Economic aspects are the dominant factor for dissemination of renewable energy systems. This paper is the first comprehensive study of the economic performance (cost and life cycle savings) of solar water heaters in Taiwan (ten locations). The differences in conventional energy savings (electricity, natural gas-LNG or liquefied petroleum gas-LPG), in terms of water use, inlet water temperature, thermal efficiency and global solar radiation, are estimated. The payback period is evaluated using a sensitivity analysis of the major variables, including the initial capital cost, the daily load volume and the fuel that is substituted. Financial attractiveness is dependent upon the proper sizing of a system and the hot water consumption pattern for each household. The solar fraction is another important indicator. An increase in daily load volume per area of solar collectors installed has a beneficial effect on the economic viability. The financial incentives offered by the government of Taiwan are not sufficiently attractive. More effective energy savings are possible in the commercial sector when solar water heaters are used as a pre-heating device. A performance-based subsidy program would be instrumental in expanding this market in Taiwan. The results of this study can facilitate application of solar thermal energy for Taiwan and other countries.
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