Decarbonizing residential hot water demand requires efficient solar collectors. Conventional flat plate collectors are widely available but experience high heat losses in colder climates. This work investigates the performance of a modified flat plate collector that incorporates honeycomb transparent insulation to reduce convective heat loss, offering a cost-effective alternative to energy-efficient evacuated tube collectors. The thermal performance of the modified flat plate collector was obtained using the finite element method in COMSOL Multiphysics, revealing a significant reduction in convective heat loss. The obtained thermal performance was then incorporated into a transient simulation to assess the year-around performance of the modified flat plate collector in a solar domestic hot water system for Irish climate. The transient simulation accounted for variations in the transparent insulation’s transmission with incidence angle which was overlooked in previous studies. Over a year-long simulation, the modified flat plate collector generated a total useful energy of 532.45 kWh m−2, while requiring 1640 kWh of auxiliary energy to meet the hot water demand of a single-family house in Ireland. An economic analysis of solar domestic hot water system revealed that the modified flat plate collector could yield savings of 443.44 € more than the standard flat plate collector and 3281.03 € more than the evacuated tube collector for homeowners. Consequently, the simple payback period for the solar domestic hot water system decreased from 3.72 years with a standard flat plate collector and 8.37 years with an evacuated tube collectors to 3.56 years with a modified flat plate collector. In addition to its economic viability, the modified flat plate collector could result in a CO2 savings of 901.85 kgCO2 per year. The study concludes with a sensitivity analysis to identify the market conditions that maximize the profitability of the modified flat plate collector based solar domestic hot water system.