the life-cycle cost) of a solar hot water system, to a level much higher than a comparable hot water heater of the conventional type. When calculating the total cost to own and operate, a proper analysis will consider that solar energy is free, thus greatly reducing the operating costs, whereas other energy sources, such as gas and electricity, can be quite expensive over time. Thus, when the initial costs of a solar system are properly financed and compared with energy costs, then in many cases the total monthly cost of solar heat can be less than other more conventional types of hot water heaters (and also in conjunction with an existing hot water heater). At higher latitudes, solar heaters may be less effective due to lower solar energy, possibly requiring dual-heating systems. In addition, federal and local incentives can be significant.
As an example, a 56 ft.2 solar water heater can cost US $7,500, but that initial cost is reduced to just $3,300 in the US State of Oregon due to federal and state incentives. The system will save approximately US $230 per year, with a payback of 14 years. Lower payback periods are possible based on maximizing sun exposure. As energy prices rise, payback periods decrease. In cooler locations, solar heating used to be less efficient. Usable amounts of domestic hot water were only available in the summer months, on cloudless days, between April and October. During the winter and on cloudy days, the output was poor. Independent surveys have shown that modern systems do not suffer these limitations. There are cases of households in cool climates getting all of their domestic hot water year round from solar alone. Systems have been show to efficiently work as far north as Whitehorse, Yukon (latitude of 60 B 43' N ).
The installation costs in the UK used to be prohibitive, on average about £9,000. This is reduced in more recent years to £3,000, with payback period reduced, with the rise in the gas price, to 12 years. As energy prices rise, payback periods shorten accordingly.
According to ANRE (a Flemish energy agency, subsidised by the Flemish or Belgian government, a complete, commercial (active) solar hot water system composed of a solar collector (3-4 m²; this is large enough for 4 people), pipes and tank (again large enough for 4 people) costs around 4000 euro. The installation by a recognised worker costs another 800 euro. Electrabel's home magazine Eandismagazine stated in 2008 that a complete system (including 4m2 of solar collectors and a supply barrel of 200-240 liters) to cost 4500 euro. The system would then pay back itself in 11 years , when the returns are weighed off against a regular electric boiler. Calculation was as follows: a saving of 1875 kWh (which is 50% of the energy requirements in domestic hot water production) x 0.10 euro/kWh = 187, 5 euros. This multiplied by 11.6 years made 2175 euros (or the cost of the system with deducted regional tax benefits).
In Australia, the cost for an average solar hot water system fully installed is between $1,800 and $2,800. This is after tax rebates (there is a federal rebate, some state rebates and Renewable Energy Certificates). According to the Department of Environment and Water Resources, the yearly electricity savings are between $300 and $700. This brings the payback period to under 2 years in the best case and under 10 years in the worst case. Easy Being Green has a program available where consumers can acquire a system for free (with government rebates) excluding the cost of installation.
Source: Wikipedia (All text is available under the terms of the GNU Free Documentation License)
For More Information: Solar Hot Water: K-12 Projects, Experiments & Background Information