If you've just had a shocking power bill, or your hot water system needs replacing, maybe you're wondering if a solar or heat pump version might be the way to go. Is it worth the upfront cost and will it really save you money in the long run? For most homes, the short answer is: yes and yes.
A well chosen solar hot water system or a heat pump may cost more to begin with, but for most homes they'll be significantly cheaper to run than a conventional electric or gas system. That's good for your bank account and good for the planet. And some of the purchase cost can be offset with government rebates and incentives.
Rooftop solar hot water system.
- Solar hot water systems consist of solar collector panels and a storage tank. A four-person household typically needs about four square metres of solar collector area (two panels) and a 300–360L tank. You need a large tank to allow for days with less sunlight (or more hot showers than usual).
- Thermosiphon systems have both the collector panels and the storage tank mounted on the roof. The liquid in the panels circulates into the tank via the thermosiphon effect (as water heats up, it becomes lighter and rises into the tank).
- Pumped or split systems have collector panels on the roof but the tank is located at ground level (or elsewhere in the building). Hot water is pumped from the panels to the tank.
- If panels can't be installed in an ideal location (usually a north-facing part of the roof with no shading), their efficiency may drop and you'll need a larger collector area.
- Collectors may be flat panel or evacuated tubes. Evacuated tubes are generally more efficient – so require less panel area, but they're also more expensive.
- The storage tank usually has an electric or gas booster element to keep the water hot on days with less sunshine.
- In frost-prone areas, the water can freeze and damage the panels, so you need frost-tolerant panels which use a special heat-exchange fluid to heat the tank rather than heating the water directly.
- Solar hot water systems can be comparatively expensive and time-consuming to install compared to conventional gas and electric hot water systems, but a well-chosen system will pay for itself in the long run due to very low running costs.
Heat pump hot water system.
- A heat pump hot water system is a very efficient electric storage tank system that works on the same principle as a fridge or air conditioner, by extracting heat from the air and using it to heat the water tank.
- Units are usually integrated (tank and compressor together) but can also be split (separate tank and compressor).
- They need to be installed in a well-ventilated area, usually outdoors.
- The compressor on the unit can be noisy, like the outdoor unit of an air conditioner, so don't install it too close to a neighbouring home.
- They tend to work best in warm and temperate regions, but some models are designed to work well in cold climates too, and most systems have a booster element for days of cold weather or high demand.
- Most heat pump hot water systems have an integrated timer, so that you can set it to only run at optimal times. For example, during the day when the ambient air is warmest and the heat pump will run most efficiently; that's also when your solar panels — if you have them — are producing cheap electricity. If yours doesn't have an integrated timer, a qualified electrician can probably install an after-market timer for you. Integrated timers are required for heat pump hot water systems sold in Victoria as of 1 March 2024.
- You'll typically need a 270–315L tank for a four-person household. Tank sizes generally range from 125–400L.
For both solar and heat pump hot water systems, the final cost can vary as it depends on the cost of the system, installation, rebates and the price of small-scale technology certificates (or STCs) at the time of purchase.
- Solar power hot water systems range in price from about $4000–8000 fully installed. Systems with a roof-mounted tank tend to be a bit less expensive than split systems, and electric-boosted systems tend to be less expensive to buy than gas-boosted systems.
- Heat pump hot water systems range in price from about $3000–4000 fully installed.
Solar and heat pump hot water systems are supplied by many companies, such as Rheem, Solahart, Bosch, Chromagen, Apricus, Dux, Stiebel Eltron and others.
Most households switching from a gas or electric storage tank system to a solar hot water system or heat pump should find that their hot water costs reduce by at least 50%, and in many cases a lot more.
Payback times will vary depending on the system you're replacing, your household's hot water usage and (of course) the size and price of the new solar or heat pump hot water system. Here's a rough guide.
Replacing an electric hot water system
The power to run an electric storage tank hot water system can make up a quarter of your electricity bill. That's a hefty amount of electricity to pay for (unless most of it is coming from your own solar PV panels). If you replace an electric hot water system with a solar or heat pump hot water system, the new system's cost savings will probably pay for it in about five years or less.
Replacing a gas hot water system
Payback time for replacing a gas hot water system with a solar or heat pump hot water system may be longer. That's because gas is actually quite an efficient way to heat water. For small households with relatively low hot water consumption, a continuous flow ("instantaneous") gas hot water system is often relatively cheap to install and run.
Of course there are other considerations around gas hot water systems; you might be aiming to get your home completely off gas for environmental and long-term cost reasons. If you've switched your heating and cooking appliances over to electric options, then it can make sense to switch your hot water system over to electric as well, so that you don't need a gas account at all. Check our guide to gas vs electric hot water for more details.
Unfortunately it can be a bit more complicated to replace a gas storage tank hot water system with an electric heat pump hot water system. For example, new electrical circuits or connections may be needed as part of the installation.
You can estimate the cost savings for replacing your gas hot water system by looking at your gas bills. A solar hot water system will probably reduce them by about 60% or more, depending on how much of the gas bill is due to hot water (if you have ducted gas heating in your home, for example, that may be a much bigger factor in your gas bill than the hot water). The payback time for gas hot water systems is generally 5–10 years.
State government incentives
Some state governments operate energy-efficiency incentive schemes. To find incentives and rebates for hot water systems, see the federal government energy website. Select the state you live in and under "I am interested in these areas", select "hot water". Or, just contact your state government. Some manufacturers and suppliers also have rebate calculators on their websites.
Federal government incentives
The main upfront financial incentive for buying a new solar or heat pump hot water system comes from federal government-regulated small-scale technology certificates (STCs) – the "solar rebate". These apply in all parts of Australia. Solar and heat pump systems qualify for a certain number of STCs depending on the efficiency of the system and where you live.
In most cases, the easiest way to use STCs is to sell them to the company supplying your new hot water system – they usually 'pay' you by discounting the system you're buying. Usually the quoted price for your system will factor in this discount, but make sure the quote is clear about that.
You can also opt to trade the STCs yourself, but this is a bit trickier and you might not do any better out of it.
Solar and heat pump hot water systems typically qualify for somewhere between 20–40 STCs. The market price for STCs varies but is usually about $30–40. So for a system eligible for 30 STCs, at a price of $30 per STC, you would get $900. Different suppliers may quote different amounts for STCs.
State government incentives
At the time of writing, these state incentives also apply for solar or heat pump hot water systems.
If you're going for a solar or heat pump hot water system, it's a logical step to also consider a solar photovoltaic (PV) panel system to help power your home. It's another upfront expense of course, but for most homes in Australia, solar panel systems will pay for themselves within a few years, thanks to the savings on your electricity bills.
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If you have a solar PV system, then you should consider a solar diverter as well. A solar diverter is a device which takes any excess solar power (i.e. power generated by your solar panels that your home doesn't need right then) and uses it to heat your hot water tank. Usually this excess power is exported to the grid, and you're paid a feed-in tariff for it (a few cents per kWh). However, feed-in tariffs aren't very generous for most home owners these days, and it may be more cost-effective to use some of the excess power in your hot water system.
A solar diverter can be used with a conventional electric hot water tank storage system, or an electric-boosted solar hot water system.
Can you keep your old electric storage tank hot water system and power it with your solar PV panels?
Yes you can! Make sure the electric hot water system is not set to be heated at night on off-peak power though. For best results, you should use a timer switch (aka load shift timer) on the hot water system to make sure it's powered during the day by your solar PV panels, say between 10am and 3pm. There are various such switches available, and they usually need to be installed by an electrician. A good electrician or local solar installation company should be able to help you here.
Note that this method assumes there's enough excess solar PV power to run the hot water system as well as your household appliances. If that's not the case – for example, if you have a small solar PV system, and you have several other appliances running during the day – then there might not be enough left over to heat the water, and the hot water system will end up using expensive power from the grid after all. So this method works best if you have a big solar PV system or if you have relatively low power needs in daytime in the rest of the house.
Remember that you're forgoing some feed-in tariff by using your "excess" solar electricity to power your hot water system, but don't worry – it's still a better option financially.
Installation of a solar hot water system can be more complex than for a conventional electric or gas system. It won't happen the next day, so unless you can live without hot showers for a while, it's probably not a good option for when your old hot water system dies. A heat pump hot water system is easier, as it's often situated and plumbed in just like other outdoor electric tank systems.
Solar hot water panels need a section of roof with good access to sunlight, preferably facing north for maximum exposure. With a thermosiphon system, the roof might need reinforcing as it has to bear the load of the water tank. And if the roof is difficult to access, the supplier might charge more for installation.
Check with your local council about building regulations. Councils probably won't object to you installing a solar hot water system, but there may be restrictions. For example, noise regulations cover the noise from a heat pump hot water system. The installer should know the relevant regulations but it's still worth checking with them – you don't want to end up in a dispute with your neighbour over a noisy heat pump.
What about apartments?
For apartment buildings, it might not be practical or even possible to install solar hot water for individual units, and most units won't have suitable outdoor space for a heat pump. However, the owners' corporation could consider a commercial installation for the entire building. Villas and townhouses have more options, but owners' corporation approval will still be needed, and the close proximity of homes means the potential noise from a heat pump becomes an important consideration.
Solar and heat pump hot water systems should run without problems for years, and in most cases they should not need significantly more maintenance than a regular hot water system. An inspection every five years is worthwhile (just as it is for a regular hot water system).
The cost for inspecting and maintaining a solar hot water system may be a little higher, as the tradesperson will need to get onto the roof to check and clean the solar collectors and connections.
Just as with any hot water system, there are parts such as pressure valves and sacrificial anodes in the tanks which may need occasional replacement. A full service will likely cost $300–500 depending on parts and labour.
Suppliers usually need about 30 minutes to assess your home. Retail suppliers are often connected with just one or two brands, but most brands have a wide range of products, so suppliers should be able to quote on a range of different types and models. As always, get quotes from at least two suppliers.
Questions the supplier should ask you:
- How many people live in the house? How much showering and hot clothes washing do you do each day, and what time of day do you do it?
- What sort of hot water system do you currently have?
- Is gas connected to the property?
Questions you should ask the supplier:
- Is installation included in the quote?
- How long will it take from placing the order to completion?
- How many STCs does the system qualify for? Is STC buyback included, and at what price for the STCs?
- Can they help you with other government rebates?
- Can you keep your existing hot water heater tank as part of the new system? It might be possible to incorporate it as a booster for a solar hot water system. However, doing this may mean you may not be eligible for STCs, because they only apply to completely new installations.
Stock images: Getty, unless otherwise stated.