Choosing Your Best Hot Water Solution

Hot water can make up a large portion of your energy spend, especially if you manage residential properties. However, replacement decisions are often reactive, driven by sudden outages, leading to hasty decisions and like for like replacements. This can lock in high costs and carbon emissions for the life of the asset.

The BOOM Platform does more than solar and energy efficiency assessments and competitive procurement. It also helps you assess and understand your hot water options, and develop a proactive management plan before it becomes urgent.

Here we step you through general advice on hot water options, and how the BOOM platform handles hot water assessments in more detail.

What are the options?


Whether a residential instantaneous system or a commercial boiler, gas has historically been the low-cost option. However, with domestic gas prices now linked to global markets (since the commissioning of several large LNG export terminals), this is no longer the case. Prices have increased by around 50%, and are likely to remain high for the foreseeable future. Emissions also pose a problem. While gas may have been a lower emission option in the past, the electricity market is rapidly decarbonising, while options to reduce gas emissions are severely limited. On top of this are the fixed costs of a gas connection which can rival usage costs for small properties. By switching to all-electric, these costs can be avoided.


For properties without a gas connection, bulk (resistive) electric hot water systems are the norm. These typically run on off-peak tariffs, with a moderate running cost and emissions profile. For large users of hot water, however, the running costs can rack up quickly. Electric (resistive) hot water heaters should be avoided as a replacement, and attractive subsidies can apply to offset the cost of replacement with a more efficient option, such as a heat pump.

The one exception to this is for properties with minor hot water usage. For example, an office that only requires hot water for a toilet or kitchenette. In these cases, an instantaneous electric water heater is worth considering. While they draw a significant amount of power when running, they only operate on-demand, and avoid the standing losses associated with a tank and hot water recirculation system.

Instantanteous electric hot water system (Source: Stiebel Eltron)

Example of an instantaneous electric hot water system, which can be installed near where hot water is used.

Solar Thermal

While solar thermal hot water systems have been considered the environmentally-friendly option, we no longer recommend them in most cases. For latitudes below Brisbane, a sizable portion of winter demand needs to be met using electric- or gas-boost, especially for cheaper flat plate systems. Faults are common, and often go undetected, increasing demand on the gas/electric backup. Installation prices have remained static, while solar PV has dramatically reduced in cost over the last 20 years — in general, we say it’s better to use the available roofspace for PV, and use it to power a heat pump (see below), than solar thermal hot water. 

Heat Pump

A heat pump hot water heater concentrates energy from the surrounding air to heat a hot water tank, in a similar way to how a reverse cycle air conditioner works to heat the air inside a building. For every unit of electrical energy consumed by the heat pump, it delivers three to five times as much energy into the hot water tank. This makes it a highly efficient option, and also low emission, especially as more renewables are added to the Australian electricity system.

Heat pump hot water unit (Source: Sanden)

Example of a domestic-scale heat pump water heater (Source: Sanden)

Heat pump hot water heaters have been available in the Australian market for decades, however highly efficient options, that can operate effectively across all climate zones down to -10°C, are a relatively recent arrival to the local market. Heat pump hot water heaters are available both in domestic scale systems (from manufacturers such as Sanden, Reclaim and Stiebel Eltron), as well as large commercial-scale systems that are suitable to replace centralised gas and electric boilers. Unfortunately many plumbers still dismiss them out of hand, having only experienced a small number of early models that had a high failure rate. Current models, especially those using CO2 (R744) refrigerant, are an altogether different proposition. Modern heat pumps have a long service life, are suitable for all Australian climate zones, are simpler to install than solar thermal, and have a low running cost, especially when coupled with solar PV (with a timer used to maximise self-consumption).

Commercial-scale heat pump. Source: Mitsubishi Heavy Industries

Commercial-scale heat pump, suitable for multi-residential applications, such as apartment blocks and aged-care.

First, minimise hot water demand

Irrespective of which technology you go with, minimising hot water demand should be your first priority. For residential settings, this means low-flow shower heads, which typically have a payback period of under a year. For commercial and industrial settings, this means low-flow fittings where appropriate, as well adequate pipe insulation (lagging), especially for long pipe runs.

What subsidies are available?

Multiple subsidies are available for installing a heat pump hot water system. Nationally, upfront STC subsidies are available as part of the small-scale renewable energy target. In Victoria, additional subsidies are available through the Solar Homes and Victoria Energy Efficiency Target programs, with a similar scheme operating in South Australia. 

For large-scale heat pumps with tanks above 500L, subsidies are generally not available, however this is partially offset by the relative economies of scale for these larger units.

What about industrial settings?

Heat pumps can also be used to provide hot water for a variety of industrial processes, whether it be in food manufacturing or chemical processing. A recent example is the Tesla Gigafactory in Nevada, which was built without a natural gas connection. Coupled with on-site solar, heat pumps mean large industrial energy users can decouple their operations from the volatile natural gas market.

So how do I choose?

Given absolute energy and emissions saving potential, we typically recommend heat pump hot water systems for both new build, upgrades and replacement of faulty units. However, we recognise that this is not always practical; budgets are limited, and paybacks will vary depending on hot water demand, the presence of solar PV, eligibility for subsidies and the differential between gas and electricity tariffs.

The BOOM Platform can help you with this decision making process. Our intelligent software can model running costs and payback periods, taking into account any subsidies, tailored to your bills and location (see below for a sample report screenshot). Our platform can automatically generate business cases across multiple properties, and prioritise upgrades according to a variety of metrics. This information can then be used to inform any unscheduled replacements, or to design a large-scale upgrade program, which can be easily delivered using BOOM’s built-in e-tendering platform.

Example hot water business case