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Solar and the Insurance Industry

Solar and the Insurance Industry
31-05-13 / Staff Writer

Solar and the Insurance Industry

However, all is not doom and gloom. In addition to the "green geyser" initiative, the country is committed to reducing its emissions growth path by 42% over the next 15 years.

Also, new building regulations stipulate that 50% of a building's hot water supply must be generated by renewable or sustainable energy sources. This means that building plans that have standard geysers or gas fired geysers will not be accepted by municipal planning authorities.

The argument for replacing electrical geysers with a solar water heater or heat pump is powerful as heating water accounts for a high percentage of most household's electricity bills.

Reducing reliance on the grid

Approximately 200 000 geysers a year are replaced by the insurance industry, which makes the industry the highest procurer of geysers in the country. New builds, in comparison, account for approximately 70 000 units per year at present.

In addition to replacing malfunctioning geysers, costs are also incurred by the insurers for the resultant water damage. Should the tank be placed outside, as is often the case with a solar water heater, the risk for resultant damage is virtually eradicated.

Assuming that consumers replacing their traditional geysers can be convinced to opt for an alternative, the local industry could be boosted by some 200,000 units a year. This would go a long way to reducing the homeowners reliance on Eskom's grid, and also save them money well into the future.

The technologies involved

If asked how we get hot water in our homes, most of us would reply"the geyser", and we'd not be 100% incorrect.

A geyser, however, is simply an insulated hot water tank. The water within the geyser can be warmed in three ways: using an electrical resistance element, using a solar collector, or using a heat pump.

What most of us mean, therefore, when answering the question, is that our hot water is warmed by an electrical element.

An electrical resistance element is very basic technology. When it is fitted inside a geyser, the heat it generates is transferred from the element to the water. It is also very light (about 300g), relatively cheap (+-R150) and readily available.

All these factors mean that, should it stop working, it can be easily repaired by just one person, typically a plumber, with minimum fuss. However, it is expensive to run. An electric element in a geyser is typically 3kW, which means it used 3 units of electricity for every hour that this element is on.

A solar water heater (SWH) uses the sun to warm water. It comprises a panel (collector) and a tank (geyser). The collector takes the light (or radiance) that hits the roof, and heats the water with this energy.

The heated water is stored in the geyser. The more hot water the occupants use, the bigger the panel needed to heat the water, and the bigger the tank to hold the larger amount of water used.

It is possible to engineer a SWH to supply 100% of the home's hot water needs. However, because the collector can only work when the sun is shining, it is estimated that most SWHs provide about 70%.

Occupants of the homes will need to use electricity to heat the water when, for example, cloud cover is heavy during the rainy season. They will not be out of hot water on these days as the electric element will take over, provided there isn't a power cut.

However, on the plus side, they should be able to count on hot water during power failures or blackouts.

Plumbers who have undergone the necessary training are able to fit and repair SWH. While the SWH technology is more expensive than an electrical geyser, payback periods can range between 3 to 4/12; years

But, should the homeowner elect to install one when his or her electric geyser fails, the cost will not only be set-off by Eskom's rebate scheme, but also by the additional payment of the insurance company, which will obviously reduce the payback period.

Another energy efficient technology used to heat water is the heat pump. This uses the ambient air temperature to heat water by transferring the heat from the air into the water.
Fridges and air conditioners also use heat pumps, but they have obviously been engineered to move the heat in the opposite direction.

A good and well-sized heat pump system for hot water should save about 70% of the costs of heating water using an element. However, electricity is still needed to run the pump; therefore, if there is a power failure, the water will not be heated.

Both a solar water heater system and heat pump are often backed up by an electrical element. This means that the household will have hot water, even when the energy from the sun or ambient air is not sufficient.

The investment case

So - just how much do you spend on hot water every month? The only way to know this is to measure. An average bath takes about 100 litres of water while showers vary in water usage; some use as much as 25 litres per minute, and others as little as 8.

The only way you will really know is to measure. Measuring baths is simple – length x breadth x depth. For a shower, hold a bucket under the shower and let it run for 15 seconds.- Measure how full the bucket is and work out how much water you use in a minute.

Add to this, the hot water use for dishes (remembering that a dishwasher doesn't use hot water from the geyser), your washing machine (if it is connected to a hot water outlet) and all other hot water uses (like brushing your teeth, washing the car, washing the floor etc.)

Now that you know how much hot water you use, you can calculate how much electricity you use to heat it. As a rule of thumb, we need 3KWh of electricity to heat 100 litres of water by 25 degrees.

But water is usually used at between 40 and 45 degrees and the cold water is usually between 15 and 20 degrees. The geyser will, of course, heat your water to a higher temperature depending on your thermostat setting, but it will be mixed with cold water.

So, for example, the hot water usage of the household is 300 litres a day. That therefore requires 9 KWh a day.

You also have to account for standing losses, that is, the electricity needed to keep your geyser water hot all day. This averages at around 2KWh per day, but can be significantly higher if the thermostat is set at a very high temperature.

At 11 KWh a day, a household uses 330 KWh for hot water per month. At a price of R1,57 per KWh (City of Cape Town domestic tariff from 1 July 2012), the monthly bill to heat the water used amounts to R520 a month from July 2012. So, the potential 70% saving from a heat pump or a solar water heater is around R360.

The table below shows the investment value of a SWH or a heat pump installed in June 2012. It was compiled using a conservative value of 200KWh saving each month and electricity prices were again taken as R1,57 a KWh in the first year and increased by 10% every year after that.

In this scenario, the technology has paid for itself in two years and it will still be under guarantee from the supplier for at least another three years.

Value of electricity savings achieved by installing a SWH

This, very conservative scenario, demonstrates that there are sound financial reasons for investing in a SWH or heat pump.

If the homeowner also considers the environmental arguments and decides to make the change when the originally-installed geyser fails, opting for sustainable technology is a "no brainer"

Challenges

As noted, the industry';s "green geyser" project is not yet a fait accompli. As good as the environmental and financial arguments are, there are still challenges to be overcome.

For example, given the industry's "replace like with like" policy and the fact that SWH systems are more costly than electrical geysers, consumers might have to pay in should they opt for the sustainable energy alternative.

The effect on premiums when policyholder change to energy efficient water heaters is difficult to predict as there is little historic data to work with. However, even though the units will cost more at the outset, it is unlikely that the entire system will fail at once.

Should the tank be placed outside, it will also reduce and quite possibly eradicate the chance for peripheral damage at time of failure. It is thus likely that the long term effect on premiums will be very low and premiums might even come down or rise slower.

Conclusion

The country's major players are ready to get behind a drive to convince home owners to adopt SWH and heat pump technology Eskom, SAIA, the Government (through EDD, Department of Trade Industry, Department of Energy and DPE), the Institute of Plumbers (South Africa) and SESSA (Sustainable Energy Society of Southern Africa)

Should the "green geyser" programm go ahead, the only ones needing to be brought on board will be the consumers.

If insurance brokers and insurers take the initiative and communicate the cost and environmental benefits to the homeowners they interact with on a daily basis, and then direct them to those who can assist them to make adopting the technology easy, as a country we will be so much closer to meeting our sustainable energy goals.

Karin Kritzinger penned this article as a guest writer. She is the Project Manager for the GreenCape.

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