With gas prices rising and government rebates making heat pumps more accessible, this is the hot water decision most Australian homeowners are wrestling with right now. Heat pumps cost more upfront but dramatically less to run. Gas is cheaper to install but running costs are climbing fast. Here's the full picture.
Heat Pump Hot Water Cost
A heat pump water heater works like a reverse air conditioner — it extracts heat from the air to heat water, using just 25–33% of the electricity of a conventional electric system.
| System / Capacity | Installed Cost (before rebates) | After Federal Rebate (est.) |
|---|---|---|
| 250–270 L (1–3 people) | $3,000–$6,000 | $2,500–$5,300 |
| 300–315 L (3–5 people) | $3,400–$7,000 | $2,900–$6,300 |
Larger 400 L+ systems for 5+ people cost more again — get them quoted. After-rebate figures take the federal STC discount (about $500–$700 in 2026) off; state rebates can take more off.
Gas Hot Water Cost
Gas storage and instant (continuous flow) systems remain cheaper to purchase and install, but running costs have risen significantly with gas price increases since 2022.
| System Type | Installed Cost | Annual Running Cost |
|---|---|---|
| Gas storage | $1,200–$3,500 | $450–$1,250 |
| Gas instant / continuous flow | $1,500–$3,500 | $400–$1,050 |
| Heat pump (for comparison) | $3,000–$6,000 | $200–$480 |
10-Year Total Cost of Ownership
This is where heat pumps decisively win. At typical prices from our price table (a 3–4 person household at Brisbane energy prices):
Based on typical installed prices of $2,200 for gas (storage or continuous flow) and $3,600 for a heat pump after the federal rebate, and typical running costs of $800 (gas storage), $650 (continuous flow) and $300 (heat pump) a year.
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Frequently Asked Questions
Can a heat pump work in cold climates like Canberra or Hobart?
Yes — modern heat pump hot water systems operate efficiently down to around -5°C. In very cold climates the efficiency drops slightly (from ~3.5x to ~2.5x) but they still run at 250% efficiency vs 100% for a gas system. Look for models rated to -7°C.
How long does a heat pump hot water system last?
10–15 years for most brands. Rheem, Sanden, and Reclaim Energy are consistently rated highest for Australian conditions. The compressor is the component most likely to fail — out of warranty, weigh a repair quote against replacing the unit.
Is a gas instant system better than storage?
Instant (continuous flow) gas heats water on demand and wastes nothing on standby heat loss, making it 15–20% more efficient than gas storage. If you're staying with gas, instant is generally the better choice for a family of 3+.
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