Payback Period of Solar Water Heating System

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Payback Period of Solar Water Heating System

I have four questions about a SWH System:

How is the Payback Period calculated?

What is the difference between the LCOE Nominal and LCOE Real?

Why isn't the difference between the Auxiliary Without Solar number and the Auxiliary With Solar number be equal to the Annual Energy Saved number?

Is the schematic diagram on which you base this system equal to Figure 10.21 in the book Principles of Sustainable Energy by Frank Kreith and Jan F. Kreider?

Paul Gilman

The payback period, real and nominal LCOE, and solar water heating outputs are described in SAM's Help system. I will explain the metrics below, but you can read more detailed descriptions in Help.

1. The payback period is the year that the cumulative payback cash flow switches from negative to positive, where:

Payback in Year Zero = Total IBI - Total CBI - Total Installed Cost

Payback in Year n>0 = After Tax Cash Flow in Year n + Debt Interest Payment in Year n × (1 - Effective Tax Rate) + Debt Repayment in Year n

After Tax Cash Flow in Year n>0 = After Tax Cost in Year n + Energy Value in Year n × (1 - Effective Tax Rate)

After Tax Cost in Year n>0 = Operating Income + State Tax Savings + Federal Tax Savings + Total PBI - Debt Total Payment

The cumulative cash flow for each year is the sum of the current year's payback cash flow and the previous year's cumulative payback cash flow.

2. The real LCOE is a constant dollar, inflation-adjusted value. The nominal LCOE is a current dollar value.

3. The annual energy saved for the solar water heating model is:

Annual Energy Saved = ( Aux Without Solar - Aux With Solar - Pump Power ) × Availability

4. I do not have a copy of the book you mention. Can you attach an image of the schematic to a reply to this forum topic?

Best regards,

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