There are variations in electricity usage in dairy farms with milk cooling and water heating being the major energy intensive processes. Hot water at a temperature of 40°C and 70°C is required for cleaning of the cow udder and sterilizing of the bulk milk cooler and all milk contact surfaces respectively. Optimizing these processes can lead to substantial electricity savings. Though the technical feasibility of solar water heating systems has been established, their financial viability in dairy farms need to be ascertained. This paper presents an economic analysis of solar water heating applications in dairy farms. An analysis of hot water demand and usage was done through an energy audit methodology on a dairy farm in the Eastern Cape Province of South Africa. A techno-economic evaluation and the feasibility of implementing such a system on a dairy farm is discussed and the payback period is evaluated. Beside this, other economic and environmental benefits to the dairy farmers by using solar energy systems are discussed. The results indicated that annual savings of 12,097 kWh can be realised through the installation of solar water heating systems on the dairy farm. The payback period was 3.84 years.