A hot water system that still produces a warm shower can still be expensive. Storage units lose heat through the tank all day, a dripping relief valve runs water down the drain, and an old element or thermostat works harder than it should.
How much of the power bill is hot water?
More than most people expect. Water heating is the second-largest share of household energy use in Australia, between 15% and 30% depending on the home, and the largest source of greenhouse emissions from an average home. The Australian Government’s Your Home guide to hot water systems puts it at about a quarter of average household energy use. It runs every single day whether you think about it or not, which is why an inefficient unit quietly matters more than almost any other appliance.
Why do storage losses never stop?
A storage tank is a giant thermos with a timer. Water sits at 60°C or more, and the heat leaks through the walls of the tank continuously. Your Home estimates that about 30% of the energy a storage system uses is lost as heat from the tank and its pipework. The better the insulation, the slower the leak, but it never reaches zero. In winter, when the tank sits in a cold garage or outside, the gap between water temperature and air temperature widens and the losses climb. Every degree the water cools is a degree the element or burner has to replace. An old tank with thin or degraded lagging can reheat itself several times a day just standing there.
Element, heat pump or gas: which costs more to run?
Not all hot water energy is equal.
| System | How it heats | What drives the running cost |
|---|---|---|
| Electric storage (element) | An element heats a stored tank | Full price for every unit of heat, plus standing losses from the tank |
| Heat pump | Moves warmth from the air into the tank | About 30% of the energy of a conventional electric system, per energy.gov.au |
| Gas storage | A burner heats a stored tank | High heat loss: the tank cannot be insulated where the flame heats it |
| Gas continuous-flow | Heats water only as it passes through | No tank, so no standing losses |
- Electric element. A resistive element converts electricity to heat at essentially 100% efficiency, which sounds good until you look at what a kilowatt-hour costs. Heating water with an element is like paying full price for every unit of heat.
- Heat pump. A heat pump does not make heat, it moves it, pulling warmth from the air into the tank. For every unit of electricity it uses, it delivers roughly three units of heat to the water. That is the 30% figure in the table.
- Gas. Gas continuous-flow only heats water as it passes through, so there is no tank slowly losing heat all day. energy.gov.au calls gas storage particularly inefficient, with very high heat loss, because the tank cannot be insulated at the point where the flame heats it. That is why the running-cost comparison between storage gas and instant gas is usually not close.
Does tariff timing change the cost?
Yes, a lot. The same litre of hot water costs very different amounts depending on when it is heated. Many NSW homes run the hot water on a controlled-load tariff, sometimes called off-peak or a J-tariff, which heats the tank overnight at a cheaper rate. That only works if the tank is big enough to last the day on one overnight heat. Homes with solar panels can flip the logic: a timer that runs the element in the middle of the day turns excess solar into hot water instead of exporting it for a few cents. Your Home cautions that solar diverters may void the heater’s warranty and may override its built-in Legionella protection, and that a timer must not be set so short that it does the same. A system on the wrong tariff, or one boosting at peak times because it cannot hold enough heat, pays a penalty on every shower.
Is my tank the wrong size?
An oversized tank is not just wasted money at purchase. Every unused litre still sits at 60°C radiating heat, so a 315-litre unit on a two-person household pays standing losses on water nobody uses; Your Home notes that households using little hot water lose a higher share to heat loss. Undersizing has its own cost: the tank empties, the boost kicks in at peak rates, or the household compensates with longer, hotter showers. The right size is the one that covers a normal day without reheating more water than you use.
Could the thermostat or sediment be the problem?
Two quiet multipliers:
- Thermostat setting. Your Home says residential storage systems must heat the water to at least 60°C at least once every 7 days to stop Legionella growing, and advises setting the thermostat to at least 60°C but no higher, because a higher setting uses more energy than it needs to. A tempering valve then limits what reaches the bathroom taps to 50°C.
- Sediment. In areas with harder water, scale settles in the bottom of the tank and coats the element. The element then has to heat through a layer of mineral before the heat reaches the water, which is why older tanks start to rumble or make kettling noises and take longer to recover.
When is the unit itself the problem?
If the unit is past about 10 years, or the tank itself is leaking, replacement is usually cheaper than another repair. Under 8 years with a failed valve or element, repair is still worth pricing. Run the 30-second hot water check or read the replacement cost guide for the ranges. If you are weighing up a heat pump, the rebate guide covers what applies in NSW.
We quote a fixed price before we start, including whether a heat-pump rebate applies. The swap itself is covered on our hot water systems page.