Guide to the Best Hot Water Systems

What is a hot water system?

A hot water system uses energy (electricity, gas or solar) to heat water, either relying on a storage tank or heating it instantly.

Types of hot water systems

There are four main types of hot water systems available with electricity, gas, or solar-powered systems.

Storage hot water system

Storage hot water systems consist of an insulated tank where water is continuously heated by a copper or nickel-chrome element. They can either be installed indoors or outdoors.

Larger units can supply hot water to multiple outlets concurrently. For example, you can run hot water from your tap without losing hot water in the shower.

Instantaneous hot water system

Instantaneous hot water systems, as a continuous flow or tankless system, heat water instantly by flowing through a coiled pipe called a ‘heat exchanger’. They are ideal for smaller homes with limited space because they don’t require a storage tank.

More importantly, they are seen as more energy efficient because there’s no heat loss from a tank. Do note that there could be a slight delay in heating water.

Heat pump

A heat pump with storage uses refrigerants, compressors and the heat of ambient air to heat your water. They operate similarly to air conditioners and require much less energy to operate. For every unit of electricity consumed, they provide multiple sources of energy for heating purposes.

Solar hot water diverter

A solar hot water diverter channels excess electricity from your solar system to your electric hot water cylinder. This means that your hot water system runs when your solar system is producing the most energy, regardless of the time of day.

Electric hot water systems explained

How does an electric hot water system work?

Electric hot water systems are the most commonly used type of hot water system. This is because electricity can be found in most Australian homes, unlike gas or solar systems. These systems work by easily connecting your water supply to your electricity supply. 

Water passes through a pipe, usually made of copper or a nickel-chrome alloy, which has an inner wire through the center. An electrical current flows through the wire, creating friction and then heat. 

What are the advantages of getting an electric hot water system?

• Cheap and easy to install: Electric hot water systems are typically the cheapest and easiest kind of hot water system to install. They have the smallest upfront cost, which is great for households that don’t want to drop thousands of dollars on a new system. 
• Save money during off-peak hours: Customers with an electric hot water system may also have access to off-peak heating. This is a type of time-of-use electricity tariff that allows homes to heat their storage hot water systems when usage rates (the running cost for your electricity use) are cheaper. To do this, you will need a smart meter and a hot water timer installed. 
• Safe to install indoors: As electric hot water systems don’t produce fumes or are at risk of leaks, they can be installed indoors or outdoors. Depending on the type of electric hot water system you choose - storage or instantaneous - most electric systems tend to be smaller than gas or solar systems. For customers concerned about space, this flexibility can be of great benefit. 

Does an electric hot water system cost less than other systems?

According to TradeLink, electric hot water systems can cost between $500 and $1200 upfront. This is lower than installing other types of hot water systems. Although the upfront installation cost is cheaper, electric water heating systems tend to be more costly to run compared to gas or solar. 

Is an electric hot water system right for me?

Whether or not electric hot water systems are right for you will depend on your personal preferences. 

Electric hot water systems are easily accessible for most Australian households. They can be installed inside or outside the home and don’t take up as much space as gas or solar hot water systems.  

An electric hot water system requires less overall maintenance as there’s no risk of leaks, like gas heaters, and no need to maintain a pilot light. 

A cheaper upfront installation cost can be beneficial; however, they also attract higher running costs than gas or solar hot water systems. 

Before committing to an electric hot water system, understand your hot water habits and explore your options.  

Solar hot water systems explained

What is a solar hot water system?

Solar hot water systems are powered by energy from the sun to heat water. 

Types of solar hot water systems

There are three main types of solar hot water systems – flat-plate collectors, evacuated tube collectors and heat pump systems.

• Flat-plate collectors: This system relies on a panel-like collector to capture sunlight, transferring the heat to an insulated storage tank. Typically, they are one of the cheaper solar hot water systems but aren’t as efficient in cooler climates. There are two types of this system — roof-mounted (the tank and collector are installed on the roof) and split (the collector is installed on the roof and the tank remains on the ground. 
• Evacuated tube collectors: They operate similarly to flat-plate collectors. But instead of a plate collector, they rely on vacuum-sealed glass tubes to collect sunlight. This allows for a more efficient transfer of solar energy. However, they are also more expensive. 
• Heat pump systems: This system, unlike other solar hot water systems, draws solar heat from the air to heat water. To pump in hot air, the system uses a modest amount of electricity. 

How does a solar hot water system work?

Solar hot water systems work in one of two ways – actively or passively. 

Active solar hot water systems

Active solar hot water systems use circulating pumps to keep water heated as it moves, using either sunlight stored by the solar collector or a heat exchanger. 

Active systems mostly come as a split unit – meaning the panel and water tank are two separate machines. These systems also come with either an electric or gas booster to help power them on cloudier days. 

In Australia, the most common solar hot water system is an active system. 

Passive solar hot water systems

Passive hot water systems store, collect and heat water in a tank before moving it. Because there are no pumps, these units are often coupled together, using thermosyphon technology to convert sunlight into solar energy and heat water in one place. 

Passive systems then rely on heated pipes to keep the water hot as it flows through your home.

Active vs passive solar hot water systems

Because active systems keep water heated during their motion, they are more reliable than passive systems. They are also more stable in cooler climates, with passive systems more prone to freezing. 

However, passive systems are typically cheaper than an active system. 

What are the benefits of a solar hot water system?

Solar hot water systems reduce your reliance on the grid, carbon emissions and long-term energy costs. They also require less maintenance and servicing compared to regular hot water systems. 

Generally, servicing is only needed every five years, but it’s best to read your system’s safety certificate for an accurate servicing schedule. 

Aussies with solar hot water systems may also be eligible for Small-scale Technology Certificates (STCs). STCs, like solar feed-in tariffs (FiTs), are financial incentives encouraging the installation of renewable energy systems.  

In Australia, STCs apply to the different climate zones. Climate zones and an STC calculator can be found on the Australian Government’s Clean Energy Regulator website.

Solar hot water system prices

According to Solar Quotes' price estimates, solar hot water systems cost between $3,000 and upwards of $6,000 for a full installation. 

Price estimates include solar hot water rebates and will vary depending on the type of system and installation costs: 

• Flat plate collectors: Between $3,000 and $4,000.
• Evacuated tub collectors: Upwards of $6,000.
• Heat pumps: Around $3,000.

Households may also be eligible for rebates or concessions, which can lower the price of installing their solar hot water systems. If you’d like to verify your eligibility, visit your state or territory government’s website for more information.

Does a solar hot water system cost less than other systems?

While solar hot water systems are expensive upfront, they are typically much cheaper to run than conventional storage hot water systems. Running costs will vary based on your location, climate and energy tariff (pricing structure for your electricity use). 

According to the Victorian Government, an average household with a solar hot water system and moderate weather should save at least 60% on its water heating bill compared to a storage hot water system. 

They also state that the annual energy usage costs of a solar hot water system can differ from $55 to $110 yearly (depending on its type), while other hot water systems can cost as much as $615 annually, depending on their energy source.

Buying a solar hot water system

What to consider before purchasing a solar hot water system

Firstly, you must assess if your home is suitable: 

• Household size
• Hot water usage and needs

Secondly, you should research and compare the different types of solar hot water systems and their features:

• Type of hot water system (flat plated, evacuated tube collectors or heat pump)
• Quality, reliability and warranties
• Efficiency and capacity
• Price

Installation requirements for solar hot water systems

There are specific installation requirements to ensure your solar hot water system is safe and running efficiently. 

For instance, the location and orientation of a roof-mounted system are crucial factors to consider as they can impact its performance. The system should also be installed in an area free from shade, especially during winter. 

It is also recommended that you hire a professional to install your system, ensuring it is installed to high-quality standards and meets safety requirements.  

Is a solar hot water system right for me?

If you live in a warm and dry area, then installing solar hot water should be perfectly suitable for you. While solar is more expensive upfront, the energy savings should see you make your money back in time. 

However, the decision to install solar hot water is a little trickier for those in some of the colder areas in Australia’s southern states. Households in cooler climates should still be able to make their money back over the long term with a solar hot water system. 

It’s recommended that you get a personalised quote to ensure that you’re making the best choice for your budget. 

Gas hot water systems explained

What is a gas hot water system?

A gas hot water system uses natural gas or liquified petroleum gas (LPG) to heat water for household use. 

There are three main types of gas hot water systems: storage systems, continuous flow systems (also called instantaneous systems) and solar hot water systems with instantaneous gas boosting.

How does a gas hot water system work?

There are two main types of gas hot water systems: storage systems and continuous flow systems (also called instantaneous systems).

• Storage gas hot water system: These systems use a gas burner to heat water in a storage tank. These systems usually have a continuously burning pilot flame to keep the stored water at a set temperature, waiting for use as needed.
• Continuous flow gas hot water system: This system heats water as it is released with a gas burner. Unlike a storage system, they rely on heat exchangers to keep water warm as it flows to the relevant outlet. Continuous gas hot water systems are generally seen as the more energy and cost-efficient choice. 

What are the benefits of a gas hot water system?

Some benefits of installing a gas hot water system are:

• Faster recovery rate: The recovery rate refers to how quickly the system heats water back to the required temperature after hot water is used. Gas hot water systems generally have a much faster recovery rate than their electric counterparts. 
• Energy efficiency: Generally, an instantaneous gas hot water system uses less energy than a traditional system because energy isn’t wasted on maintaining storage tank heat.
• Easy to install: As long as you are connected to your local gas mains, gas hot water systems are generally simple to install at home.
• Older models have off-grid capabilities: If you are using a 100% gas-powered traditional hot water system, then you may still have hot water during a power outage. Please note that this is typically only applicable to older systems.

Gas hot water system prices

Gas hot water systems can cost anywhere $900 and $2,000, depending on their make and type. 

Their actual price will vary based on system type (instantaneous vs storage), size, gas connection and the number of outlets it is expected to serve. However, the cost to install it is separate. 

Installation prices generally range from $1,500 to $3,000 for a new system or $500 to $800 for a replacement. Replacement systems are much cheaper because gas connections are already available from a previous unit.  

How much does it cost to run a gas hot water system?

Gas hot water system usage costs will depend on your household size, system type and gas prices in your distribution area. 

According to Sustainability Victoria, instantaneous systems have a better gas energy rating than storage systems, but a higher gas consumption rate.

To give you an idea of what you could pay on your energy bill, Canstar has collected annual estimated costs for instantaneous and storage gas hot water systems across Australia.

Average annual gas water heater running costs (200L per day)

Source: www.canstar.com.au – 15/08/2024. Average energy consumption figures based on gas hot water heaters listed in the Commonwealth of Australia E3 Program’s Registration database, which assumes delivering 200L of hot water per day. Annual gas usage cost estimates based on the average annual national gas usage rate of 3.7 c/MJ, 3.9 c/MJ in Canberra, 3.6 c/MJ in Sydney, 4.9 c/MJ in Brisbane, 4.1 c/MJ in Perth, 3.4 c/MJ in Adelaide, 3.4 c/MJ in Melbourne and 5.4 c/MJ in Hobart. Average gas usage rates are based on summer rates of single-rate plans in Canstar’s database, available for an annual usage of 33,625 MJ.

Is a gas hot water system right for me?

Whether a gas hot water system is right for you will depend on factors such as household size, location, and existing energy connections. 

If you already have a mains gas connection at your home, then you may find value in connecting a gas hot water system. 

If you don’t have a gas mains connection, consider whether it’s worth paying the cost to set one up. According to hipages, a new gas connection can cost between $70 and $110, depending on location.

Larger households may also find benefit in gas hot water systems due to their higher recovery rates. This is important as it can affect household water usage. 

Centralised hot water systems explained

What is a centralised hot water system?

A centralised or bulk hot water system provides tenants living in apartment complexes and multi-dwelling homes with hot water. 

Centralised hot water systems allow individual apartments and multi-dwellings to save space. However, they are individually metered and billed.

There is a natural gas option for apartments with gas cooktops and other common property facilities. Origin Energy is potentially the largest supplier of centralised hot water in Australia, offering bulk hot water and serviced hot water options.

What are the benefits of centralised hot water systems?

Rather than having individual residents choose their electricity or gas provider, centralising the system can be convenient and cost-efficient: 

• Cost-effective: Apartment blocks purchasing ‘hot water’ in bulk can deliver potential savings to each resident. However, this isn’t always guaranteed. 
• Convenience versus choice: It’s important to weigh up the value of being able to choose your own energy provider or having property management pick one for you. If you value choice, a centralised system may take time to adjust to. Alternatively, a centralised system is perfect if you find picking a provider stressful or inconvenient.

However, there are two other things to be cautious about: 

• Metering: The downside of centralised systems for apartment complexes may be incorrect meter readings. You could be incorrectly billed for a different apartment’s hot water usage. However, this mistake can be corrected by contacting your property management or body corporate.
• Tenancy: If you’re entering a lease in an apartment complex, ensure the previous tenant has finalised their accounts. Centralised hot water systems can be disrupted by a tenant ending a lease, as well as a new lease beginning in the same apartment. Check that you have set up a new billing account with the apartment’s bulk hot water provider. You don’t want to pay for the previous tenants’ water usage and vice-versa. 

How does centralised hot water benefit body corporate, property managers or owners?

Body corporate and property managers or owners benefit from utilising centralised hot water through increased convenience and lowered leakage risks.

• Automated billing: The provider splits and sends the hot water bills to each apartment for the property managers or body corporate. 
• Metering service: Each apartment is individually metered, making for easy usage calculations.
• Space-saving: Space in an apartment can be minimal. A centralised system means that hot water can be supplied without having a storage tank in each apartment. 
• Lower risk of leaks: Individual hot water tanks, if they spring a leak, can cause severe water damage to each apartment. Having a centralised hot water tank makes it easier to address any leakages without damaging each apartment. 

How much does centralised hot water cost?

Similar to electricity or gas accounts, centralised hot water costs are calculated from usage and supply charges:

• Usage charges: This cost, charged in c/kWh, is a variable amount for how much electricity you use. 
• Daily supply charges: Charged in c/day, these ensure your house or business stays connected to the grid.

Because most centralised systems are powered by gas, bills and individual meters will present your gas use in megajoules (MJ). 

Gas costs will vary between states. However, centralised systems can deliver savings to each user due to their bulk purchasing power. You should be billed separately for your gas usage and your cold water, which is handled by your water retailer.

While Origin Energy has been a long-term provider of centralised hot water, smaller providers such as Savant Energy also offer it. While there may be different suppliers on a case-by-case basis, tenants usually don’t get a choice of provider.

This means you probably cannot switch energy providers. You will need to set up an account with whichever provider supplies the complex you live in.

Is a centralised hot water system right for me?

Centralised hot water systems are convenient, but they remove a tenant’s choice of provider. They are also convenient for managers, provided each tenant activates their accounts. An unactivated account can disrupt the entire billing system. 

If you want to avoid centralised hot water systems altogether, make sure the apartments you’re applying for don’t use centralised systems.

Continuous flow hot water systems explained

What is a continuous flow hot water system?

A continuous flow system, also known as instantaneous, on demand or tankless hot water systems, heats the water as you use it rather than maintaining a stored, heated supply. Because of this, the system provides continuous hot water flow until the outlet being used is turned off. 

Continuous flow models work with both gas and electrical systems, meaning that they will suit most households.

Most continuous flow models comprise a smaller, wall-mounted unit. Most hot water system providers will have a continuous flow line, with demand for smaller units increasing dramatically in recent years.

How do continuous flow hot water systems work?

Most continuous flow hot water systems rely on a similar heating process:

1. Cold water enters the system and passes through a heat exchanger.
2. When a hot water tap is switched on, a flow sensor detects the water movement and activates the heating element.
3. As the water flows through the heat exchanger, it is heated instantly and sent to the tap. 

What are the benefits of a continuous flow hot water system?

There are several reasons why you may prefer switching to a continuous flow or instant hot water system, including:

• Continuous supply of hot water: As water is heated on demand, you won’t need to worry about running out of hot water for the day.
• Energy efficiency: Continuous flow models tend to be more energy-efficient than traditional systems because it doesn’t have to maintain stored water at the correct temperature.
• Lower ongoing costs: Once your hot water system is installed, it can offer significant potential savings on your hot water bill due to decreased energy consumption.
• Longer lifespan: Continuous flow hot water systems can typically last more than 20 years, which is around twice as long as a hot water storage system.
• Compact size: Continuous flow systems take up less room than hot water systems, which require tanks or roof panels
• Ease of maintenance:  Continuous flow systems typically require less maintenance and repairs than traditional hot water storage systems. 

How do I find the best continuous hot water system?

The best continuous flow hot water system is the one that is best suited to your personal circumstances, which are not limited to:

• Size of the continuous flow hot water system
• Your fuel type preference (gas, electricity or solar)
• Budgetary constraints (initial costs, running costs)
• Energy efficiency ratings
• The number of people using it in your household
• Warranty
• Space constraints. 

We recommend shopping around for a continuous flow system while considering your household's needs.

Is a continuous flow hot water system right for me?

A continuous flow model will cost more than a traditional hot water system to buy, but you’ll spend less on power bills and maintenance in the long run. 

Because of its smaller dimensions and wall-mounting features, it’s ideal for those with limited space. The continuous flow model also best suits homes with lower usage or fewer people to keep costs down.

It’s up to you to decide if a continuous flow model is worthwhile. However, with lower ongoing costs and higher efficiency levels, it will be tough to choose otherwise.

Keep in mind that water consumption and location will influence which brand and type of system you should buy. 

Hot water system timers

What are hot water system timers?

Hot water timers let you set when your hot water system switches on and off

If you don’t have a timer attached to your hot water system, your system will heat water continuously. This isn’t necessarily a problem, but it does mean your system will run during peak electricity hours, which will ultimately cost you more. 

Many new hot water systems come with built-in timers, meaning you may simply need to check your timer is set to your preferred hours of operation. 

If you’re looking to add a timer to an older hot water system, have a qualified electrician install the timer on your switchboard. Heat pumps have their own hard-wired circuit and should be handled by a professional.

How do hot water system timers work?

Hot water system timers allow households to optimise when their systems heat their water. Timers can be set on most hot water systems, whether electric, gas or solar. 

Most hot water system timers can be set for specific hours throughout the day. Households can then set their timer to heat their water overnight when usage charges are typically cheapest.

Hot water system timers for solar

A hot water timer is an excellent way to make the most of the energy your solar panels produce. 

Your hot water system timer can be set to switch on during hours when solar power production is expected to be at its highest. That way, you can maximise your home’s energy efficiency. 

In Australia, solar generation is typically highest between 10am and 3pm. By setting your hot water system to switch on during these hours, you can take advantage of cheaper off-peak electricity rates, reducing your overall energy spend. 

Benefits of using a timer for your hot water system

Installing a hot water system timer enables you to get more from your solar power. By utilising peak solar production times (typically during the middle of the day) and setting your hot water system to run during this time, you limit your overall energy usage, create a more energy-efficient home and reduce your carbon footprint. 

Using your solar system to heat your water during the middle of the day means you’re utilising energy that might otherwise be sent back to the grid. By being strategic with the amount of solar energy you use to heat your hot water, you can reduce your reliance on grid electricity and your power bill.

Cost of a hot water timer

A hot water system timer can cost between $50 and $300, depending on the brand and installation costs (through an electrician). 

There are many different types of timers available. You’ll be able to choose between a digital and a manual timer. Both allow you to set and change the operating hours for your hot water system as needed. 

Typically, one version isn’t better than the other. It’s up to your personal preference whether you choose a digital or manual timer.

Installing a solar hot water system timer

You’ll have to hire a qualified electrician to install a hot water system timer. They will ensure it’s done safely and set the timer for you. 

Most timers are set to run between 10am and 3pm when solar generation is at its peak. However, your electrician may recommend extending their operating hours, depending on the season and the number of people living in your home. 

Typically, a household of four people will need four hours of hot water heating time during the day. For every extra person in your household, it’s recommended you add an hour of heating time throughout the day.

Choosing the right timer

Your electrician or hot water system installer can steer you toward the best type of timer for your system and energy usage patterns.

There are many manual and digital hot water system timers available. Some timers have features like multiple programming options, override functions, and battery backup to guarantee reliability and user-friendliness.

Here are some key points to consider when choosing a hot water system timer: 

• Budget
• Digital or manual timer
• Programming options
• Solar system size
• Household size

Is a hot water system timer right for my home?

Integrating a hot water system timer into your solar-powered home can improve energy efficiency and slash your overall energy costs. 

More importantly, feed-in tariffs are typically far lower in value than peak and off-peak electricity. A feed-in tariff is a bill credit for every kilowatt hour (kWh) of excess solar exported from your solar system to the grid. 

A hot water system timer redirects captured solar energy to power your hot water system. This allows you to save more through reduced usage charges than a FiT’s bill credit.  

However, there are important factors to consider, such as: 

• Whether your existing solar system is large enough to support your hot water system element. 
• How much will it cost you to purchase and install a timer. 

Consult a qualified electrician to ensure you make the right choice for your home.

Which hot water system is best?

Which hot water system is best will boil down to personal preference. Here is a short list of factors that can influence your choice: 

• The available power source(s) at your property (e.g., natural gas connection, solar, etc.).
• How big your household is and your average water usage (e.g., larger families may benefit from gas-powered systems).
• How much space do you have at home (e.g., electric continuous flow systems are best for smaller homes).
• Your budget (i.e., if you want to invest in a top-of-the-line system or simply change your connection).
• If you want to keep running costs to a minimum (e.g., go green with a solar-powered or a gas-powered system).