A heat pump hot water system is the cheapest mainstream way to heat water, and rebates make the up-front cost a lot easier to swallow. But the rebate landscape changes often, so this is an honest, indicative guide rather than a promise of an exact dollar figure. Always confirm what is current when you buy.
TL;DR
A heat pump uses about a third of the power of an electric storage unit. Federal STCs are usually applied as a discount on the purchase price, and the certificates step down each year until the scheme ends in 2030. NSW adds its own upfront discount through the Energy Savings Scheme. Check what is current the week you buy, because the numbers move.
How does a heat pump work, and why is it cheap to run?
A heat pump works like a fridge running in reverse. Instead of using a heating element to make heat, it uses a small compressor to pull warmth out of the surrounding air and pump it into the tank. Moving heat is far cheaper than making it. The Australian Government’s energy.gov.au puts heat pump water heaters at 30% of the energy of a conventional electric hot water system, roughly a third, for the same hot water. That is where the saving comes from, every day, for the life of the unit.
What rebates are there?
There are two main layers, and they do not all apply to everyone.
Federal STCs (Small-scale Technology Certificates). This is the big one and it applies nationwide. Eligible air source heat pumps earn STCs under the Small-scale Renewable Energy Scheme. The Clean Energy Regulator says most people assign the right to create them to a registered agent in exchange for a discount on the purchase price, usually written into the purchase contract, so you do not lodge anything yourself. Only models on its register qualify, and heat pumps must be under 425 litres. How many certificates a system earns depends on the model and on the postcode zone where it is installed, and the deeming period drops by a year each year until the scheme ends in 2030, which cuts the number of certificates a new install can earn.
NSW Energy Savings Scheme. NSW runs a hot water upgrade incentive that is listed as available now, with no closing date. It comes off the installer’s quote as an upfront discount. The NSW Government’s indicative figures are up to $640 when a heat pump replaces an electric water heater, and up to $330 when it replaces a gas one. The actual amount varies with the installer, the model and the install, you still make a minimum payment, and a home that already has an efficient system may not be eligible. Retailer programs come and go on top of this.
| Federal STCs | NSW hot water upgrade incentive | |
|---|---|---|
| Run by | Clean Energy Regulator | NSW Government (Energy Savings Scheme) |
| How you get it | Assign the certificates to a registered agent for a discount on the price | Upfront discount on the installer’s quote |
| How much | Depends on the model and postcode zone; falls each year to 2030 | Indicative: up to $640 replacing electric, up to $330 replacing gas |
| Catches | Registered models only; heat pumps under 425 L | Minimum payment applies; existing efficient systems may not qualify |
Because the values change with policy, the scheme pages and your chosen installer are the right place to confirm the exact figure for your unit. We will tell you the indicative discount on the model we quote and point you at the current programs, rather than quote a number that might be out of date.
Is it worth it for your home?
A heat pump suits most households, and it is an especially good move if you:
- run a medium-to-large household that uses a fair bit of hot water,
- have rooftop solar (the Clean Energy Regulator suggests a timer so the heat pump runs during the day while the panels are generating),
- are replacing an old electric storage unit and want to cut the running cost.
It is a closer call for a small household already on cheap off-peak electricity, or a spot with poor airflow around where the unit would sit. energy.gov.au also notes that the compressor can be noisy, like an air conditioner, and that not all models are designed for places that regularly drop below 5°C in winter, so where the unit sits matters. We will be straight with you about whether a heat pump, a gas continuous-flow or a plain electric unit is the better buy for your place.
For a wider cost comparison see our hot water replacement cost guide. If you are ready to replace the unit, our hot water systems page covers the install, or request a callback and we will work out the right system for your home.