Which hot water system is cheapest to run?

A heat-pump system is usually the cheapest to run, because it delivers roughly three units of heat per unit of electricity — about a third of the power a plain electric element uses. Gas can be competitive where rates are low, while conventional electric storage is typically the most expensive unless it runs on a cheap off-peak circuit.

How much of my energy bill is hot water?

For many Australian homes hot water is around a fifth to a quarter of the total energy bill, making it one of the largest single loads. The exact share depends on household size, system type and how much hot water you use.

Is a heat-pump hot water system worth it?

For most households, yes. It uses roughly a third of the electricity of a plain electric tank for the same hot water, and government rebates often cover a large part of the upfront cost. The payback is faster the more hot water your home uses.

What is a controlled-load or off-peak hot water tariff?

It is a separate, cheaper electricity rate for a dedicated circuit — usually an electric hot water tank — that heats during off-peak hours, typically overnight. It only saves money if that controlled-load rate is genuinely low, which is worth checking against other available plans.

Why is my hot water more expensive in winter?

Incoming mains water is colder in winter and showers tend to get longer, so the system has to work harder to deliver the same hot water. Heat pumps also lose a little efficiency in cold weather, though a good one still beats a plain electric element year round.

Hot water running cost: electric vs heat pump vs gas

Hot water is often a quarter of the power bill. Compare electric, heat-pump and gas hot water running costs in Australia and how to cut them.

A bigger cost than most people realise

Hot water is one of the largest single loads in an Australian home, often accounting for a substantial slice of the energy bill — commonly around a fifth to a quarter of it. Because it runs quietly in a cupboard or outside wall, it rarely gets the attention that heating and air conditioning do, yet the type of system you have makes an enormous difference to what you pay.

There are three common ways to heat water: electric resistance (a simple element in a tank), heat pump (a tank driven by a heat-pump compressor), and gas (either a storage tank or an instantaneous unit). They deliver the same hot shower but their running costs differ widely, because they turn energy into hot water with very different efficiency.

How the three systems compare

A conventional electric storage system is the simplest and usually the most expensive to run, because every unit of electricity becomes one unit of heat with no multiplier. On a general tariff that is a lot of full-price kilowatt-hours. The saving grace is that many electric tanks run on a dedicated off-peak (controlled load) circuit, heating overnight at a much lower rate, which changes the maths significantly.

A heat-pump hot water system is the electric option to beat. Like a reverse-cycle air conditioner it moves heat rather than making it, delivering roughly three units of heat per unit of electricity. That means it uses around a third of the electricity of a plain electric element for the same hot water — the reason it is the system most rebate schemes push households toward.

Gas hot water sits in between and depends heavily on gas rates and the daily supply charge. An instantaneous gas unit only heats water on demand so it avoids standing losses, while a gas storage tank keeps a tank hot around the clock. Where gas is cheap it can be competitive; where the supply charge is high and usage is modest, that fixed daily fee can dominate the cost.

Seasonal and household notes

Hot water demand rises in winter because incoming mains water is colder and showers get longer, so the system works harder in the exact months the rest of the bill is climbing. Heat pumps also lose a little efficiency in cold weather, though a good unit still comfortably beats a plain electric element year round.

Household size drives the total more than anything. A large family showering morning and night uses far more hot water than a single-person home, so the payback on an efficient system is faster the more hot water you use. For a low-use household, the fixed costs — a gas supply charge, or standing heat losses from a tank — can matter more than the efficiency of the heating itself.

How to cut hot water costs

If you are replacing a system, look hard at a heat pump — it typically uses about a third of the electricity of a plain electric tank, and rebates often cover much of the upfront cost.
Put an electric storage tank on a controlled-load (off-peak) circuit so it heats overnight at a cheaper rate.
Fit a water-efficient showerhead and take shorter showers — the single biggest lever on usage.
Wash clothes in cold water where you can, and fix dripping hot taps promptly.
Check the thermostat is not set hotter than needed — storage tanks must stay above 60°C for safety, but running far hotter wastes energy.
Insulate exposed hot water pipes to reduce heat lost between the tank and the tap.

Where EnergySorted fits

The type of hot water system sets your efficiency, but the tariff sets the price of every kilowatt-hour it uses. An electric or heat-pump tank on a controlled-load circuit only saves money if that controlled-load rate is genuinely cheap — and many households never check. EnergySorted costs your real usage, including controlled-load and off-peak components, across more than 16,000 plans with no retailer commissions, so you can see whether your hot water is being charged fairly.

The Bill Health Score then tracks whether your plan stays competitive over time. If you switch to a heat pump, the comparison also helps you pick the electricity plan that best suits the way it runs, so the efficiency gain is not eaten up by an overpriced rate.

General information only, current at the time of writing — not financial advice. Rebate schemes and rules change; always confirm details with your retailer or state government energy site.