A family is considering replacing their hot water heater. A conventional electri

Question

A family is considering replacing their hot water heater. A conventional electric hot water heater is $200 including instalation. his brother and his wife now move in and they estimate that a family of four uses an average of 300 liters of hot water a day, which will require $350 worth of electricity each year. The installed cost of small solar water heater system is $1,400 and will cost $60 per year on the average to operate(electricity to pump the water through the panels and to augment solar heating on cloudy days. Both systems will have a $0 salvage value at the end of their useful lives. Based on a MARR of 12%, determine how long the soalr system must operate to make it as economical as the electric system.

Explanation / Answer

Time is not known. Let time be n years

So, (1/(1+0.12))^n * 290 = 1200

or, (1/(1+0.12))^n = 1200/290 = 4.137

Using trial & error method, in the table of PV factor of 12%, and culumative value at 6 years comes at 4.111 and at 7 years 4.564.

So, during 7th year, both the systems are equivalent.

Conventional Heater Solar water heater Incremental Outflow Initial investment $                200.00 $          1,400.00 $             1,200.00 Annual Outflow $                350.00 $               60.00 $               (290.00) MARR @ 12% 12%

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