The design of combined solar collection and storage systems for house heating requires careful integration and optimization to minimize unfavorable economics. Because the environmental factors are highly variable with time, hourly performance over a season must be considered to accurately assess economic problems. This study comprises annual simulation of system performance including the house, a flat plate solar collector, a water heat storage unit and an auxiliary heater, and the optimization to achieve a maximum allowable collector cost. Actual weather data for a design year stored on magnetic tape as hourly values are utilized in the study. The digital computer programs developed to make this study possible include a solar irradiation program, an implicit finite difference thermal analyzer program to calculate house heat load, a system simulation program utilizing the hourly weather, heat load and collector performance information to establish the state of the system at hourly intervals over a 1-yr period and an optimization program utilizing the ‘pattern search’ technique. Three modes of operation were investigated: 1. 1. Maintenance of an upper and lower bound to the storage water temperature by means of the cessation of solar collection and utilization of auxiliary heating, respectively. 2. 2. Use of auxiliary heat to maintain a minimum storage water temperature but starting when the water temperature drops to within a specified increment of the minimum temperature. 3. 3. Use of auxiliary heat directly, allowing the storage water temperature to drop below the minimum value. A design optimization study utilizing annual weather data for the Fresno. California, area indicated a maximum allowable cost of approximately $1.00/ft 2 for the solar collector. An auxiliary heater was needed to provide heat during long overcast and peak heat load periods. Savings resulting from a solar collection system were accountable only by the reduction of fuel consumption. Some savings in auxiliary heater capacity are possible by using the storage system to suppress peak heating loads through distribution over longer periods.