Hot water systems


Water heating is the second largest segment of household energy use, ranging from 15% to 30%. It's the largest source of greenhouse gas emissions (up to 25%) from an average Australian home. When a renewable source is used, the emissions are reduced or eliminated.

Hot water systems are usually either:

Storage-based – water stored in a tank and kept hot, ready at all times. Off-peak systems only heat during off-peak times.

Instantaneous – water is heated only as required and not stored in a tank.

Types of hot water systems

Electric storage

Electric storage systems are used by around 50% of Australian households. They are the cheapest to buy and install and are generally more expensive to run, unless powered by a solar PV system.


Solar hot water systems consist of solar panels or evacuated tubes, and a storage tank unit which is either installed on the roof or at ground level.

In areas with less mid-year sun and long cold nights, solar hot water units may require a booster using gas or electricity.

Purchase and installation of solar hot water systems is expensive.

Small-scale technology certificates (STCs) and other rebates may apply to reduce costs.

Heat pump

Heat pump water heaters are highly efficient and use 30% of the energy of a conventional electric hot water system. These systems use a refrigeration cycle to extract heat from the air to heat the water.

There are 2 main types:

  • Integrated with the tank and compressor combined.
  • Split with the tank and compressor separate.

The compressor can be noisy, like that of an air conditioning system.

Not all models are designed for cold locations where it regularly drops below 5°C in winter.

Heat pumps are expensive to purchase and install, but are cheap to run.

Small-scale technology certificates (STCs) and other rebates may apply to reduce costs.


Gas hot water heaters are usually installed outdoors because of venting requirements. They have medium-to-high purchase, installation and running costs.

Continuous flow (also called instantaneous) is the most common type of gas water heater.

Gas storage systems are particularly inefficient, especially in cold climates. They have very high heat loss because it’s not possible to insulate at the point where the gas flame is heating the tank.


Look for a licensed installer in your area.

If your existing heater fails, some installers will lend you a temporary electric hot water heater while you choose the most suitable system.


Look for available Australian, state and territory government rebates and assistance. Solar and heat pump hot water systems could be eligible for renewable power incentives in the form of small-scale technology certificates (STCs). An STC is a measure of renewable energy which can be traded for cash or a discount on the purchase price of the system.

Energy performance requirements

Minimum energy performance standards (MEPS) are required for:

  • electric and gas storage water heaters
  • gas instantaneous water heaters.

MEPS are not in place for solar, heat pump or electric instantaneous water heaters.

Regulations do not require water heaters sold in Australia to display an Energy Rating Label. The energy label found on gas water heaters is industry run and not regulated by government.

Off-peak tariff

Electric storage systems can be switched to an off-peak tariff to reduce electricity costs, but this does not reduce greenhouse gas emissions. Water is only heated during the off-peak period when energy prices are cheaper.

Read more

Hot water service Your Home

How to buy the best hot water system Choice

Small-scale technology certificates Australian Government

Water heating Energy Rating