Hot water – the cheapest per litre – AEF | Australian Energy Foundation

Hot water – the cheapest per litre

Australians love their showers, but the hot water coming out of your showerhead isn’t free.  Some households spend over $1,000 per year on energy just to heat water. Consumers can choose between several types of water heater such as gas, electric and heat pump. So, what’s the cheapest method?

Let’s consider a family[i] taking a total of five long showers[ii] per day and using 365 litres of hot water daily. Perhaps they’ve got long-haired, sporty teenagers! An old-style electric tank would cost $1,321 per year[iii] when run overnight on an electricity rate dedicated to hot water.[iv] Alternatively, a standard gas-powered water heater[v] would cost about $830 per year.[vi]

This family would enjoy much lower running costs by choosing a heat pump hot water system. These use only a fraction of the energy consumed by gas or old-style electric options. Most of the heat is harvested from the outdoor air, which can be achieved even in sub-zero conditions. The Reclaim Energy heat pump has market-leading efficiency and would cost about $295 per year[vii], running overnight on a standard off-peak tariff.

Heat pump powered by solar electricity

Households such as this tend to have roof space for a large solar system. If they set the heat pump’s timer to run around midday, most of its electricity would be supplied directly from the solar panels. This brings down the annual cost to around $135 per year.[viii]

Bar graph of annual hot water cost by type

What if the hot water runs out?

Unlike most other heat pump brands, the Reclaim Energy has a “boost” button. If the hot water tank runs out (for example when guests are staying), you can force the heater to turn on just by hitting the button.

How much does it cost to buy?

The Solar and Energy Bulk Buy, run through the Australian Energy Foundation (AEF), Mornington Peninsula residents can purchase a Reclaim Energy heat pump with 400 litre stainless steel tank for $5,250 when upgrading from an old-style electric tank. This includes installation and rebates.[ix]

Purchase prices are cheaper for gas and simple electric water heaters, but this family would achieve a quick payback time due to the lower running costs associated with the hot water heat pump. Households should consider their individual situation – for those with small hot water requirements, a lower-cost appliance might be more economic.

Smart solar

It’s possible to save even more if the solar is smart enough. A solar system including a Fronius inverter can send a signal that excess solar power is available. This signal can be connected to the Reclaim Energy heat pump, which will respond by switching on. Fronius inverters are also available to Mornington Peninsula residents as part of the solar bulk buy via AEF. In this case, hot water costs could reduce below $100 per year.

What about solar hot water?

A solar thermal hot water system (e.g. evacuated tubes) would need boosting in colder months, using about as much electricity annually as a heat pump system.) However, this is less suitable to run from solar electricity because the required boosting during winter may exceed the solar system’s generation during those months.

bar graph of the hot water cost per thousand litres

Gas supply charge

Having a gas connection can cost around $280 per year, in addition to the cost of gas.[x] If a water heater is the only gas appliance, the daily supply charge should be factored into the running cost, making the gas option nearly as expensive as old-style electric.


What’s the cheapest hot water per litre? As shown in the following chart, the cheapest option is a heat pump hot water system powered mostly by solar. For the family with relatively high usage of hot water, this option’s running costs are only about one-sixth of a gas unit, or one-tenth of an old-style electric tank.

If you are interested in calculating your estimated annual running costs for different types of water heaters, try using our new Hot Water System Running Cost Comparison Calculator.


[i] Assumes mains electricity and gas, no free firewood, temperate location.

[ii] Assumed showering at 10 litres per minute for a duration of 13 minutes.  Water inlet 15 degrees C.

[iii] 21.2 kWh/day, including 2.1 kWh/day to cover heat escaping through the tank wall. A 400-litre tank is assumed.

[iv] Controlled load tariff of 17.07c/kWh.  Origin Energy, UED area, accessed 2/6/21.

[v] Assumes a gas burner with 85% efficiency, a hot water storage tank and standby power 5 Watts. An instantaneous gas option would reduce running costs by about $70 per year.

[vi] Burning 90 megajoules of gas daily at 2.5c per MJ.  Australian Gas Networks, Central area, accessed 2/6/21.

[vii] Coefficient of Performance: 5. Off-peak tariff

[viii] Assumes 85% of power comes from solar, costing the feed-in tariff of 6c/kWh. 15% comes from the general electricity tariff of 24c.  Origin energy, UED area, accessed 2/6/21.

[ix] Includes the VEEC and STC rebates but excludes the Solar Victoria hot water rebate. Should you be eligible for this rebate, this reduces the cost of the unit by 50% (or up to $1000).

[x] Australian Gas Networks, Central area, accessed 2/6/21.


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