Hot water is the biggest single gas user in most Australian homes — typically 60–75% of total gas consumption. Swapping a gas hot water system for electric is now the single highest-return electrification upgrade available, especially once federal Small-scale Technology Certificates (STCs) and state rebates are stacked. This guide walks through the three electric replacement options, what each costs installed in Australia in 2026, the rebates you can claim, and the running cost numbers that explain why heat pump hot water almost always wins.
The Three Electric Options
Not every "electric hot water" is the same. The three main technologies differ enormously in efficiency and running cost:
- Resistive electric storage tank: A simple tank with an immersion element. Cheap to install, expensive to run. Suitable as a short-term swap or for small households with strong solar and a smart controller.
- Heat pump hot water: Uses a refrigerant cycle (like a reverse cycle AC) to draw heat from the air into the tank. Uses about one third the electricity of resistive for the same hot water. Now the default recommendation in most climate zones.
- Solar hot water with electric boost: Rooftop solar-thermal collectors plus a boosted tank. Great output per year but more complicated and usually beaten on total cost by "PV solar + heat pump" for the same household.
Installation Cost by Option
Prices below are typical installed costs for a 3–5 person household, before STCs and state rebates:
| Option | Equipment | Typical Installed | Annual Energy Use |
|---|---|---|---|
| Resistive electric tank (315L) | $900–$1,600 | $1,800–$2,800 | 3,500–4,500 kWh |
| Heat pump (270–315L, split) | $3,500–$5,500 | $4,200–$6,500 | 900–1,400 kWh |
| Heat pump (270–315L, integrated) | $3,000–$4,500 | $3,800–$5,800 | 1,000–1,500 kWh |
| Solar hot water + electric boost | $3,500–$5,000 | $4,500–$7,000 | 800–1,500 kWh |
Site Works You May Also Need
The sticker price on the unit isn't the whole story. When moving from gas to electric, most homes need at least some additional work. Budget for:
- New dedicated circuit: A heat pump typically runs off a 15–20A dedicated circuit from the switchboard. Expect $400–$800 if an existing circuit can't be repurposed.
- Switchboard upgrade: Older boards with ceramic fuses often need a full changeover to accommodate the new circuit and RCBOs. $1,200–$2,500.
- Gas disconnection and cap-off: The plumber caps the gas outlet; if you're abolishing the meter, the gas retailer and network both charge. $200–$600 depending on state.
- Tank relocation or bund: Heat pumps need ventilation around the compressor — relocating from a cupboard to an external wall can add $300–$900 in plumbing.
- Tempering valve: Required on all new tanks. Usually included, but confirm. $150–$250 if separate.
STCs and State Rebates Stack
The combined discount on heat pump hot water in 2026 is substantial and depends on your state. STCs are applied at point of sale by the installer; state rebates are usually also point-of-sale.
| Location | STCs (Federal) | State Rebate | Total Discount | Net Installed (Heat Pump) |
|---|---|---|---|---|
| Victoria | $800–$1,200 | VEU $1,000–$2,800 | $1,800–$4,000 | $1,500–$3,500 |
| NSW | $800–$1,200 | ESS $500–$1,600 | $1,300–$2,800 | $2,000–$4,200 |
| SA | $900–$1,300 | REPS $400–$1,200 | $1,300–$2,500 | $2,300–$4,500 |
| WA | $900–$1,300 | HEP up to $1,000 | $1,900–$2,300 | $2,300–$4,500 |
| QLD | $900–$1,300 | Climate Smart $1,000 | $1,900–$2,300 | $2,300–$4,500 |
| ACT | $800–$1,200 | SHS zero-interest loan | $800–$1,200 + loan | $2,800–$4,500 |
Annual Running Cost Comparison
Running costs below assume average Australian family hot water use (around 180 L/day) and typical 2026 prices: electricity 35c/kWh peak, 20c/kWh off-peak (controlled load), gas 4.5c/MJ plus $1.00/day supply.
| System | Annual Running Cost | With 6 kW Solar (daytime boost) |
|---|---|---|
| Gas storage (instant) | $850–$1,200 + $365 supply | $850–$1,200 + $365 |
| Gas storage + disconnect charge if sole appliance | $1,215–$1,565 | $1,215–$1,565 |
| Resistive electric on controlled load | $700–$900 | $350–$550 |
| Resistive electric peak tariff | $1,200–$1,500 | $400–$600 |
| Heat pump (timed to midday solar) | $320–$500 | $80–$180 |
| Solar hot water + electric boost | $180–$350 | $120–$280 |
10-Year Total Cost of Ownership
Totalling purchase + installation + 10 years of running cost (no inflation, for simplicity):
| System | Upfront (after rebates) | 10-Year Running | 10-Year TCO |
|---|---|---|---|
| Keep existing gas storage | $0 (until failure) | $12,150 | $12,150 |
| Resistive electric on controlled load | $1,500 | $8,000 | $9,500 |
| Heat pump (with solar) | $3,000 | $1,300 | $4,300 |
| Solar hot water + boost | $4,500 | $2,000 | $6,500 |
Heat pump hot water wins decisively — and the margin grows if gas prices rise (they've averaged 6–8% annual increases since 2020) or if you increase daytime solar self-consumption by running a timer.
Why Heat Pump Usually Beats Gas, Even Without Solar
On pure running cost alone, a heat pump on a controlled load tariff at 20c/kWh comes in around $400 a year for a four-person household. Equivalent gas is $850–$1,200 of gas plus $365 of supply charge. You're saving $800–$1,200 a year before solar even enters the picture — and the rebate stack puts the upfront investment under $3,000 in most states.
Interaction With Solar Panels
If you already have solar (or are installing it), schedule your heat pump or resistive tank to heat during the 10am–3pm solar window. A simple timer relay ($80–$150) or smart controller like Paladin or Catch Power ($450–$900) lifts self-consumption dramatically. With solar, heat pump hot water can drop to $80–$180 per year — essentially free hot water for a decade.
Don't Wait for the Gas Unit to Fail
The single most expensive mistake Australian households make is waiting until their gas hot water fails on a Friday night, then paying emergency replacement rates for another gas unit because it's "easier". Plan ahead:
- Once a gas storage unit hits 10 years old, start getting heat pump quotes. Gas units typically last 8–15 years.
- Get three quotes from rebate-accredited installers. Price spreads of 30% are common.
- If your system is approaching end of life in winter, book the changeover for late spring — installer diaries are shorter and you won't be under pressure.
Model Your Full Switch
Hot water is usually the best starting point, but the real financial win comes from disconnecting gas entirely — stopping that $1.00/day supply charge for good. Use our Gas Disconnect Calculator to model the full picture: hot water, heating, and cooking together, with your state's rebates and tariffs pre-loaded so you can see the exact payback for your household.