Solar water heating systems usually cost more to purchase and install than conventional water heating systems. However, a solar water heater can usually save you money in the long run.

How much money you save depends on the following:

• The amount of hot water you use;
• Your system's performance;
• Your geographic location and solar resource;
• Available financing and incentives;
• The cost of conventional fuels (natural gas, oil, and electricity);
• The cost of the fuel you use for your backup water heating system, if you have one;

Solar water heaters - also called solar domestic hot water systems - can be a cost-effective way to generate hot water for your home. They can be used in any climate, and the fuel they use - sunshine - is free.

On average, if you install a solar water heater, your water heating bills should drop 50%–80%. Also, because the sun is free, you're protected from future fuel shortages and price hikes.

If you're building a new home or refinancing, the economics are even more attractive. Including the price of a solar water heater in a new 30-year mortgage usually amounts to between $13 and $20 per month. The federal income tax deduction for mortgage interest attributable to the solar system reduces that by about $3–$5 per month. So if your fuel savings are more than $15 per month, the solar investment is profitable immediately. On a monthly basis, you're saving more than you're paying.