Heat Pump Hot Water vs Gas: Which Is Better?
With gas prices rising and rebates available for heat pumps, the switch is making more sense than ever. Here's a clear, honest comparison across running cost, upfront price, and environmental impact.
Heat Pump vs Gas: Side-by-Side Comparison
Based on typical Australian household usage. Actual figures vary by location, tariff, household size, and installer.
| Feature | Heat Pump | Natural Gas |
|---|---|---|
| Annual running cost (4-person home) | ~$300–$600 | ~$680–$1,020 |
| Upfront cost (after rebates) | ~$1,500–$3,500 | ~$1,200–$2,500 |
| Government rebates available | Yes | No |
| Carbon emissions | Low (grid electricity) | Moderate (combustion) |
| Gas supply charges ($200–$400/yr) | No | Yes |
| Works with solar panels | Yes | No |
| Hot water in power outage | No | Yes |
| 10-year price stability | Better (electricity trending cheaper) | Uncertain (gas prices rising) |
Bottom line: For most Australian households, heat pumps offer lower running costs, no gas supply charges, compatibility with solar, and significant government rebates — making the switch financially compelling for most existing gas customers.
Annual Hot Water Running Costs in Australia
Estimated annual running costs by system type. Figures are indicative based on typical usage patterns and published energy rates.
LPG (bottled gas)
Electric Storage
Natural Gas
Solar (electric boost)
Heat Pump (standard tariff)
Heat Pump (with solar)
4-person household estimates. Actual costs depend on your tariff, usage, location, and system model.
Switching from Electric Storage
A 4-person household can save approximately $600–$900 per year — often recovering installation costs within 4–6 years.
Environmental Impact
Switching to a heat pump can reduce your household hot water emissions by 50–75%, and to near-zero when paired with rooftop solar.
Government Rebates for Heat Pump Hot Water
Australian homeowners can claim federal STCs plus state-specific incentives — often stacked together for maximum savings.
State-by-State Rebate Overview
| State / Territory | Scheme | STC Est. | State Rebate |
|---|---|---|---|
| NSWNew South Wales | Energy Savings Certificates (ESC) | $700 | $600–$900 |
| VICVictoria | Solar Victoria Rebate | $650 | $1000–$1000 |
| QLDQueensland | Queensland Climate Smart Rebate | $800 | $300–$400 |
| SASouth Australia | REPS (Retailer Energy Productivity Scheme) | $700 | $1000–$1300 |
| WAWestern Australia | WA State Energy Rebate | $700 | $1000–$1000 |
| TASTasmania | Energy Saver Loan Scheme | $500 | $300–$500 |
| ACTACT | Sustainable Household Scheme | $600 | Loan up to $15,000 |
| NTNorthern Territory | Smart Energy Grant | $900 | $2500–$5000 |
Rebate amounts are indicative estimates only. Values change with STC spot prices and program availability. Always verify current rebate eligibility directly with your installer or the relevant government authority.
How a Heat Pump Hot Water System Works
Unlike a resistive electric heater that converts electricity directly to heat, a heat pump moves heat — making it 3–4× more efficient.
Air Intake
The heat pump draws in ambient air from the surroundings — even in cool weather, air contains useful heat energy.
Heat Extraction
Refrigerant in the evaporator coil absorbs heat from the air, turning from liquid to gas in the process.
Compression
A compressor raises the refrigerant temperature significantly — the same principle used in reverse-cycle air conditioning.
Water Heating
The hot refrigerant transfers its heat to the water in the storage tank, then cools and returns to start the cycle again.
The Efficiency Advantage
A conventional electric storage system uses 1 kWh of electricity to produce 1 kWh of heat (COP = 1.0). A quality heat pump produces 3–4 kWh of heat per kWh of electricity (COP = 3.0–4.0+). For a typical Australian household, this translates to annual hot water bill savings of $400–$1,200 compared to electric storage — with no change to comfort or convenience.
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