Hot water rebates and running costs in Victoria
The richest stacking in the country, and the dirtiest grid.
What a hot water system costs to run in Victoria, 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 Victoria
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. Victoria sits in STC Zone 4, the lowest-value zone. Gas and electric resistance systems create no certificates.
Administered by the Clean Energy Regulator. Official scheme page. Last verified 5 September 2026.
Solar Homes hot water rebate
Up to $1,000, or up to $1,400 for an eligible Victorian-made system from 1 July 2026
- Owner-occupiers only — renters are not eligible.
- Combined household income of $150,000 or less from 1 July 2026. Households between $150,000 and $210,000 had to apply before 30 June 2026.
- Gas storage and electric resistance systems do not qualify.
Administered by Solar Victoria. Official scheme page. Last verified 5 September 2026.
Victorian Energy Upgrades (VEU)
A discount applied at the point of sale by an accredited provider
- Delivered as a discount by an accredited VEU provider, not a claim you lodge.
- A minimum customer contribution of $200 applies.
- Stacks with the Solar Homes rebate and with federal STCs.
Administered by Essential Services Commission. Official scheme page. Last verified 5 September 2026.
Why Victoria is different
Victoria is the best place in Australia to replace a hot water system and the worst place to argue that going electric cuts your emissions today. Both facts are worth knowing before you decide.
On money: three separate programs stack here. Solar Homes pays up to $1,000, or up to $1,400 from 1 July 2026 for an eligible Victorian-made system. Victorian Energy Upgrades adds a discount applied by an accredited provider on top. The federal certificates come on top of that again. Together they can reach $2,200 to $3,800 on a single heat pump installation, which is why Victorian households sometimes report paying almost nothing.
The conditions matter. Solar Homes is for owner-occupiers only — renters are not eligible. From 1 July 2026 a combined household income cap of $150,000 applies; households between $150,000 and $210,000 had to apply before 30 June 2026. The Victorian Energy Upgrades discount carries a minimum customer contribution of $200.
On emissions: Victoria's grid emits 0.78 kg of CO₂-equivalent per kilowatt hour, the highest of any state, because of the brown coal still in the mix. Run the numbers on this page and you will see that a gas instantaneous system currently produces fewer emissions per year than a heat pump in Victoria, even though the heat pump uses far less energy. That will reverse as the grid decarbonises, and the heat pump will still be there when it does — but it is not true today, and a site that told you otherwise would be selling you something.
Every system at Victoria prices
A three-person household using 120 litres of hot water a day, at Victoria's reference rates and the Melbourne climate. On these assumptions the cheapest system to run in Victoria is solar thermal with gas boost at about $323 a year.
| System | Cost per year | Rebates | 10-year total | CO₂e a year |
|---|---|---|---|---|
| Solar thermal with gas boost | $323 | −$2,200 | $7,527 | 232 kg |
| Heat pump | $384 | −$2,200 | $6,293 | 948 kg |
| Gas instantaneous | $414 | — | $6,492 | 535 kg |
| Solar thermal with electric boost | $492 | −$2,200 | $9,225 | 1227 kg |
| Gas storage | $512 | — | $7,521 | 717 kg |
| LPG instantaneous | $745 | — | $9,797 | 621 kg |
| Electric storage | $813 | — | $10,031 | 2306 kg |
| LPG storage | $1,069 | — | $13,092 | 843 kg |
A three-person household in Victoria using 120 litres of hot water a day, at 27.5c/kWh and 2.58c/MJ for gas, with the Melbourne climate and the Victoria grid's emissions factor of 0.78 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 Victoria 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.
Frequently asked questions
What is the cheapest hot water system to run in Victoria?
On our figures, solar thermal with gas boost, at about $323 a year for a three-person household using 120 litres a day at Victoria's reference rates. It has the lowest running cost of anything available here, but also the highest installed cost, so check the ten-year column in the table above before deciding.
How much is a heat pump rebate worth in Victoria?
Between $2,200 and $3,800 in total, combining the federal certificates with 2 state programs. The exact figure depends on the system's capacity, your postcode's STC zone and the traded certificate price on the day, so it will only be pinned down on an accredited installer's quote.
What does electricity cost in Victoria?
The reference rate is 27.5c per kilowatt hour with a daily supply charge of $1.27, from the ESC Victorian Default Offer 2026–27 effective 1 July 2026. A controlled load circuit for hot water is available at 21.4c. Market offers from retailers are frequently below the reference rate — use your own bill figure in the calculator rather than ours.
Does a heat pump work properly in the Melbourne climate?
Yes, though how well varies. On our model a heat pump in Victoria achieves an effective annual coefficient of performance of about 2.22 against a nameplate figure of 3.2 — at the lower end nationally, because there is less heat in the air to move. Even at the bottom of that range it uses less than half the electricity of a resistance element, which is why it remains the cheapest electric option in every Australian jurisdiction.