Is a heat pump cheaper than gas or electric hot water?
By Sithum Imarsha Last reviewed
Usually yes. For 4 people in New South Wales a heat pump costs about $397 a year, against $1,190 for an electric tank on the general rate and $651–$777 for gas.
Your result
Saved a year with a heat pump
$291
Electric storage tank, controlled load (off-peak): $687 a year. Heat pump, general rate (peak): $397 a year. Includes the gas supply charge you stop paying, — a year.
- You pay for the heat pump
- $3,305
- Pays back in
- 6.2 years
- STCs
- 15
- STC zone
- 3
- STC discount
- $555
- State rebate
- $640
- Extra over a like-for-like
- $1,805
From 1 March 2027, a gas hot water system that fails in an existing Victorian home must in most cases be replaced with electric (Official source).
A heat pump on controlled load heats overnight in the coldest air, so it works less well than the COP we use. Ask your installer about the model's recovery time.
— We used the general rate.
—
At these rates a heat pump does not cost less to run than your current system.
After rebates the heat pump costs no more than a like-for-like system, so it pays back at once.
Some models have no — rating and get no STCs there. Check your model on the CER register.
Fix the highlighted field to update.
| System | Energy | Unit | Cost a year |
|---|---|---|---|
| Electric tank, general rate | 3,595 | kWh | $1,190 |
| Electric tank, controlled load | 3,595 | kWh | $687 |
| Gas storage tank | 16,634 | MJ | $777 |
| Instant gas | 13,937 | MJ | $651 |
| Heat pump, general rate | 1,198 | kWh | $397 |
| Heat pump, controlled load | 1,198 | kWh | $229 |
Each row heats 150 litres a day from 15 to 60 °C. The heat pump uses a COP of 3 (Estimate) for the STC zone of the capital city. Gas costs leave out the supply charge.
How we calculated this
Work out the heat your household needs
Litres a day × 4.186 kJ per litre per °C × (60 − 15 °C) ÷ 3,600 × 365 days. A tank also loses heat: we add 2 kWh a day (Estimate) for electric and heat pump tanks. Gas efficiency already includes a gas tank's loss.
150 L a day: 3,595 kWh a year for an electric tank
Divide by each system's efficiency
A heat pump moves heat from the air, so it needs the heat ÷ its COP in electricity. We use a yearly "task" COP by STC zone, from your postcode or your capital city. It includes defrost and tank reheating, so it is lower than a brochure COP measured in warm air. Gas uses the median efficiency on the Energy Rating register.
Zone 3, COP 3: 1,198 kWh a year
Price a year
kWh × the general or controlled-load rate, or MJ × the gas rate. The gas supply charge only counts when hot water is your last gas use and you cancel gas.
$687 now · $397 with a heat pump
Take off STCs and state rebates
STCs = the model's 10-year register count × the deeming factor for your install year, rounded down, × the STC price. Then the state discount for your state. In Victoria, Solar Homes counts only if you say you qualify, and Victorian Energy Upgrades needs you to pay at least $200.
15 STCs = $555 · state $640 · you pay $3,305
Work out the payback
If your system has failed, you would buy a new one anyway, so only the extra over a like-for-like system counts. If it still works, the whole price counts. Extra ÷ the yearly saving = years.
$1,805 ÷ $291 a year = 6.2 years
| Household | Hot water | Checked | Where it comes from |
|---|---|---|---|
| 1 person | 50 L a day | Dated third-party source | Sustainability Victoria running-cost table, as quoted by CHOICE (Melbourne, mid-2024) |
| 2 people | 90 L a day | Dated third-party source | Sustainability Victoria running-cost table, as quoted by CHOICE (Melbourne, mid-2024) |
| 3 people | 120 L a day | Estimate | Interpolated between 2 people (90 L) and 4 people (150 L) in the SV table |
| 4 people | 150 L a day | Dated third-party source | Sustainability Victoria running-cost table, as quoted by CHOICE (Melbourne, mid-2024) |
| 5 people | 180 L a day | Estimate | Extrapolated at 30 L per extra person from the SV table steps |
| 6 people | 210 L a day | Estimate | Extrapolated at 30 L per extra person from the SV table steps |
| What | Value | Checked | Where it comes from |
|---|---|---|---|
| Hot water set point | 60 °C | Official source | YourHome (archived 15 Nov 2025) and NSW Government heat pump page (9 Jul 2026): set the thermostat to 60 °C |
| Cold water in | 15 °C | Dated third-party source | Gas water heater label test load: 200 L a day heated from 15 °C to 60 °C (Elgas). Fixed for every city in v1 |
| Tank heat loss (electric, heat pump) | 2 kWh a day | Estimate | Derived two ways from SV 4-person electric running costs (1.7 to 2.2 kWh a day), just under the register median for a 250 L tank (2.27 kWh a day) |
| Electric element | 100% | Official source | E3 Consultation RIS, heat pump water heaters (Jul 2013): electric resistance heaters have a COP just below 1.0. Old |
| Gas storage efficiency | 62% | Official source | Energy Rating register export, gas water heaters (AS/NZS 4552.2), 25 Sep 2026: storage, median of 125 |
| Instant gas efficiency | 74% | Official source | Energy Rating register export, gas water heaters (AS/NZS 4552.2), 25 Sep 2026: instantaneous, median of 459 |
| Heat pump COP, Zone 1 | 3.3 | Estimate | Warm, humid climate is the best case (YourHome). No measured figure: our estimate |
| Heat pump COP, Zone 2 | 3.3 | Estimate | Warm, humid climate is the best case (YourHome). No measured figure: our estimate |
| Heat pump COP, Zone 3 | 3 | Estimate | Between the RIS 2013 fleet (55 to 63% saving) and NSW Government "up to 75%". Reproduces the register Zone 3 median (30 STCs) at the 200 L standard load |
| Heat pump COP, Zone 4 | 2.4 | Estimate | Derived from SV Melbourne costs for 4 people: heat pump $435 vs electric tank $1,015 |
| Heat pump COP, Zone 5 | 2 | Estimate | Derived from RIS 2013: 46 to 51% saving in Zone 5 (old models; newer units do better) |
| What | Value | Checked | Where it comes from |
|---|---|---|---|
| Installed in 2026 | × 0.5 | Official source | Clean Energy Regulator, calculate STC entitlements: deeming years fall by one each 1 January and the scheme ends after 2030. Rounded down to whole certificates |
| Installed in 2027 | × 0.4 | Official source | Clean Energy Regulator, calculate STC entitlements: deeming years fall by one each 1 January and the scheme ends after 2030. Rounded down to whole certificates |
| Installed in 2028 | × 0.3 | Official source | Clean Energy Regulator, calculate STC entitlements: deeming years fall by one each 1 January and the scheme ends after 2030. Rounded down to whole certificates |
| Installed in 2029 | × 0.2 | Official source | Clean Energy Regulator, calculate STC entitlements: deeming years fall by one each 1 January and the scheme ends after 2030. Rounded down to whole certificates |
| Installed in 2030 | × 0.1 | Official source | Clean Energy Regulator, calculate STC entitlements: deeming years fall by one each 1 January and the scheme ends after 2030. Rounded down to whole certificates |
| Register median, Zone 1 | 26 STCs | Official source | CER air source heat pump register (10-year STCs), median of current models, downloaded 25 Sep 2026 |
| Register median, Zone 2 | 25 STCs | Official source | CER air source heat pump register (10-year STCs), median of current models, downloaded 25 Sep 2026 |
| Register median, Zone 3 | 30 STCs | Official source | CER air source heat pump register (10-year STCs), median of current models, downloaded 25 Sep 2026 |
| Register median, Zone 4 | 33 STCs | Official source | CER air source heat pump register (10-year STCs), median of current models, downloaded 25 Sep 2026. Median of rated models: 15 models have no Zone 4 rating |
| Register median, Zone 5 | 32 STCs | Official source | CER air source heat pump register (10-year STCs), median of current models, downloaded 25 Sep 2026. Median of rated models: 30 models have no Zone 5 rating and get no STCs there |
| STC price we use | $37 | Estimate | The site-wide price, below spot, because installers pass on less after fees |
| STC spot price (context only) | $39.90 | Dated third-party source | Ecovantage energy certificate market update. Spot price for context only: the maths uses the shared $37 price (14 to 18 Sep 2026) |
| State | Scheme | Replacing electric | Replacing gas | Checked | Rules |
|---|---|---|---|---|---|
| NSW | NSW Energy Savings Scheme, Hot Water Upgrade Incentive | $640 | $330 | Official source | Up to. Indicative only. Replace an existing system, nominate before install, minimum 5-year warranty. You pay a minimum amount (not stated). |
| VIC | Victorian Energy Upgrades, hot water system discounts | $630 | $560 | Official source | Indicative, from the VEU page, 26 Sep 2026. Set by the VEEC certificate price, so it moves. Your provider's quote may differ. Any VIC household (renters too) replacing an existing system in a building at least 2 years old; up to 2 systems. Must be an approved product with a minimum 5-year warranty. |
| VIC | Solar Homes hot water rebate (Solar Victoria) | $1,000 | $1,000 | Official source | 50% of the product price after other discounts, up to $1,000 ($1,400 for locally made). Owner-occupier, combined income under $150,000, system at least 3 years old, property under $3M. Off unless you say you qualify. |
| QLD | No state rebate | — | — | No state rebate found when we looked on 26 September 2026. | |
| SA | Retailer Energy Productivity Scheme (REPS), activity WH1 | — | — | Official source | The amount is set by each retailer or provider. Type the discount on your quote. |
| WA | No state rebate | — | — | No state rebate found when we looked on 26 September 2026. STCs only. | |
| TAS | No state scheme | — | — | Official source | The Energy Saver Loan Scheme has closed (read in a browser on 26 Sep 2026). |
| ACT | Sustainable Household Scheme | — | — | Official source | Loans of $2,000 to $20,000 at 3% over up to 10 years. A loan, not a rebate. |
| State | Network and tariff | Rate | Checked | Where it comes from |
|---|---|---|---|---|
| New South Wales | Ausgrid, Controlled load 1 (EA030) | 19.12c/kWh | Dated third-party source | Nectr’s own standing offer price from 1 Jul 2026 (one retailer, not the regulated price), read on Nectr’s rate update page on 1 Oct 2026. The regulated cap for 2026-27 differs: 19.3094c for Ausgrid controlled load 1 and 23.0050c for controlled load 2 (AER DMO 2026-27 determination, s.9 table (5)). Controlled load 2 on Ausgrid is 22.77c a kWh, with supply for at least 16 hours a day. Controlled load 1 is 20.44c a kWh on Endeavour Energy and 19.69c on Essential Energy. These three are also one retailer’s prices (Nectr). EA030 is Ausgrid’s network tariff code for controlled load 1. |
| Victoria | United Energy, Victorian Default Offer, controlled load | 17.26c/kWh | Official source | Essential Services Commission, Victorian Default Offer from 1 Jul 2026 (Nectr shows the same rates). Other networks: CitiPower 16.59c, Powercor 17.26c, Jemena 21.41c, AusNet 22.11c |
| Queensland | Energex, Tariff 31 (controlled load, night) | 16.27c/kWh | Dated third-party source | Nectr’s own standing offer price from 1 Jul 2026 (one retailer, not the regulated price), read on Nectr’s rate update page on 1 Oct 2026. The regulated cap for 2026-27 differs: 16.4323c for Energex controlled load 1 (AER DMO 2026-27 determination, s.9 table (5)) |
| Queensland | Ergon Energy, Tariff 31 (controlled load, night) | 16.66c/kWh | Official source | QCA Gazette No. 29 (5 June 2026), notified prices from 1 July 2026: tariff 31 is 15.148c a kWh before GST; GST step: ex-GST price × 1.1 |
| South Australia | SA Power Networks, Controlled load | 22.03c/kWh | Dated third-party source | Nectr’s own standing offer price from 1 Jul 2026 (one retailer, not the regulated price), read on Nectr’s rate update page on 1 Oct 2026. The regulated cap for 2026-27 differs: 22.2497c for SA Power Networks controlled load (AER DMO 2026-27 determination, s.9 table (5)) |
| Western Australia | No default | — | — | Synergy has no controlled-load plan for new customers. Type your rate, or use your A1 rate. |
| Tasmania | Aurora Energy, Tariff 41 (heating and hot water) | 21.1193c/kWh | Official source | Aurora Energy residential price schedule from 1 Jul 2026. Aurora lists tariff 41 as closed to new customers (read in a browser on 26 Sep 2026). Existing tanks keep it; a new heat pump may need another tariff. |
| Australian Capital Territory | Evoenergy, ActewAGL standing offer, controlled load | 27.775c/kWh | Official source | ActewAGL ACT Standard plan electricity prices from 1 July 2026 |
| What | Price | Checked | Where it comes from |
|---|---|---|---|
| Heat pump, installed | $4,500 | Estimate | Our estimate inside the NSW Government range ($2,000 to $6,000 installed) and Gridly mid range (31 Mar 2026) |
| Electric tank, like for like | $1,500 | Estimate | Our estimate inside $900 to $1,800 installed (search results) for a like-for-like tank |
| Gas storage, like for like | $2,200 | Estimate | Our estimate from CHOICE unit prices ($1,000 to $7,000) plus installation |
| Instant gas, like for like | $2,200 | Estimate | Our estimate from CHOICE unit prices ($700 to $3,000) plus installation |
| Gas to electric conversion | $1,000 | Estimate | Our estimate for a new circuit and gas cap-off (Gridly: $900 to $1,500 extra labour) |
| Heat pump range, installed | $2,000 to $6,000 | Official source | NSW Government heat pump page, updated 9 Jul 2026: installed, before incentives |
The register's gas efficiency is measured at the label test load, which is more hot water than a small household uses. A gas tank's own heat loss is then a bigger share, so our gas costs may read a little low for a small household. Keep the tank at 60 °C to stop Legionella: the calculator does not let you lower it. A heat pump's outdoor unit makes some noise, so place it away from bedrooms. STC prices are before GST.
Sources
- YourHome: hot water systems (archived 15 Nov 2025)
- NSW Government: heat pump hot water (updated 9 Jul 2026)
- CHOICE: gas vs electric hot water systems
- Elgas: gas hot water star ratings
- Energy Rating registry: electric hot water heaters (AS/NZS 4692.2), 25 Sep 2026
- Energy Rating registry: gas hot water heaters (AS/NZS 4552.2), 25 Sep 2026
- Energy Rating: Consultation RIS, heat pump water heaters (Jul 2013, archived)
- Clean Energy Regulator: calculate STC entitlements
- Clean Energy Regulator: air source heat pump models (updated 10 Aug 2026)
- Ecovantage: energy certificate market update (14 to 18 Sep 2026)
- NSW Energy Savings Scheme: Hot Water Upgrade Incentive
- Victorian Energy Upgrades: hot water system discounts
- Solar Victoria: hot water rebate (updated 1 Jul 2026)
- ACT Government: Sustainable Household Scheme
- ReCFIT: Energy Saver Loan Scheme
- ESCOSA: REPS activity WH1, water heating
- Victorian Government: electric and efficiency standards for buildings (read via a Wayback copy, 23 Jul 2026)
- Clean Energy Regulator: postcode zones for air source heat pumps and solar water heaters (Version 3, 1 Jan 2020)
- Nectr: July 1 2026 rate update
- AER: DMO 2026–27 determination, controlled load tariff caps (Federal Register of Legislation, F2026L00643)
- ESC VDO: Victorian Default Offer
- Aurora Energy: residential prices
- QCA: Gazette No. 29, notified prices from 1 July 2026
- Ausgrid: controlled load pricing
- ActewAGL: controlled load, ACT Standard plan electricity prices from 1 July 2026
- Canstar: controlled load rates (9 Jan 2026, before the July reset)
- Victoria Government Gazette S280 (Origin gas standing offer, 1 Jul 2026)
- ActewAGL: ACT standard gas prices from 1 July 2026
- Energy Policy WA: household gas pricing
- Finder: average cost of gas (Sep 2026)
- Canstar: electricity cost per kWh
- EnergyPlans: solar feed-in tariffs July 2026
- OTTER: Tasmanian feed-in tariffs
- WA legislation: Synergy A1 tariff, charges amendment by-laws 2026 (SL 2026/140)
Questions
How much cheaper is a heat pump than an electric tank?
For 4 people in NSW our heat pump uses 67% less electricity than an electric tank: $397 a year against $1,190, both on the general rate. The COP behind it is an Estimate.
Is it worth it if my tank is on off-peak?
Less so. In NSW the saving drops from $793 a year against a peak-rate tank to $291 against an off-peak one. Put the heat pump on controlled load too and it saves $458, but it then heats in the colder night air.
Heat pump or instant gas?
In NSW for 4 people, about $397 a year for a heat pump against $651 for instant gas. If hot water is your last gas use, cancelling gas also saves the supply charge: $287 a year.
Do heat pumps work in Canberra or Hobart?
Yes, but less well in cold air. We use a COP of 2 in Zone 5 against 3 in Zone 3 (both Estimates). Check the model has a Zone 5 STC rating: some have none, and get no STCs there.
How long does a heat pump take to pay back?
In NSW, about 2.3 years when it replaces a failed peak-rate tank and 6.2 years for an off-peak one. It depends most on your old tariff, and on whether you leave gas.
What STC price do you use?
The spot price was $39.90 in the week of 14 to 18 Sep 2026 (Ecovantage), but installers pass on less after fees. We use $37, the same price as our battery rebate calculator. Type the figure on your quote under Advanced settings.
Can I save by setting the tank lower?
No. Keep stored hot water at 60 °C to stop Legionella (YourHome, NSW Government). The calculator does not let you lower it.