Everything you need to know about energy-efficient hot water systems

by | Nov 15, 2023 | Home design, Sustainable homes

If you’re looking for advice on purchasing an energy-efficient hot water system, you’re in the right place. With energy bills rising and concerns about the environment, more of our clients are concerned about the sustainability of their homes. The issue is once they start their research, they discover just how many types of hot water systems there are on the market. That’s where this blog post comes in! We’re taking a look a the main water heating options on the market which are:

  • Electric Hot Water Systems
  • Gas
  • Solar Power
  • Heat Pumps

We’ll take a look at each of these options and compare their pros and cons, with a particular emphasis on energy efficiency.

What makes a hot water system energy efficient?

In the most basic terms, a water system’s energy efficiency is measured by how much energy is required for the system to achieve its job of heating enough water. This takes into account the type of energy being used and the greenhouse gas emissions being emitted from the use of the appliance.

What are the environmental benefits of energy-efficient hot water systems?

Hot water can account for a whopping 30% of your total hot water bill. This is due to hot water being a necessity of everyday life, but also because hot water systems are constantly running throughout the day. Reducing the costs of something that makes up for nearly a third of your energy bill, will have both a noticeable immediate impact and also a significant long-term impact.

What are the different types of hot water systems?

Electric hot water systems

The most common type of system in Australia, electric hot water systems have been stable in Aussie homes for years. It’s also the most varied category of water heater systems ranging from more traditional systems to continuous flow water heaters to heat pump hot water systems (see below for more information). The cost of an electric hot water system can range from $300 to over $2,000, depending on the type of system you’re looking to buy.

Traditional storage tank

The hot water system storage tank is a recognisable sight in laundries or outside houses across the country. The large tank is used to store hot water, which requires more energy. The other potential downside is that storage tanks are susceptible to leaks, rust and other damage over time, meaning traditional hot water systems tend to have a shorter lifespan than tankless heaters.

Tankless varieties

Continuous flow and electric instantaneous water heaters forgo having a tank and instead heat water when required. Without the need to keep stored water warm, tankless systems have lower running costs and longer lifespans due to having fewer parts. They are, however, more expensive upfront and to fix when they need repairs.


  • More affordable upfront
  • Can be efficient, however, this depends on the type of heater you purchase.
  • Can be installed anywhere with electricity, unlike a gas hot water heater which requires you to have a gas connection.


  • Can be less energy efficient:
  • Tankless heaters have less capacity than storage tank heaters so can struggle if you have multiple demands at once (for example someone in the shower while the dishwasher is running).

Are electric hot water systems energy efficient?

It depends on the system you’re buying. We know this is an annoyingly vague answer, but there are a lot of variants when it comes to an electric hot water system. An instantaneous hot water system is more energy efficient than a heater with a tank.

Gas hot water systems

Gas hot water systems are incredibly popular, making for nearly half of all hot water systems in Australia. They’re a go-to option for those with a gas connection to their home and have been long promoted as an energy-efficient option. They’re also available in models with a tank and tankless models, which follow the same basic principals as the electric versions, except they’re powered by gas. Gas systems tend to be more expensive costing between $900-$4,000 depending on size, brand and model.

When discussing gas connections, it’s important to note that there are actually two separate types of gas connections in Australia.

Gas tank

This is the most common and recognisable type of gas connection in Australia. You or someone you know will have gas storage tanks outside your home. This option is much more readily available to a wider scope of areas than the natural gas option, so if you’re building in a rural area, this is a much better bet for you.

Natural Gas

Natural gas is mined from the earth and though much more common in southern states like New South Wales and Victoria, it is available in some areas of Brisbane. The advantage of natural gas is that you have a continuous source of gas and don’t need to remember to replace tanks.


  • Heat Quickly
  • Gas storage systems are fairly energy efficient: This is especially true if you buy a model with a four or five-star energy rating label.
  • Still works during power outages.
  • Eco-friendly


  • Cost more upfront
  • More expensive to operate
  • They require you to stay on top of your gas supplies
  • If you’re installing gas storage systems indoors, you’ll need somewhere with proper ventilation.

Are gas hot water systems energy efficient?

Though once considered the most energy-efficient option on the market, they’ve since been surpassed by heat pump hot water systems and solar hot water systems. However, if your home has a gas connection, a gas hot water system can be an efficient option for your home.

Solar hot heater systems

A solar hot water system is any hot water system that uses energy from solar panels to heat the water. While very cheap to run, they are the most expensive option upfront, costing anywhere between $3,000 fully installed to upwards of $7,000. The other way to look at it though is that while a standard electric hot water system will cost around $900-$1000 a year for a standard family, a solar hot water system will only cost $250 per annum.


  • Government rebates
  • Lower running costs
  • Better for the environment.


  • High initial costs
  • Require solar panels, so if you don’t have them already, the purchase and installation will greatly add to your

Are solar hot heater systems energy efficient?

According to Sustainability Victoria, solar hot water systems are estimated to use around 60% less energy than either electric or gas hot water systems. The biggest hurdle most people have with solar panels is the hefty initial cost. However, with rebates and the price of panels always dropping, they’re much more affordable than they used to be.

Heat pump water heater

A heat pump hot water heater works a little like a reverse air conditioner. Heat pumps still haven’t become as ubiquitous as storage tanks, but they’re quickly gaining popularity around Australia due to their longer lifespan and lower running costs. The downside for many homeowners is the initial cost which can be anywhere between $2000-$4,500. Luckily, there are rebates for heat pumps that will help reduce the price.


  • More efficient hot water system:
  • Environmentally friendly:


  • More expensive upfront:
  • Can struggle in cold climates:

Are heat pump hot water systems energy efficient?

Heat pumps are one of the most eco-friendly options when it comes to hot water heaters. In most environments, they are far more efficient than traditional options like electrical and gas, however, they do have a higher initial cost.

How much does it cost to invest in energy-efficient hot water systems?

It really depends on the type of system you’re looking to invest in. The very cheapest systems upfront tend not to be very eco-friendly and cost a lot to run. We’d recommend expecting to pay at least a grand for a hot water system that is eco-friendly.

Does this help save money in the long run?

The less energy required to operate your hot water system, the lower the running costs. Though it may seem like a small amount at first, a well-maintained, quality hot water system can last for 10-15 years. If you were to compare a cheap electric hot water system to solar water units, the solar option would save you over $7,500 in running costs over ten years.

Are there any government incentives and rebates for energy-efficient hot water systems?

The Queensland Government currently offers rebates for Solar hot water units and heat pump hot water systems. This could potentially give you hundreds of dollars back on your purchase.

Our practical tips for new home builders

Beyond the type of water heater system you choose, there are a few other considerations to take on board to help get the most from your hot water system.

  • Make sure you’re purchasing the right size hot water system: Hot water systems come in different sizes to meet different demands. Choosing too big a size will increase your initial and running costs for little gain while buying too small a system will leave you running out of water constantly and could burn out the heater system, meaning more repairs. A qualified plumber or water system expert should be able to guide you in choosing the right size hot water system.
  • Take your environment into consideration: Certain hot water systems will thrive in specific areas and may struggle in others. For example, solar hot water systems are naturally going to perform better in areas that have a lot of sun and in a location where solar panels have full access to this sun. Again, a local plumber or hot water heater professional should be able to guide you with this.
  • Look into rebates: Many government bodies, from federal to state and even local, offer rebates for certain types of water systems. This is especially true of hot water systems considered eco-friendly.
  • Plan for the future: A hot water system should easily last you a decade at least, so consider what life events are going to happen in that time. If you and your spouse are planning a family in the next few years, it may be worth taking this into consideration with your heater.
  • Stay up to date with maintenance: Getting annual services and check-ups from a licensed expert will ensure your machine stays in good working order. It also allows your plumber to catch any issues early before they become worse and more expensive to fix.
  • Talk to a building broker: The type of water heater you choose is just one of many decisions you’ll need to make during your building journey. Buildi has helped hundreds of clients throughout their building journeys, helping them navigate the often overwhelming construction world. From finding you the right builder for your project to providing tricks to save money, Buildi is on your side.

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