Hot water rebates and running costs in New South Wales
The incentive is bigger for replacing electric than gas — which surprises everyone.
What a hot water system costs to run in New South Wales, what you can claim towards replacing it, and the local facts that change the answer here — the tariff structure, the climate and the grid.
What you can claim in New South Wales
Federal Small-scale Technology Certificates
$800–$1,200 off an eligible heat pump or solar thermal system
Available in every state. The installer claims the certificates and discounts your quote, so there is nothing for you to lodge. New South Wales sits in STC Zone 3. Gas and electric resistance systems create no certificates.
Administered by the Clean Energy Regulator. Official scheme page. Last verified 5 September 2026.
Hot water upgrade incentive
Up to $640 replacing an electric system, up to $330 replacing gas
- Applied as an upfront discount at installation — there is nothing to claim back afterwards.
- A minimum customer co-payment of $220 including GST applies under the ESS Rule that commenced 12 September 2025.
- Systems with a storage volume of 700 L or less need a five-year warranty on both the tank and the heat pump unit.
Administered by NSW Climate and Energy Action, under the Energy Savings Scheme. Official scheme page. Last verified 5 September 2026.
Why New South Wales is different
New South Wales runs its hot water incentive through the Energy Savings Scheme, and it pays more for replacing an electric storage tank (up to $640) than for replacing gas (up to $330). That looks backwards until you remember what the scheme is buying: energy saved. An electric resistance tank wastes far more energy than a gas one, so replacing it delivers a bigger saving and earns a bigger incentive.
The discount is applied by the installer at the point of sale, so there is nothing to claim afterwards. Since the current scheme rule commenced on 12 September 2025 there has been a minimum customer co-payment of $220 including GST, and systems with a storage volume of 700 litres or less need a five-year warranty on both the tank and the heat pump unit to qualify — worth checking against a quote before signing it.
On prices, the figures on this page use the Ausgrid zone, which covers Sydney, the Central Coast and the Hunter. Endeavour Energy is slightly dearer at 33.7c/kWh and Essential Energy, which covers most of regional New South Wales, is 35.0c/kWh with a much higher daily supply charge of $2.72. The spread across the state is about 6% on usage but far wider on the fixed charge.
Every system at New South Wales prices
A three-person household using 120 litres of hot water a day, at New South Wales's reference rates and the Sydney climate. On these assumptions the cheapest system to run in New South Wales is solar thermal with gas boost at about $312 a year.
| System | Cost per year | Rebates | 10-year total | CO₂e a year |
|---|---|---|---|---|
| Solar thermal with gas boost | $312 | −$1,130 | $8,488 | 173 kg |
| Heat pump | $411 | −$1,130 | $7,628 | 698 kg |
| Gas instantaneous | $418 | — | $6,531 | 489 kg |
| Solar thermal with electric boost | $498 | −$1,130 | $10,352 | 847 kg |
| Gas storage | $516 | — | $7,557 | 673 kg |
| LPG instantaneous | $692 | — | $9,267 | 568 kg |
| Electric storage | $917 | — | $11,070 | 1773 kg |
| LPG storage | $1,004 | — | $12,439 | 791 kg |
A three-person household in New South Wales using 120 litres of hot water a day, at 33.1c/kWh and 2.72c/MJ for gas, with the Sydney climate and the New South Wales grid's emissions factor of 0.64 kg CO₂e per kWh. Change any of it in the calculator.
Your own household will differ. Put your bill figures into the calculator and every number above recalculates.
The certificate value is falling every January
The federal scheme is winding down on a fixed schedule. Certificates are deemed over a period that shortens by one year every 1 January, and the scheme ends in 2030 — so the same system installed in New South Wales in December earns about a fifth more than it would a few weeks later.
| Install year | Deeming period | Indicative value |
|---|---|---|
| 2025 | 6 years | — |
| 2026 (now) | 5 years | $800–$1,200 |
| 2027 | 4 years | $640–$960 |
| 2028 | 3 years | $480–$720 |
| 2029 | 2 years | $320–$480 |
| 2030 | 1 years | $160–$240 |
The certificates a heat pump creates are deemed over a period that shortens by one year every 1 January until the scheme ends in 2030. Waiting from December to January costs about a fifth of the discount, for exactly the same system. It is the one piece of timing advice on this site that is worth acting on.
How New South Wales compares
South Australia runs its incentive through retailers rather than a fixed scheme, so the offer varies by who you ask. Queensland runs no state scheme at all, so the federal certificates are the whole story there.
Frequently asked questions
What's the cheapest hot water system to run in Sydney?
Solar thermal with a gas boost, at roughly $312 a year for a three-person household on 120 litres a day at NSW reference rates. It is also the most expensive to install of the options here, so check the ten-year total before assuming it is the right call for you.
How much is the NSW heat pump rebate worth?
$1,130 to $1,840 in total, stacking the federal certificates with the Hot Water Upgrade Incentive — the exact number depends on your postcode's STC zone, the system's capacity and the certificate price on the day, so treat it as indicative until an accredited installer quotes it.
What does NSW electricity cost for hot water?
33.1c per kilowatt hour with a $1.66 daily supply charge, per the AER's 2026–27 Default Market Offer (DMO 8), effective 1 July 2026. A controlled-load circuit for hot water brings that down to 19.3c. Retailer offers frequently beat the reference rate, so your own bill is a better number than ours.
Does a heat pump handle Sydney's climate well?
Yes — an effective coefficient of performance around 2.33 against a 3.2 nameplate figure, sitting close to the national middle. That is still under half the running cost of a resistance element, which holds true in every state.