If I could only give one energy advice to Australian homeowners, it wouldn’t be “install solar” (though you should). It’d be “get a heat pump hot water system and run it during your solar hours.” The economics are absurd. In a good way.

The hot water problem

Hot water heating accounts for roughly 25% of the average Australian household’s energy use. If you’re on a gas system, that’s gas you’re burning. If you’re on a traditional electric element, you’re using 3-4 kWh per day just to keep water hot.

A heat pump hot water system does the same job using about one-third the electricity. Instead of directly heating water with an element (like a kettle), it works like a reverse air conditioner — extracting heat from the surrounding air and transferring it to the water. The physics gives you roughly 3-4 units of heat energy for every 1 unit of electrical energy consumed.

The maths that make installers smile

Let’s walk through a typical scenario:

Old system: Electric storage hot water, using 4 kWh/day. At 35 cents/kWh, that’s $1.40/day or $511/year.

Heat pump: Same amount of hot water, using 1.2 kWh/day. If running during solar hours and you’ve got solar, the effective cost is close to zero (you’d otherwise export that 1.2 kWh at 6 cents, so the opportunity cost is about $0.07/day or $26/year).

Annual saving: $485/year.

A heat pump hot water system costs about $3,000-4,500 installed, depending on the model and whether you need plumbing modifications. Many states offer rebates: Victoria’s rebate covers up to $1,000, and the federal STC scheme provides another $800-1,200 in certificate value for heat pump hot water.

After rebates, your out-of-pocket cost might be $1,500-2,500. At $485/year in savings, you’re looking at a 3-5 year payback period. If you’re replacing gas, the savings can be even higher because gas prices have gone through the roof.

Why it pairs perfectly with solar

Here’s the beautiful thing about heat pump hot water: it’s a natural load for solar consumption.

Most heat pumps have a timer or can be connected to a solar relay. Set it to run between 10am and 2pm, and it’ll heat your water using solar power that would otherwise be exported at a pathetic feed-in rate.

Your hot water tank is essentially a thermal battery. You’re storing solar energy as heat in 250-315 litres of water, ready for showers and dishwashing whenever you need it. No expensive lithium battery required.

This is why I always recommend heat pump hot water before a battery for most households. You get storage functionality at a fraction of the cost.

Which heat pumps work best in Australia

The market has exploded in the past few years. Here are the models I’d recommend:

Reclaim Energy CO2 Heat Pump: Uses CO2 as the refrigerant instead of conventional gases, which works better in cold climates. Excellent efficiency and Australian-designed. Premium price but premium performance.

Sanden Eco Plus: Another CO2 heat pump, split system (the heat pump unit is separate from the tank). Very efficient, very quiet. Popular with the energy nerd crowd for good reason.

iStore 270L: Good value for money, integrated design (everything in one unit). Solid performance in typical Australian conditions. This is what I’d recommend for most households looking for the best balance of price and performance.

Rheem AmbiHeat: From the brand most plumbers know and trust. Decent performance, wide availability, good warranty support through Rheem’s established network. Not the most efficient but the easiest to get serviced.

Common objections

“They’re noisy.” Modern heat pumps run at about 45-50 dB — similar to a quiet conversation. Some older or cheaper models were louder, which gave the technology a bad reputation. Check the specs and ensure it’s placed away from bedroom windows.

“They don’t work in cold weather.” CO2 heat pumps work down to -10C. Standard heat pumps work well down to about 5C and still function (with reduced efficiency) below that. For most of Australia, cold weather performance is not an issue.

“I’d rather wait for hydrogen.” You’ll be waiting a very long time for residential hydrogen hot water, and when it arrives, it’ll be more expensive than a heat pump. This isn’t a technology gamble — heat pumps are proven, available, and cost-effective right now.

The gas question

If you’re currently on gas hot water, switching to a heat pump is one of the best things you can do for both your wallet and your carbon footprint. Gas prices have roughly doubled in the past five years, and the trend isn’t reversing. Electrification via heat pump is the way forward.

Many states are actively phasing out gas connections in new builds. Victoria has banned new gas connections in new residential developments from 2024. If you’re still on gas, the transition is coming whether you choose it or not. Better to do it on your terms, with solar to power it.

Just do it

Seriously. If you’ve got solar and an old hot water system, replacing it with a heat pump is probably the single highest-return energy investment you can make right now. The payback is fast, the technology is mature, and you’ll wonder why you didn’t do it sooner.