Gas Water Heater Vs Heat Pump Water Heater – Which is Better?

“Should I stick with my gas water heater or switch to the heat pump water heater?” Has this question recently popped into your head?

If yes, this is exactly where you need to be.

In Australia, gas water heaters have been the preferred option for water heating for decades due to their low installation costs, ability to function reliably in cold regions, and dependability. 

However, heat pump water heaters have become the talk of the town recently after a spike in gas prices and new government incentives offered in an effort to push energy efficient technology into the Australian market.

So, in 2025, which one actually makes the most sense? Let’s analyse it using actual expenses, real figures, and a healthy dose of common sense.

Gas Vs Heat Pump Water Heaters: How They Work

Before beginning to analyse them and choosing the right fit for your household, it is important to understand the key difference between these two types of water heaters, i.e., the way they operate.

Simply put, gas water heaters use a flame to directly heat water by burning natural gas or LPG. Heat pump water heaters, on the other hand, work like a reverse refrigerator by using energy to draw heat from the air and transfer it to your water tank.

Their cost and environmental performance are directly influenced by the way they generate heat.

Upfront Costs: Which One Hits the Wallet Harder?

Let’s begin with the aspect that is seen to affect the buying decisions of Australians most of the time and truly concerns everyone: the upfront expense of installing a water heater.

Looking at the price ranges, gas water heaters definitely seem cheaper. Yet, the rising energy prices and various rebate schemes offered by the Australian government for heat pump water heater installations urge us to give equal consideration to other options. 

Government Incentives and Rebates

This is where heat pump water heaters will stand out in your analysis of both systems.

Australian government is taking solid measures for environmental sustainability and reducing the carbon footprint. Small-scale Technology Certificates (STCs), offered by the Australian Government’s Small-scale Renewable Energy Scheme (SRES), are one such initiative that can help you reduce installation costs by $800 to $1,200.

Furthermore, with incentives, state-level initiatives like the NSW Energy Savings Scheme and Victorian Energy Upgrades can lower the ultimate cost to almost $2,000.

In contrast, gas water heating systems hardly ever qualify for any such incentives.

Operating Expenses: Another Game-Changer

Based on the statistics from the Australian Government’s Energy Rating:

• Operating a gas storage water heater normally costs around $400 to $600 every year.
• The typical cost of a heat pump water heater is only $150 to $250 annually, depending on the model and consumption.

This amounts to a yearly operating cost reduction of about 60% for those using a heat pump water heater. Consequently, it is safe to say that the greater initial cost of a heat pump could be readily compensated for by the $2,000 to $3,000 you could save over a period of ten years.

The Benefit of Solar Energy

Its energy efficiency already earns a heat pump water some extra points, but this helps it climb the ladder up even higher. A heat pump can operate virtually for free throughout the day if your house already has rooftop solar.

No matter how sunny the weather gets, gas water heating systems will continue to burn fossil fuels, thus they cannot benefit from your solar energy.

For this reason, solar-compatible heat pumps such as iStore or Rheem Ambiheat are becoming increasingly popular throughout Australia, especially in Queensland, Western Australia, and New South Wales, which have the highest rates of solar installations.

Noise, Maintenance, Performance & Lifespan

Noise:

Like a refrigerator, heat pumps have a soft hum that ranges from 45 to 50 dB. So, placement needs to be well thought out if noise is an issue. Gas systems, on the other hand, are almost silent.

Maintenance: 

Gas heaters need to have their burners, pilot lights and leaks checked on a regular basis. Most heat pumps, however, require yearly maintenance and filter cleaning only.

Performance in cold weather: 

The idea that heat pumps “don’t work in winter” is among the most pervasive misconceptions about them. In severely cold climates or places with little ventilation, gas water heating systems do continue to have a slight edge, but for 95% of Australian houses, the performance difference has vanished.

Lifespan: 

Although heat pumps frequently outlast gas systems with fewer moving components, both have an average lifespan of 10 to 15 years.

Gas Water Heater Vs Heat Pump Water Heater: The Ultimate Choice

Gas water heating systems still make sense if you live in a chilly climate without solar power because it’s simple, consistent, and dependable.

However, a heat pump water heater is the better long-term investment for the majority of Australian homes, particularly those with solar panels or those fed up with erratic increases in gas prices.

Not only is a heat pump water heater better, but it’s the next big thing if you want to reduce your energy costs, future-proof your house, and support Australia’s clean energy agenda.

Looking Ahead

Moving from gas to a heat pump may seem like a significant change, but so was going from flip phones to smartphones.

Technology has advanced, prices have decreased, and there are noticeable savings. So, you should give the heat pump water heater careful consideration, whether you’re building, remodelling or just ready for lower bills.

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