The Best Way To Heat Your Water – Solar PV Or Solar Thermal?

From flat plate thermal systems to heat pumps and solar PV diverters,  in this video Finn takes a look at your solar hot water options.

Video transcript:

Did you know that there are two fundamentally different ways to generate solar energy and therefore two fundamentally different types of solar panel?

To keep it simple, I’m going to call them solar PV and solar thermal. PV stands for photovoltaic, which is the conversion of light into electricity. When most people talk about solar, this is what they mean – panels that generate electricity.

solar pv panels

Flat Plate And Evacuated Tube Solar Hot Water

Solar thermal panels on the other hand, do not generate any electricity at all. They simply use the heat from sunlight to warm up water inside the panels, and they come into types – flat plate and evacuated tube.

Flat plate systems look similar to solar PV panels, except there are about three times as thick. An evacuated tube system looks very different to both flat plate and solar PV.

flat plate and evacuate tubes

“I get it,” I can hear you say, “I should put both solar PV and solar thermal panels on my roof and get all my electricity and hot water from the sun. ”

Actually no, and I say that for economic reasons. Solar thermal used to be the cheapest form of solar water heating, but now since solar PV prices have plummeted, solar thermal has been dethroned.

To put things into perspective, the cheapest form of solar thermal is a flat plate system. That’s going to run you about $4,000 to put on your roof – and all it will do is heat your water. Meanwhile, a 6.6 kilowatt solar system these days costs you around $6,000 and could offset the electricity usage of your entire house, including your hot water if it’s electric.

So the cheaper options for solar water heating are, these days, powered by electricity – specifically solar electricity. I recommend either heat pump or diverted PV systems. Let’s look at them in a bit more detail.

Heat Pumps

A heat pump system kind of looks like a small air conditioner hooked up to a traditional hot water tank. You can also find some newer, sleeker units that look like this one.

solar heat pump

Heat pumps extract heat from the air and transfer it into the water. Now, you may be wondering why it’s considered a form of solar water heating if the sun doesn’t seem to be involved. Well, as the heat in the air originally came from the sun, you can think of it as a solar heat pump.

Most importantly, you can claim STCs otherwise known as the solar rebate, on a heat pump, which brings their cost down considerably. An entry level model will set you back about $2,000 fully installed. If you live outside Queensland or the tropics, then a modern heat pump is about as efficient as flat plate solar thermal hot water, but it doesn’t require gas to boost them in winter. A good heat pump is as quiet as a good quality air conditioner and will work well even in freezing temperatures, albeit with a reduced efficiency.

A heat pump is also a good choice if you have a generous feed in tariff, say over about 15 cents a kilowatt hour ; as its efficiency leaves more electricity available for export.

If you buy a heat pump, it’s important to try and run it off solar PV as much as possible. That means two things. One, running it in the day, and two, having enough PV to power it over and above your other appliances. I’d say at a minimum you should have 6.6 kilowatts of solar PV.

Solar PV Diverter

Now, no matter where you live in Australia, whether it’s in the tropics or in Tassie, there is a potentially even cheaper upfront option for heating water with the sun; provided you buy it at the same time as your new solar PV system. This is known as a diverted PV solar hot water system. This is the cheapest in terms of upfront costs, most reliable and lowest maintenance system, for heating hot water from the sun.

pv diverters
If you have it put in at the same time as your solar panels, it could only cost you about a thousand dollars extra.

A diverted PV system uses an intelligent control box to divert “spare” solar electricity from your solar PV panels into a conventional hot water tank. So, electrically it is about four times less efficient than a heat pump, but many people are cool with the low efficiency if it only uses solar electricity. This “spare” electricity would have otherwise been sold to the grid for a feed in tariff.

If your self-consumed solar is more valuable than your exported solar, it’s more valuable to use that solar to heat your water. But, if you have a cheap off-grid hot water tariff that is lower than your feed in tariff, diverted PV makes no economic sense. You may as well export the solar and pay for the hot water heating with that credit.

“But Finn,” I hear you cry. “If I’m powering my hot water as well won’t I need extra solar panels?”.

Yes, you will. But because of the diverter’s intelligent controller, which scavenges spare solar energy whenever it’s available, you might get away with only 1.5 kilowatts of extra panels. Meaning a 6.6 kilowatt system is the minimum size you should be aiming for – 8 kilowatts plus is probably better.

So, to summarize, if you use gas to heat your water and you want to reduce this cost by around 70 to 80% you should seriously consider transitioning to an all-electric home. The most efficient way to heat your water with solar electricity is to use a heat pump. But if you don’t want to pay thousands up front for a heat pump, a cheaper option is to get a PV diverter installed. And that’s assuming you have plenty of spare solar electricity, and assuming you’re feed-in tariff is less than your hot water tariff.

Discover everything you need to know about solar energy for your home in Finn’s book, The Good Solar Guide – free to read online.

About Michael Bloch

Michael caught the solar power bug after purchasing components to cobble together a small off-grid PV system in 2008. He's been reporting on Australian and international solar energy news ever since.


  1. Daniel Debreceny says

    Lets assume Solar Fit of 10.2c, and Off-Peak rate of 18c, and daily average HWU consumption of 8kW/h, and 15c daily charge day for OP1 controlled load.

    8x 10.2c FIT = $0.816
    8x 18c = $1.44 + 15c = $1.4415
    Price differential of: $0.6255 / day
    365 days per year @ 62.55c = $228.3075 per year saving.
    If it costs you $1,000, then payback of 4+ year is pretty poor. You’d be better off just installing an extra 1.5-2kW of solar on your roof instead, and leave the HWU as it is.

    If your Fit is 15c, or even 22c in NSW, then that payback is 24c per day & minus 32c per day. That’s a hard sell, even with a 5 year warranty.

    Compared to a reliable $2500 with STCs stiebel eltron/quantum heat-pump or premium Sanden/Reclaim which are environmentally friendly because they just use less electricity, Heat-pumps always have a positive payback, although it may be longer.

    For the people passionate about environmental issues, rather than just basic financial, the heat-pump during the middle of the day reduces energy demand (and fossil fuels) indirectly through lower usage, and allowing additional solar export when it is needed most (during the day), but particularly overnight when fossil fuels dominate generation.

    • I don’t see how a heat pump always has positive payback.

      We use 5.5kWh/day for hot water, on average.

      FIT 10.5c/kWh, controlled load 11.5c/kWh, no extra daily fee.

      So there’s little point investing in expensive diversion of solar PV as the controlled load tariff is comparable.

      Even if the tariff differential meant it was sensible to divert solar PV to HW, investing in expensive “smart” diverters is not all that great an investment versus using a simple timer to heat the tank during peak insolation hours. Just doing that will achieve the vast bulk of such savings, for a vastly lower up front investment.

      As for a heat pump, if it reduces our hot water energy demand from 5.5kWh/day to ~1.5kWh/day, then it can at best save us 46c/day or ~$168/year.

      A quality heat pump installed will cost over $3k for us (after rebates).

      For a $3k up front investment there’s not an ice cube’s chance in Hades that investing in a heat pump HW makes financial sense. It’s a payback approaching 20 years. The unit will fail before payback.

      I really like the idea that the increased efficiency = fewer emissions overall, and that’s worth some premium but the price to achieve it is way too high.

      • Thomas Waterhouse says

        Hi Michael, I’ve previously read a blog here about concerns with the reliability of heat pump systems, and they do need to be reliable as the pay back is often fairly long. Are you more confident about their reliability these days?

  2. You say “If you live outside Queensland or the tropics, then a modern heat pump is about as efficient as flat plate solar thermal hot water…” – what about for those of us who DO live in the tropics – how does the equation change? Also, if we already have flat-plate or evac on the roof, how does replacing it at EOL compare to putting in a new unit?

    • Ronald Brakels says

      Generally speaking, evacuated tube solar hot water isn’t worth it in the tropics or subtropics because it doesn’t get cold enough for it to be worth the extra expense. Flat plate solar hot water will do. But the most cost effective way of heating water is usually solar PV plus a standard hot water system. This is because the cost of solar PV has fallen a long way. olar PV plus a heat pump is more energy efficient, but because people usually don’t use a lot of hot water in the tropics it will usually make more sense to put the money into getting a larger solar system. However, people may want a solar hot water system anyway because they can’t easily install more solar PV, they are export limited, they want the advantage of still having hot water during a blackout, or for other reasons.

      • Yes, most cost effective way, and probably also the simplest, is usually solar PV plus a standard hot water system. I’m on controlled tariff, hence I use a diverter. (about $450 extra if installed with PV system)

        The more complicated ‘smart diverters’ don’t really seem worth the trouble of installing to me

        Every time I do sums on heat pump, evacuated tube etc HWS, I still find that the economics don’t stack up.

        Is worthwhile to also replace shower heads with lower flow rate per min ones, you do use less HW water. Keeping water consumption down is steadily becoming an evermore important issue. Is a pretty straight forward DIY job to replace shower heads, normally you just need to unscrew the existing head, and screw on the new one (remembering to use nylon tape to prevent minor leakage).

        Family size is a factor. 2 person household would probably average around 3.5 kwh per day on hot water heating – including laundry, dishwashing, showers etc.

  3. We have both flat plate collectors (with overnight electric heating), and a PV system.

    The HWS has been on our roof for 21 years, and needs no night time top ups for about 5 months of the year (in Victoria). Given the existing investment it probably doesn’t make any sense for us to change this over, but I can see it would make sense for new builds.

    • Steve Bird says

      Diverters will become more compelling when electric cars become common place.

      Also note that recent firmware upgrades to newer Fronius inverters mean that technically you dont need the OhmPilot to control loads, just the in built Datamanager. Ive heard web comments that the load capacity is limited and that impacts the use for water heating.

      ….But ive had little luck finding solar companies with any experience with the Datamanager. A bit frustrating.

      • A hot water diverter does a lot more than switch a load on and off. If chops up the 230V AC to create a square wave that can deliver a granular amount of power to the water heater’s DC element. So you get fine grained control, not just On/Off Control (also called BANG-BANG control).

  4. Wayne Poulsen says

    You missed the Sunflux option.
    I have one installed .
    1200w of panels connected offgrid via the Sunflux unit(1kw) to the lower (main) element in a 250l electric storage unit. The upper (top up) element is connected to the grid. This effectively adds 1 kw/1.2kw to my 5kw/6.6kw system without financial penalty, also removes cncern about pv system having enough capacity to avoid using grid power.
    We currently have sufficient hot waterwith the mains topup switched off.
    I am afraid I cannot offer accurate costing as I have used free secondhand panels (plenty out there) but the unit cost was about $800(2019) plus installation costs (lost in a bigger bill).
    New panels installed by registered offgrid installer attract credits.

    I like it.

  5. We have an Apricus evacuated tube hot water heater and 10 kW of PV. We get free hot water and a cheque from the energy provider for 9 months of the year. For the winter months we pay a few (small) dollars and have to boost the hot water in the storage tank.
    I had the heating element in the storage tank changed to a 2400 watt element so that I could utilise excess PV electricity in winter but after 12 months I think I should have gone for the 1800 watt element and boosted over a longer period to reduce the energy from the grid on overcast days.
    It all works. Given retailers are pushing down what they pay for your electricity this is a no brainer and the final piece in this jigsaw puzzle is battery storage. That’ll do ’em in Tangle…….. I’ll be cracking open the champagne when the day arrives.

    • Ian Thompson says

      Yes Michael – anyone can get a cheque back from their DNSP if they are willing to tip enough wheelbarrows full of cash into their system!

      To me, saying you pay no bill, or get cheques back, is totally meaningless if the DCF on your capital outlay swamps your perceived savings.

      I’d be much more interested in the ROI – or payback period.

      But I do agree that downsizing the heating element will allow more self-use of PV – up to a point – obviously if too small you may have to draw power when the panels are not producing. Here in WA, we have so far this season have had to use our old flat-plate thermal solar booster for a total of only 4 hours (manually switched) – and this was done when PV was producing enough excess (our FiT is only 7 c/kWh).

  6. Hi there,
    We were planning on getting a heat pump for a new build where we will be solar off grid.
    There will be times when solar energy we are producing is low and we won’t have the grid option to heat the water.
    Would you suggest that in this situation, a heat pump is still the best way to go?


    • Ronald Brakels says

      Hi Pauline, Ronald here.

      A heat pump will use considerably less energy than a standard hot water system and so reduce the need to use a generator in winter. The drawback is reliable heat pump hot water systems are expensive. Some people find that expanding expanding their solar capacity and using a standard hot water system is a more cost effective option, but which is best will depend on your individual circumstances.

  7. My basic understanding lead me to change nothing with our recently installed 6.6kw solar with 17c FIT, electric storage water heater on 20c tariff. We cover hot water usage with export.
    We don’t use a huge amount of electricity on the hot water. That may change in winter but the maths didn’t check out on adding a $900 catch power diverted.

    • 17c FIT? Where do you get that?
      The only retailers I saw who offered a high FIT also had high electricity prices. Its a con!

    • Thomas Waterhouse says

      Many people want to heat HW during the day off their solar because it is greener. Most power at night, especially if you are not in SA, will not be a high % environmentally friendly. Yet.
      With a 6.6kw system and if your normal house load isn’t a lot then running HW during the day without a diverter even may rarely exceed your solar production.

  8. Mary-Ann De Hoon says

    Not sure this is the place to ask questions….
    I am currently running an instant gas HW system which I loathe!
    I have a 4.2kw of panels and a 5kw inverter so extra panels is not really a cost effective option.
    Looking at some reviews of Heat Pumps and it seems to me that they are not reliable and expensive to repair?
    Our average usage, for 2 ppl, is 2kw per day and the FIT is 11c
    Would it be worth just getting an electric storage HW system and running it in the middle of the day or off peak?
    All opinions welcome.

    • Ronald Brakels says

      A reliable heat pump system, like a Sanden, should operate reliably for a long time, but unfortunately they aren’t cheap. A standard electric hot water system won’t set you back as much, but will use considerably more energy. If you are only using 2 kilowatt-hours a day you will have a lot of excess solar energy during the day so you can put your hot water system on a timer that switches it on during the day. For two people a standard hot water system with a 1,800 watt heating element will do. Using a smaller heating element means it will be less likely to draw power form the grid during the day and so mostly use power form your solar system. I recommend getting a timer you can easily adjust yourself so you can change the settings if you find yourself running out of hot water.

  9. Bob Johnson says

    Hi Michael. We live on the sunshine coast and are with AGL. Our fit is 20cents and T31 (night rate) is 18.5cents including GST so we are in a good position with a 6.5kW solar system and normal storage hw system . We rarely use the air conditioning and don’t have a pool (except for the Pacific ocean). This last year we have had more than $600 refund. It just seems a bit too generous (but I am not complaining!) and I feel for unit owners and renters who are partly subsidising us. Any comments?

    • Thomas Waterhouse says

      20c isn’t huge, about half of that is them paying you for power going to someone else which is only fair, the rest I would assume is the state government paying extra that yes all taxpayers are subsiding.
      But it isn’t huge, try 60c feed in here in SA for some people. Despite having it I am looking to go from 7.6kw to 25kw solar shortly which will drop my tariff to 15c but makes me feel better about producing at least as much electricity as we use.

  10. Cecilia Kemp says

    Hi. A quick question about the diverted PV system option.

    If we have PV panels installed that produce in excess of what we are using and exporting during the day but our traditional electric hot water system is set to heat during sunlight hours, do you still need a diverted PC system?

    Wouldn’t the hot water system be drawing PV generated electricity straight from the inverter?


    • Ronald Brakels says

      Hi Cecilia,

      With your current set up a diverter probably isn’t worthwhile, as it probably won’t same you much over using a timer. But if your solar system is small and your hot water system has a large heating element, it may be able to come out ahead by getting a diverter if you use a lot of hot water.

    • Thomas Waterhouse says

      The point is you may have a 3kw HW heater and say 7kw of solar, with average house use of say 1-2kw. So during a good day with a timer set during the middle of the day you’ll be fine, it will only use solar. But on a bad winter day you might only produce say 1kw of solar and be paying to import for your HW. If you currently pay standard rates for HW then that doesn’t matter as it costs the same as it does now, but many people pay half or less for HW at night. So it can then cost a lot more to heat it on some bad solar days.

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