A techno-economic analysis is undertaken to assess hybrid PV/solar-thermal (PVT) systems for distributed
electricity and hot-water provision in a typical house in London, UK. In earlier work (Herrando et al., 2014), a
system model based on a PVT collector with water as the cooling medium (PVT/w) was used to estimate
average year-long system performance. The results showed that for low solar irradiance levels and low
ambient temperatures, such as those associated with the UK climate, a higher coverage of total household
energy demands and higher CO2 emission savings can be achieved by the complete coverage of the solar collector
with PV and a relatively low collector cooling flow-rate. Such a PVT/w system demonstrated an annual
electricity generation of 2.3 MW h, or a 51% coverage of the household’s electrical demand (compared to an
equivalent PV-only value of 49%), plus a significant annual water heating potential of to 1.0 MW h, or a 36%
coverage of the hot-water demand. In addition, this system allowed for a reduction in CO2 emissions
amounting to 16.0 tonnes over a life-time of 20 years due to the reduction in electrical power drawn from
the grid and gas taken from the mains for water heating, and a 14-tonne corresponding displacement of primary
fossil-fuel consumption. Both the emissions and fossil-fuel consumption reductions are significantly
larger (by 36% and 18%, respectively) than those achieved by an equivalent PV-only system with the same
peak rating/installed capacity. The present paper proceeds further, by considering the economic aspects of
PVT technology, based on which invaluable policy-related conclusions can be drawn concerning the incentives
that would need to be in place to accelerate the widespread uptake of such systems. It is found that,
with an electricity-only Feed-In Tariff (FIT) support rate at 43.3 p/kW h over 20 years, the system cost estimates
of optimised PVT/w systems have an 11.2-year discounted payback period (PV-only: 6.8 years). The
role and impact of heat-based incentives is also studied. The implementation of a domestic Renewable Heat
Incentive (RHI) at a rate of 8.5 p/kW h in quarterly payments leads to a payback reduction of about 1 year. If
this incentive is given as a one-off voucher at the beginning of the system’s lifetime, the payback is reduced
by about 2 years. With a RHI rate of 20 p/kW h (about half of the FIT rate) PVT technology would have
approximately the same payback as PV. It is concluded that, if primary energy (currently dominated by fossil
fuels) and CO2 emission minimisation are important goals of national energy policy, PVT systems offer a significantly
improved proposition over equivalent PV-only systems, but at an elevated cost. This is in need of
careful reflection when developing relevant policy and considering technology incentivation. Currently,
although heat outweighs electricity consumption by a factor of about 4 (by energy unit) in the UK domestic
sector, the support landscape has strongly favoured electrical microgeneration, being inclined in favour of
PV technology, which has been experiencing a well-documented exponential growth over recent decades.