Solar Water Heater vs Solar Panels: Which is Better for Homes, and Why?

A solar water heater is a solar thermal device that uses sunlight to directly heat water, which can be used for domestic and residential purposes. Rooftop solar panel systems, on the other hand, are photovoltaic devices that convert sunlight into electricity that can be used to power all household appliances, including geysers for heating water. If you’ve been thinking, solar water heater vs solar panels, which is the better option for your home? The answer is rooftop solar panels. 

Let’s explain why!

Solar panels can provide hot water, too, by supplying electricity to geysers, but that’s not the only thing they do. Unlike solar heaters that can only provide warm water, a rooftop solar panel for homes can power all appliances, including geysers for hot water supply, air conditioners, refrigerators, washing machines, lights, fans, and all other kitchen appliances. 

On-grid rooftop solar systems for housing societies and homes are a smarter and more beneficial investment than solar water heaters, as they offer multiple advantages.

• Solar panels generate free solar electricity for 25+ years: Solar panel systems can reduce electricity bills by 90% or more because they generate free solar electricity to power the entire household. 
• Homeowners receive a subsidy for installing made-in-India DCR solar panels: The government offers homeowners a subsidy capped at Rs. 78,000 under the PM Surya Ghar Muft Bijli Yojana for installing rooftop on-grid solar systems.

In this blog on solar water heater vs solar panels, we will give you a detailed account of how these two technologies differ from each other and why rooftop solar systems are better for residential and commercial installations. We will also give a detailed ROI breakdown of the solar savings you can make in India by installing an on-grid rooftop solar system in your city.

TL;DR Summary Box: Which is Better, a Solar Water Heater or a Solar Panel?

Solar photovoltaic panels are clear winners in the debate, ‘solar water heater vs solar panels, which is better for homes’. The maximum functionality of a solar heater is limited to providing hot water. On the contrary, solar panels generate free solar electricity for 25+ years, which can be supplied to your regular geyser to take care of hot water needs while being simultaneously sent to all other home appliances. 

Since a properly-sized rooftop solar system can power every single one of your home appliances and not just a geyser, it offers a great ROI and reduces electricity bills by 90% or more, which a solar panel water heater can’t. Additionally, solar panels last for 25 years or more, unlike solar heaters, which typically last only 15-20 years.

Here are the main topics covered in this blog in detail:

What is a Rooftop Solar Panel System and How Does Its Working Differ from Solar Water Heaters? 

A rooftop solar panel system is a PV device that uses solar panels to convert sunlight into DC electricity. This direct current is taken to another component of the solar system, a solar inverter, that converts DC power to AC (alternating current) power that’s used to power all household appliances. 

Unlike a solar water heater that uses the greenhouse effect, solar panels use the photovoltaic effect to generate solar electricity using just sunlight as the fuel. As a result, they can provide not only hot water by supplying electricity to a geyser, but they can also power all household appliances, reducing your reliance on expensive grid electricity that becomes 3-6% costlier every year.

The three main types of rooftop solar systems include on-grid solar systems, off-grid solar systems, and hybrid solar systems.

• On-grid solar energy systems: They’re the most economical and most popular solar system type, as they do not require expensive lithium batteries to store any excess solar energy produced by the solar panels. Since they’re connected to the grid, a bi-directional net meter exports all excess solar energy not being consumed in real time to the grid. Later at night, the same net meter can import as much electricity from the grid as required to keep a household running. This unit exchange process is known as solar net metering.
• Off-grid solar energy systems: They’re not connected to the grid but to a lithium battery bank. Excess solar energy is used to charge the lithium batteries through a solar panel charge controller. Since these batteries are expensive to install and have to be replaced from time to time, on-grid solar systems are considered better investments than off-grid systems. 
• Hybrid solar energy systems: They’re the most expensive type of solar system as they’re connected both to the grid and the lithium battery bank. Any excess energy is first used to charge the batteries. If leftover current still remains after batteries are charged, it can be sent to the grid through a smart meter.

How Does an On-Grid Rooftop Solar Panel System Work?

An on-grid rooftop solar system uses solar panels to capture and convert sunlight into DC power. Let’s check out the entire process in simple steps: 

• Step 1 – Solar cells in solar panels absorb photons: Solar panels are made of solar cells that absorb energy packets present in sunlight, which are known as photons. 
• Step 2 – Photons transfer their energy to electrons present in the solar cells: Energized electrons leave their atomic bonds and begin to move. The place they leave empty is known as a hole, which is positively charged.
• Step 3 – Electron-hole pairs are kept separated at the p-n junction: The solar cell’s built-in electric field pushes electrons and holes in the opposite direction.
• Step 4 – The electrons flow in one direction: The electron’s unidirectional flow is called direct current.
• Step 5 – DC cables and DC combiner boxes transfer DC power to the solar inverter: The inverter changes DC power to alternating current so it can be used to power household appliances safely.

What is a Solar Heater and How Does Its Working Differ from Rooftop Solar Panel Systems?

A rooftop solar water heater is a solar device that uses solar thermal collectors to absorb sunlight and use it to directly heat water by increasing its temperature. Their main types based on circulation technology are active solar panel water heaters and passive solar panel water heaters. Based on collector technology, they can be classified into flat-plate collector solar heaters, evacuated tube solar water heaters, and batch collector solar water heaters.

Unlike a photovoltaic solar panel that works on the principle of the photovoltaic effect to convert sunlight into electricity, a solar heater uses the greenhouse effect, where sunlight directly raises the temperature of air or water. Hence, a solar water heater is unable to generate electricity. It can only increase the temperature of water to provide hot water for residential and commercial uses. 

How Does a Solar Water Heater Work?

A solar heater uses sunlight to raise the temperature of water present in an insulated storage tank using the same greenhouse effect that solar greenhouses use.

Here’s a step-by-step guide on how solar heaters work:

• Step 1 – Solar collectors absorb sunlight: Solar water heaters use solar thermal collectors to trap sunlight. These collectors have a special coating that helps absorb as much sunlight as possible. As the sunlight hits the surface, the collectors warm up, and thermal energy is generated.
• Step 2 – Heated collectors start warning the fluid present within them: Inside the tubes of the collectors, there’s a fluid, usually water or a heat-transfer liquid. This fluid absorbs the heat from the collector surface. As it heats up, its density decreases. As a result, it begins to move upward in passive solar heaters or is circulated by a pump in active solar heaters.
• Step 3 – The warm fluid reaches the water present in the insulated storage tanks: In passive solar water heaters, the hot fluid rises on its own and flows into a storage tank placed just above the collectors. In active solar water heaters, a pump controlled by sensors moves the heated fluid to the tank. In both cases, the storage tank is well-insulated to prevent heat loss.
• Step 4 – The hot water is available through a tap: The storage tank, often made from stainless steel or lined with glass, is insulated with polyurethane foam (PUF) to keep the water hot for longer. Since hot water is lighter, it stays at the top, while the cooler water settles at the bottom, ready to be reheated. 

Solar Water Heater vs Solar Panels: What Makes Rooftop Solar Better for Homes?

Rooftop solar panel systems produce free solar electricity that powers all household appliances. It means that on top of supplying hot water by sending solar electricity from the panels to your geyser, it can run all other household appliances, including ACs, washing machines, refrigerators, LED TVs, lights, fans, and common kitchen appliances. 

Since they last for 25+ years with proper maintenance, reduce electricity bills by 90% or more, and produce free solar electricity to meet all your energy requirements, solar systems are a much better and much smarter investment than a rooftop solar panel water heater that can only provide hot water.

Here’s a detailed table citing the key differences between solar water heaters and rooftop solar panels:

*Please note: The above-mentioned 4 kW solar plate price in Pune with subsidy is indicative as of 15th September 2025 for the SolarSquare Blue 6ft variant. The final solar system cost depends on your DISCOM charges, city, product variant opted for, panel type, inverter type, mounting structure height, type of after-sales service, savings guarantee, roof height, etc. Prices are subject to change. Additionally, when calculating savings, we have considered an annual tariff escalation of 3% and an annual degradation of 1%. The actual final savings from for a 4 kW solar panel system depends on the types of solar panels you’ve installed and their efficiency, intensity of sunlight your rooftop receives, orientation of the panels and tilt angle, the pollution level and weather conditions in your city, the temperature, shadow on the roof, impact of dirt/dust, and how well you maintain your panels after installation.

Benefits that Make an On-Grid Rooftop Solar Panel for Homes Better Than a Rooftop Solar Water Heater

On-grid solar systems reduce reliance on expensive grid electricity by generating free solar electricity, making the bills lower by 90%, and even bringing them down to zero in many cases. Plus, since installing solar is equal to planting trees, solar PV systems also improve the air quality index. 

Let’s check out all the benefits that make on-grid solar panels for homes better than rooftop solar water heaters:

• They produce free solar electricity for 25 + years: Since you’ll get free electricity from your solar system for decades, you no longer have to worry about expensive grid electricity that becomes costlier by 3-6% every year. Solar panels will reduce your reliance on grid electricity so much so that your final electricity bills will see a 90% reduction. In fact, many customers get zero bills after installing rooftop solar at their homes. 
• You’ll get financial assistance from the government for installing on-grid rooftop solar: 2025 is the best time to install solar at cheaper rates because the government is still offering homeowners and housing societies a substantial subsidy under the PM Surya Ghar Muft Bijli Yojana.  
• They will reduce air pollution in your city: Installing even something as small as a 3 kW solar system is equal to planting 118 full-grown trees, offsetting 77,616 kg of carbon dioxide from the air in 25 years. Can you imagine how clean the air in your city will be in the next 25 years if every home has a solar system? 

Let’s check out how much carbon dioxide different capacity solar systems can offset in your city from the atmosphere in 25 years of their life:

On-Grid Rooftop Solar System Installation Cost  in India in 2025 vs ROI 

In this section, we’ve tabulated the solar system installation cost vs savings in India for a 4 kW solar system with subsidy. You can use SolarSquare’s free solar power estimator to check the right solar system size for your home and the savings that the solar system will offer in 25 years in your specific city. 

That said, here’s a breakdown of the 4 kW solar panel price in India with subsidy vs the solar savings you’ll make in 25 years of your system’s life:

*Please note: The above-mentioned 4 kW solar plate price in India with subsidy is indicative as of 15th September 2025 for the SolarSquare Blue 6ft variant. The final solar system cost depends on your DISCOM charges, city, product variant opted for, panel type, inverter type, mounting structure height, type of after-sales service, savings guarantee, roof height, etc. Prices are subject to change. Additionally, when calculating savings, we have considered an annual tariff escalation of 3% and an annual degradation of 1%. The actual final savings from for a 4 kW solar panel system depends on the types of solar panels you’ve installed and their efficiency, intensity of sunlight your rooftop receives, orientation of the panels and tilt angle, the pollution level and weather conditions in your city, the temperature, shadow on the roof, impact of dirt/dust, and how well you maintain your panels after installation.

Disadvantages of Rooftop Solar Panel Water Heaters  

Unlike solar PV systems that take care of the energy needs of the entire household, a solar panel water heater can’t offer that kind of energy independence. Additionally, they’re costlier than normal water heaters, and you will also have to invest more money for backup systems for extra cold or overcast days, where the hot water supply from a solar heater might not be enough.

Let’s check out all the main disadvantages of solar heaters in detail:

• Not ideal for all locations: If your home is in a place that doesn’t get enough sun during winter or is covered in shade, solar water heating won’t be as effective.
• Extra costs for backup systems: On cold days or during extended periods of overcast skies, you’ll still need an electric or gas backup to heat water, which adds to the overall system expense and increases your electricity bills.
• May not work well in freezing weather: In extremely cold areas, the water in the pipes can freeze if the system isn’t specially designed for such conditions, leading to damage or poor efficiency.
• Storage tanks can lose heat: Without proper insulation, the hot water stored in the tank can cool down quickly, especially at night, resulting in energy loss.
• Doesn’t replace electricity needs: Unlike solar panels that power multiple appliances, solar water heaters only heat water. You’ll still need a separate solution for your home’s electricity requirements if you want to reduce your bills. Hence, it’s better to install on-grid rooftop solar panels that take care of hot water requirements while powering every single appliance in your home.

Calculate your savings

Forecast your savings with solar on your investment on the SolarSquare’s plant

Pin code *

Please enter a valid pincode.

Oh! We haven’t reached your location yet

We are not yet servicable at your location but we will soon!

City

Avg electricity bill

Min. 500 Max ₹10,000

Calculate now

Conclusion 

Solar panels are clear winners in the solar water heater vs solar panels debate as they reduce reliance on grid electricity and power every single home appliance, including geysers for hot water supply. A solar water heater, on the other hand, can only heat water. It can’t generate electricity like solar panels do. 

Solar panel water heaters can be a good addition in remote and rural setups with no grid supply yet, as they can supply hot water for livestock watering and other purposes like cooking and bathing. However, if you live in cities with a reliable grid connection, you should invest in installing on-grid rooftop solar panel systems. For any further queries, book a free solar consultation with SolarSquare now. 

FAQs

Q1. Is solar water heating better than photovoltaic panels?

Ans. No, solar water heating isn’t better than PV panels, as solar water heaters only heat water, while photovoltaic (PV) panels generate electricity that can power your entire home.

Q2. Is solar water heating worth it?

Ans. Solar water heating is worth it in rural areas where grid supply is not available or is unreliable. In those cases, solar heaters offer a hot water supply for livestock watering and other important purposes like bathing, cooking, and cleaning.

Q3. Which type of solar panel is the most efficient?

Ans. Bifacial solar panels with mono-PERC half-cut solar cells are the current favorite modules in the Indian market. Their efficiency reaches up to 22.5%.

Q4. Do solar water heaters work in winter?

Ans. Yes, they can work in winter, but may need a backup heater on cloudy or very cold days.

Q5. What is the disadvantage of a solar water heater?

Ans. It can’t generate electricity to take care of all your energy requirements, and it may also need a backup system in poor weather, increasing the installation expense, maintenance cost, and electricity bills.