You’ve got four main options for hot water systems: electric, gas, solar, and a heat pump. Of these, it’s our opinion that heat pumps are the best option.

To explain why, we’ll go into the pros and cons of a heat pump hot water system, covering what could make them the right choice for you – and what might mean they’re not the best fit.

How hot water heat pumps work

First, let’s start with how these systems work. Unlike other systems that try to heat water directly through conventional sources – an electric element, a gas burner, or the sun – a heat pump extracts heat from the air.

To do this, a refrigerant is used to absorb the hot air. This warm gas then passes through a compressor to increase pressure and temperature. From there, a heat exchanger passes the heat into cold water, which warms up and is sent to the storage tank. That assumes a split system. An integrated unit transfers via coils, and is a slower process.

That naturally cools the gas down, which allows it to continue the cycle.

As you might expect, extracting warmth from the air means that a heat pump performs worse on cold days (but, still better than electric or gas systems), and in some temperatures doesn’t work at all. Look for a heat pump that can function up to -10°C, as these will work throughout almost all Victorian conditions.

Running this whole process does use electricity, but, crucially, it uses far less than directly heating water. While an electric storage system can turn 1kW of electricity into 1kW of heat energy, the best heat pumps can turn 1kW into 5kW of heat energy. That’d mean an 80% reduction in energy use if you upgraded from an electric storage system.

Pros of hot water heat pumps

As you might’ve already guessed from above, the main advantage of a hot water heat pump is its fantastic efficiency. This efficiency means that you save a massive amount compared to a standard electric system – by understanding what CoP is, you can even know exactly what percentage you can expect to shave off your bills.

If you’ve got an existing solar system, it’s an even better investment. A solar system with an electric water heater is a solar system that hasn’t reached its full potential. Your electric water heater is a significant power hog, using up a large amount of your system’s production. If you upgrade to a heat pump, you free up your production for other uses – it’s the same principle as upgrading any appliance to a more efficient version. Since hot water systems tend to be among the most expensive appliances to run, it can make the most difference towards offsetting all of your power use with solar.

Some heat pumps even come with solar integration. This makes the unit run at prime solar production hours, minimising dependence on the grid. You’ll want a highly efficient unit for this, however, as lesser ones will struggle to heat the entire tank within the time frame.

Another heat pump benefit is its environmental impact. Because you use less electricity, you’re also drawing less fossil fuel energy from the grid. Be warned, some systems do use refrigerants that can be potentially environmentally hazardous – but the best systems, which use CO2 refrigerants, have a minimal impact.

You also get price stability compared to a gas system. While gas has historically been cheaper than electricity, there’s no guarantee that low gas prices will continue. In fact, with supplies in the Bass Strait depleting, it’s likely that gas prices in Victoria are headed up. Since a heat pump uses such little electricity, you have security and consistency with low prices.

Both the federal and Victorian governments offer rebates for heat pumps, which we cover in more detail here and here. That means the upgrade is cheaper than you might think, reducing the time it takes for a system to pay itself back in savings.

Cons of hot water heat pumps

This all makes heat pumps sound like a fantastic piece of technology – and they are – but you’re probably expecting some sort of catch here. If it were a no-brainer to get a heat pump, surely everyone would be using them already?

While there’s not a lot of disadvantages, there is one main one: the upfront cost. Getting a great, highly efficient heat pump means shelling out around $5,000. That’ll pay for itself over time, and you can get some money off through rebates, but it’s still a significant amount of money.

If you don’t have all the money you need upfront, it mostly becomes a choice between upgrading immediately to a lesser heat pump, or saving up until you have the money for a premium one. That’s ultimately a choice for you to make, but it’s worth remembering that you can only claim the Victorian Government’s rebate once – you don’t want to use a good rebate on a bad product.

A cheaper heat pump will still save you compared to an electric or gas system, but it won’t save as much as a more expensive system, nor will it last as long. We’ve previously talked about why we shy away from the lower-end of the market, which might be useful for figuring out the right choice for you.

Since heat pumps are new, uncommon technology, servicers and repairmen are less used to them. While not necessarily hard to find one familiar with heat pumps, it is admittedly harder than finding a technician with electric storage experience.


Hot water heat pumps are a great option if you need to bring your hot water bills down. These systems are highly efficient, intelligently designed, and the cutting edge of hot water.

However, it might not be the right time to upgrade. The high upfront cost can mean you have to wait longer and save up. But, if you have the money, there’s few reasons to choose anything else.

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