Hot water running costs in Australia
Hot water is roughly a quarter of the average Australian household's energy use and the single biggest lever most people have over their bill. It is also the decision most often made in a hurry, by whoever can come out tomorrow, on the day the old tank fails.
This section exists to make that decision in advance instead. Everything here is independent: no installer network, no quote form, and no result that anyone has paid for.
Start with the calculator
Six questions and you have every option ranked for your household, your state's prices and your climate — with the ten-year cost and the rebates alongside the running cost, because the cheapest system to run is regularly not the cheapest system to own.
The eight systems, and what separates them
Every hot water system does the same job: it raises the temperature of the water coming into your house by about 45 °C. What differs is where the energy comes from, how much of it is wasted, and how much the box costs in the first place.
| System | Fuel | Efficiency | Typical life | Installed cost | Federal STCs |
|---|---|---|---|---|---|
| Electric storage | Electricity | 95% | 11 years | $1,900 | No |
| Gas storage | Natural gas | 75% | 11 years | $2,400 | No |
| Gas instantaneous | Natural gas | 87% | 18 years | $2,350 | No |
| LPG storage | Bottled LPG | 75% | 11 years | $2,400 | No |
| LPG instantaneous | Bottled LPG | 87% | 18 years | $2,350 | No |
| Heat pump | Electricity | COP 3.2 nameplate | 12 years | $4,650 | Yes |
| Solar thermal with electric boost | Electricity | 95% | 18 years | $6,500 | Yes |
| Solar thermal with gas boost | Natural gas | 87% | 18 years | $6,500 | Yes |
Installed cost is the midpoint of the range for a supply-and-fit job before any rebate. Efficiency for a heat pump is the nameplate figure — the effective annual figure is lower, and the table below shows by how much.
Electric storage
An insulated tank with a heating element in it. Every unit of electricity becomes a unit of heat, which sounds efficient and is the problem — there is no way for it to be better than 100%, while a heat pump is routinely better than 200%. It is the cheapest thing on the list to buy and the dearest to run, and on a standard flat tariff it costs roughly twice what a heat pump costs. Its saving grace is the controlled load tariff, which in most states cuts the rate by about a third.
Gas storage and gas instantaneous
Gas storage keeps a tank hot with a burner; instantaneous heats water only while a tap is running. The difference between them is standing loss — about 8 MJ a day to keep a gas tank hot whether anyone showers or not, which is roughly $80 a year and the reason instantaneous is consistently cheaper to run. Instantaneous also lasts substantially longer, typically 18 years against 11.
Heat pump
A refrigeration circuit run backwards. Rather than making heat it moves heat out of the outside air into the tank, which is why it can deliver more energy than it consumes. It is the cheapest electric option in every part of Australia without exception. Whether it also beats gas depends on the supply charge question above: it wins in every state where hot water is your only gas appliance, and loses in most states where the gas connection is staying anyway. It is also the system most misrepresented in marketing material, which is the subject of our heat pump guide.
Solar thermal, with electric or gas boost
Collectors on the roof heat the water directly, and a booster covers whatever the sun did not — mostly in winter, mostly at night. The solar fraction runs from about 55% in Hobart to 82% in Darwin. Running cost is the lowest of any system; installed cost is the highest, at $4,500 to $8,500 fitted. Over ten years that usually cancels out, and over twenty it usually wins, because the collectors last far longer than a tank does.
LPG storage and LPG instantaneous
Mechanically the same appliances as their natural gas equivalents, running on bottled gas at roughly three times the price per megajoule. If you are on LPG and mains electricity is available, a heat pump will almost certainly halve your running cost. If you are off-grid, the comparison is a different one entirely.
What it costs in each state
The same system does not cost the same to run in different parts of Australia, and the gaps are wider than most people expect. Electricity in South Australia costs 52% more than in Victoria. Two jurisdictions have no off-peak hot water tariff at all. And a heat pump does measurably better in Brisbane than in Hobart, because there is more heat in the air for it to move.
| State or territory | Heat pump | Gas instantaneous | Gas storage | Electric storage |
|---|---|---|---|---|
| New South Wales | $361 | $418 | $516 | $917 |
| Victoria | $334 | $414 | $512 | $813 |
| Queensland | $286 | $365 | $453 | $742 |
| South Australia | $474 | $474 | $582 | $1,187 |
| Western Australia | $359 | $529 | $736 | $916 |
| Tasmania | $364 | no gas | no gas | $859 |
| Australian Capital Territory | $476 | $449 | $549 | $1,124 |
| Northern Territory | $263 | no gas | no gas | $724 |
A three-person household using 120 litres of hot water a day, at each state's reference rates and each capital's climate, with gas also used for cooking. The cheapest option in each row is in bold. Change your own details in My home and every figure here recalculates.
Guides
Heat pump hot water, honestly
Why the coefficient of performance on the box is not the one you will get, what the real annual figure is where you live, and when a heat pump is the wrong answer.
Gas versus electric hot water
The comparison changed direction in the last few years. What the numbers say now, why the daily supply charge decides more of it than the fuel price, and what happens to the emissions argument.
Hot water rebates by state
Every scheme available in Australia, what it is worth, who qualifies, and the four states that have one at all. Plus why installing in December rather than January is worth about 20% of the federal discount.
Frequently asked questions
How much hot water does a household actually use?
The figures this site uses are the ones Sustainability Victoria uses, which keeps our output comparable with theirs: 50 litres a day for one person, 90 for two, 120 for three, 150 for four and 180 for five or more. Those are litres at 60 °C, which is more water than it sounds once it has been tempered down to 50 °C at the tap.
Why is water stored at 60 degrees when nothing comes out that hot?
Because below about 60 °C, Legionella bacteria can multiply in a storage tank. Australian plumbing standards require storage at 60 °C and then a tempering valve that limits the temperature reaching the tap to 50 °C. It is a health requirement, not a comfort setting, and turning the thermostat down to save money is not a safe economy on a storage system.
How long does a hot water system last?
An electric or gas storage tank typically lasts around 11 years, a heat pump about 12, and instantaneous gas or solar thermal 18 or more. This matters more than it looks: over a twenty-year horizon a tank has to be bought twice and a solar thermal system once, which is enough to reverse the ranking between them. Our calculator's twenty-year view includes the replacement.
Is it worth replacing a system that still works?
Usually not on cost alone. Replacing a functioning gas storage unit with a heat pump saves in the order of $100 to $250 a year depending on your state, against an installed cost of $3,000 to $6,000 before rebates — so the payback runs well past a decade. The moment worth acting on is when the old system fails, because then you are spending the money either way and the only question is on what.
Does rooftop solar change which system I should choose?
It strengthens the case for a heat pump specifically, because a heat pump is the only system on the list whose run can be timed for the middle of the day. Doing that means the electricity it uses costs you not the retail rate but the export credit you gave up, which across most of Australia in 2026 is only 3 to 5 cents. The calculator models this if you tell it you have solar.