If you're planning to electrify your home, the order in which you tackle upgrades matters more than most people realise. Done right, each upgrade improves the economics of the next, creating a compounding effect that maximises savings and minimises out-of-pocket costs. Done in the wrong order, you might miss out on thousands of dollars in savings or make earlier investments less effective.
The Optimal Upgrade Order
| Priority | Upgrade | Typical Cost (after rebates) | Annual Savings | Payback |
|---|---|---|---|---|
| 1 | Solar panels | $5,000–$8,000 | $1,200–$2,000 | 3–5 years |
| 2 | Heat pump hot water | $1,500–$3,000 | $400–$800 | 3–5 years |
| 3 | Reverse cycle heating/cooling | $3,000–$8,000 | $500–$1,200 | 5–8 years |
| 4 | Induction cooktop | $800–$2,000 | $60–$120 + $310–$365 supply charge | 2–4 years* |
| 5 | Battery storage | $8,000–$14,000 | $500–$1,000 | 8–12 years |
*Payback for induction includes the gas supply charge elimination, which only applies when it's the last gas appliance.
Priority 1: Solar Panels
Solar should almost always come first. It has the fastest payback of any energy upgrade, generates savings from day one, and — critically — it makes every subsequent upgrade cheaper to run.
Without solar, switching from gas to electric appliances means paying grid electricity rates (28–42c/kWh) instead of gas rates. With solar, many of those new electric loads run on free solar power during the day, making the switch dramatically more economical. A heat pump hot water system timed to run during solar hours costs almost nothing to operate; without solar, it still saves money versus gas, but less so.
Size your system for your future all-electric load, not just your current consumption. A 6.6–10kW system provides headroom for heat pumps, heating, and potentially EV charging down the track — and the latest 2026 solar panel pricing makes upsizing more affordable than most people expect.
Priority 2: Heat Pump Hot Water
Hot water is typically the largest single energy expense in an Australian home. A heat pump uses roughly one-third the energy of a gas storage system and one-quarter the energy of an electric resistance system. With generous rebates (federal STCs plus state incentives), the net cost can be as low as $1,500.
Install the heat pump soon after solar — ideally within the first year. Set it to run during solar hours (typically 10am–2pm) so it heats water using free solar electricity. This maximises your solar self-consumption and minimises grid purchases.
Priority 3: Reverse Cycle Heating and Cooling
Replacing gas ducted heating or gas wall furnaces with reverse cycle air conditioning is a major upgrade but delivers substantial ongoing savings. A quality reverse cycle system provides 3–5 units of heating for every unit of electricity consumed, making it 3–5 times more efficient than gas heating.
This comes third because:
- It's a larger upfront cost than hot water, so you benefit from having solar savings accumulating before taking it on.
- Gas heating is seasonal — most households only use it 4–6 months per year, so the urgency is lower than hot water (which runs year-round).
- State rebates like Victoria's VEU scheme can cover a significant portion of the cost, but these are best leveraged when you've already done your research and have solar in place.
Priority 4: Induction Cooktop
The cooktop is usually the cheapest upgrade ($800–$2,000) and saves the least on energy ($60–$120/yr in cooking gas). So why bother? Because it's almost always the last gas appliance — and removing it means you can disconnect from the gas network entirely, eliminating the gas supply charge of $310–$365/yr.
When you factor in the supply charge elimination, an $800 induction cooktop that replaces the last gas appliance has an effective saving of $370–$485/yr, giving it a payback of under 2 years. That's why it should come after heating — you want the heating upgrade to eliminate the largest gas usage first, then the cooktop closes the door on gas entirely.
Priority 5: Battery Storage
Batteries come last for a simple economic reason: they have the longest payback period (8–12 years). While batteries increase self-consumption and provide backup power, the return on investment is lower than solar, heat pumps, or heating upgrades.
However, batteries become more valuable after you've completed the other upgrades:
- A fully electric home uses more electricity in the evening (cooking, heating, hot water top-up), which is exactly when a battery discharges.
- Higher evening consumption means the battery displaces more expensive grid purchases.
- Your solar system may be exporting significant excess during the day at low feed-in rates (5–8c/kWh). A battery stores that energy and lets you use it at full retail value (28–42c/kWh) in the evening.
When to Deviate from This Order
While this order is optimal for most households, there are situations where you might change the sequence:
- Your gas hot water system has just died: Don't wait for solar — install the heat pump now. You need hot water immediately, and a heat pump is still far cheaper to run than a new gas or electric resistance system even without solar.
- You already have solar: Skip straight to Priority 2. Many households installed solar years ago and are now ready for the next step.
- A rebate is about to expire: If a generous state rebate (like VEU heating replacement) has a deadline, it may make sense to bring that upgrade forward to capture the rebate.
- You're renovating: If your kitchen is being renovated anyway, switch to induction as part of the renovation even if you haven't done heating yet. The incremental cost during a renovation is minimal.
- Your heating system is failing: If your gas heater is on its last legs, replace it with reverse cycle even if you haven't done hot water yet. Don't throw money at repairing an inefficient gas system.
- You're building new: For new builds, do everything at once. All-electric new homes are cheaper to build (no gas connection, single metering) and cheaper to run from day one.
Use our Whole Home calculator to model this upgrade sequence for your specific household, with your state's electricity and gas rates, and all applicable rebates factored in.