Hot water systems buying guide

Don't wait until your hot water system goes. Review your options and plan your next purchase now.
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01 .Introduction

hot water systems - nozzle

When a hot water system (HWS) goes – whether with a bang or a whimper, or even a flood – it tends to go suddenly. At that point you don’t have the luxury of carefully reviewing the available options (unless you love cold showers). Instead, you get a replacement of the same type wheeled in ASAP – and blissfully forget about it until next time.

However, water heating can account for a quarter of typical household energy use, so it’s worth reviewing your hot water usage well before your current system dies and checking out the alternatives – you may find a system that saves energy and money and is kinder to the environment.

CHOICE hasn't tested hot water systems for several years due to the considerable expense and lab space it would require. We are considering options for sourcing the data in other ways. However, our 2013 appliance reliability survey included hot water systems (including heat pump and solar systems as well as conventional electric and gas models). To see which brands rated best among our members, go to the brand reliability comparison table and select "hot water system" under the Model filter to see just the results for hot water systems. Brands such as Vulcan, Rheem, Rinnai, Dux and more are included so you can see how each brand rates for reliability.

New limits on electric HWS

For many people, replacing an old electric hot water system with a similar model is no longer an option. Standard electric systems produce around four tonnes of greenhouse gases per year (on average) – similar to an average sized car, and around three times as much as gas or solar HWS. To reduce this environmental impact, government regulations now limit the installation of electric HWS:

  • Electric HWS can’t be installed in any new detached, terrace or town house, or any such existing property where there is access to piped natural gas (some exemptions apply).
  • From 2012, this has applied to existing detached, terrace or town houses.
  • However, not all states have implemented the phase-out at this time, or have varied their regulations from the federal scheme. Details are here.

You don’t need to replace a working electric HWS, but if you own a detached, terrace or town house, and it currently has an electric HWS, you may need to consider a gas, solar or electric heat pump for your next replacement (and they are worth considering anyway for the long term cost savings they can provide). Electric HWS are still available for apartments and other homes where gas, solar or heat pump systems aren’t feasible.

For more articles on saving energy, see EnergyCHOICE.

Which fuel?

The most common fuels used for water heating are gas and electricity.

  • Electric water heaters that can heat water at any time of day are by far the most expensive option. Off-peak electric (which heat only when tariffs are lower) and gas systems have similar costs, depending on the tariffs you have to pay.
  • Natural gas produces much less of the greenhouse gas carbon dioxide (CO2) than electricity to heat the same amount of water. But it's not available everywhere.
  • You can also get hot water from sun and air, which reduces CO2 compared to conventional electric heaters, in most places.
  • In areas where you can't get natural gas, liquid petroleum gas (LPG) is an alternative. But expect to pay about one-and-a-half to three times as much as for natural gas or electricity.

Which type?

There are two main types of water heater: storage and instantaneous. Instantaneous heaters heat the water instantly, while in storage heaters it's stored in a tank.


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The water is heated to a relatively high set temperature (usually between 60 degrees celsius and 70 degrees celsius) and kept ready for use in a tank. When you use hot water, it's drawn from the top of the tank and replaced by a layer of cold water at the bottom. The temperature drop is sensed by a thermostat, which turns on the heater at the bottom of the tank.

Although the tank is insulated, it's constantly losing energy. So the water temperature drops over time unless it's reheated. If you draw off hot water faster than the cold water can be heated up, the cold layer can eventually move to the top of the tank - and you'll run out of hot water.

Tank materials

Storage tanks must withstand high water temperatures and pressure, and have to be protected against corrosion.

  • Mild-steel tanks are protected from water corrosion by a lining of one or two layers of spun glass, often called vitreous enamel. The mild steel can also be corroded by forming an electrolytic cell with copper water pipes, which are common. So these tanks have a magnesium rod (called a sacrificial anode) inside them that corrodes first, and which you need to check (and usually replace) at least every five years in order to prevent damage to the tank. Mild-steel tanks usually have five- to 10-year warranties.
  • Stainless steel is resistant to water and electrolytic corrosion. Tanks made from it are more expensive to buy, but generally last longer and don't require as much maintenance as mild-steel tanks. They usually carry a 10-year warranty.
  • Regardless of the tank material, hot water systems will require ongoing maintenance such as occasional replacement of valves and seals.

Note: Tank warranties usually only apply if the water quality is within certain limits. For example, depending on the concentration of suspended solids in your water, mild-steel tanks may require different types of anodes, and stainless steel may not be compatible with bore water. Check with the installer whether a particular type of tank is suitable for the water in your area before you buy.

Heater types


Electric continuousElectric systems have to meet minimum energy performance standards regarding the tank's heat loss.

Most electricity providers offer a choice of tariffs for water heaters.

If you connect your heater to a continuous or day-rate supply, electricity is available 24 hours a day and the heater can replace tank heat losses and hot water that's been drawn off relatively quickly. You're unlikely to run out of hot water - at least not for very long. So the tank can be smaller than with an off-peak system and you'll save on the purchase cost. A four-person household needs a tank of about 125-160L. However, the high day-rate tariff makes this type the most expensive to run.

Electric off peakOff-peak or night-rate systems only receive power for a period during the night. Tank heat losses and hot water that's drawn off can't be replaced until the following night. So you need a large tank that can cope with your day's demand, otherwise you may end up without hot water (about 250–315L for a four-person household). You can get a twin-element tank (see diagram). The bottom element is connected to off-peak supply and does most of the heating. If you run low on hot water, a second element connected to continuous supply kicks in to heat a small portion of water at the top of the tank.


Gas water heaters have a gas energy rating label: the more stars on the label, the more efficient the heater. There are standard and high-efficiency gas storage heaters. High-efficiency models are more expensive to buy, but cheaper and more environmentally friendly to run. Gas storage

Gas storage heaters only need relatively small tanks, as gas is available 24 hours a day and heat losses can be replaced quickly. A four-person household needs a tank of about 135–170L. Gas heaters can be installed externally, or internally with a flue, which may require more installation work (and cost more) than an electric system. Some gas suppliers may have a specific tariff for gas storage water heaters.

Solar and heat pump

Solar water heaters use the sun's rays to heat your water. They basically consist of solar collector panels and a storage tank. A heat pump works on the same principle as a fridge or air conditioner. It doesn't create heat, but transfers it from the air to your hot water tank.

As a general rule, one person uses about 50L of hot water a day (more if you use your dishwasher often, take very long hot showers or often wash clothes in warm or hot water). Based on this, a four-person household needs about four square metres of solar collector area (two panels) and a 300-360L tank, to allow for days with lower radiation or a higher demand. If your panels can't be installed in an ideal location, their efficiency may drop and you'll need a larger collector area.

Heat pumps don't rely on the sun, so a slightly smaller system is sufficient (270-315L tank for four people).

Check our article on solar and heat pump water heaters for more details.

Gravity-fed systems

Slightly unusual these days, gravity-fed hot water systems are non-pressurised tanks located in the roof space. They were common before mains-pressure systems became popular some decades ago. They are still available. Some solar hot water systems are also available with gravity-fed storage tanks.

You're probably aware of the main disadvantage: as the hot-water pressure depends on the height difference between the tank in the roof space and the water outlet, it's usually not enough to allow several hot-water outlets to draw from the tank at the same time. However, these systems don't require much maintenance, and can last for a very long time. And you can connect solar collector panels.

This type only heats as much water as you need, when you need it. If you turn on the tap, cold water flows through a heat exchanger, igniting a gas burner or switching on an electric element. So there are no heat losses, and as long as there's gas or electricity, you'll never run out of hot water.

The size you need (the flowrate in litres per minute) depends on the number of hot water outlets the heater has to serve, more than the number of people in the household. As a general rule, for a two-bathroom house you need a flowrate of about 22-24 L/min. But talk to your supplier to find the capacity most suitable for your situation.

Heater types


Electric instantaneousElectric instantaneous water heaters have to be connected to the day-rate tariff, so the running costs will probably be higher than with an off-peak storage system. However, because there's no tank to lose heat, they're cheaper to run than day-rate storage heaters. Modern models have better temperature control than older ones you might have come across.


With older models, the water temperature varied depending on the water flow: the more cold water running through the heat exchanger, the lower the temperature. However, modern systems have electronic control that ensures a constant temperature up to the model's maximum flowrate. Only if you draw water at a higher rate than that will the temperature drop.
Gas instantaneous
You can select different temperatures for different water outlets - 55 degrees celsius in the kitchen and laundry, say, and 40 degrees celsius in the bathroom (to avoid the risk of scalding).

Standard models have a pilot light, which wastes a certain amount of gas. Models with electric ignition are more economical. Gas instantaneous heaters can be installed externally, or internally with a flue. As there are no tank heat losses, they're likely to be cheaper to run than gas storage systems.

Regardless of household size, there’s a probably a gas, solar or heat pump option that’s suitable. Gas-boosted solar systems are generally considered the greenest option (and most economical in the long run) but won't suit all homes. If you have to go for an electric system, aim for instantaneous or off-peak systems if possible. Points to consider:

  • How many people live in your home, how much hot water you use and when you use it (e.g. do you all shower in the morning or evening, do you wash clothes in hot or cold water, etc)
  • Is natural gas available in your area?
  • How much sunlight does your roof get in summer and winter?
  • Local climate - ambient temperatures, frost and so on
  • Your budget, and the purchase and operating costs of a new system (including possible rebates)
  • Your home's design - space and access for potential hot water system locations
  • Your current system - if electric storage, you may qualify for rebates when replacing it with greener options. Or you may be able to incorporate it into a new system, e.g. as a storage tank for a solar system.

A good hot water system supplier can analyse your home and usage patterns and recommend hot water system options. Get quotes from a few different suppliers, to explore different options and brands and make sure you get a good deal.

Small household (1-2 people): If solar access is good, a gas-boosted solar HWS may be the best option. However a gas storage or instantaneous system will probably be cheaper to install.

Medium household (3-4): Gas systems (instantaneous or storage) are a good option here, but heat pumps and solar HWS are also a good choice due to increased economy of scale.

Large household (5+): You’ll need large tanks, and with potentially larger savings to be made, the upfront cost of going solar may be less daunting. For these households, gas storage units may be more economical than instantaneous systems.

Saving energy and water

  • If you have a storage system, make sure the tank and hot-water pipes are well insulated. Limit the water temperature to around 60 degrees celsius if possible. Install it as close to the main hot-water outlets as possible. Turn it off when you go away for more than a couple of days.
  • Take showers instead of baths, and limit them to about five minutes.
  • Get low-flow shower heads and taps, or install flow restrictors.
  • Consider a front-loading washing machine the next time you have to replace yours.
  • For more water saving tips, see our home water-saving guide.

If you install a new solar or heat pump system, you’ll probably be eligible to receive Small-scale Technology Certificates (STCs) which replace the old renewable energy certificate (REC) system. These were developed by the Commonwealth Government to encourage the reduction of greenhouse emissions from the use of electricity.

The STC scheme works by requiring electricity retailers to contribute towards meeting renewable energy targets - an obligation they can meet by purchasing STCs.

So when you install an eligible system, you’ll be rewarded with a certain number of STCs based on how much greenhouse gas it saves and where you live, as this affects the system's efficiency.

You then either register your STCs and sell them to an energy retailer, or you assign them to an agent (often the supplier of the your hot water system) who will register and sell them for you. The second option is the most common as it's more convenient for the consumer; when you buy a solar or heat pump hot water system, the supplier offers an up-front discount in exchange for the STCs - usually this amounts to several hundred dollars off the price.

STC prices can vary but are typically in the range of $15 to $40 per certificate. Their value may vary depending on supply and demand. The small print of the STC scheme is fairly complicated, so consult your retailer or check the Office of the Renewable Energy Regulator (ORER) for more information on how it works. The ORER site has calculators to help you estimate how many STCs a given system will be eligible for, and a guide to approximate STC prices.

Government rebates can apply when you install a solar or heat pump hot water system. Not all households will be eligible. For more information on rebates and other incentives, go to the Federal Government's Living Greener website, or contact your state government energy authority.

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