Are Hot Water Heat Pumps Worth It?

As energy prices continue to rise in Australia, more households are looking for efficient hot water systems that can reduce their power bills.

One recurring and popular option is heat pump hot water systems. But are they really worth the high upfront cost compared to simpler systems like solar or gas? In this article, we take a detailed look to help you weigh your options.

How Do Heat Pump Systems Work?

Unlike conventional electric, gas, or solar hot water heaters that directly heat water, a heat pump water heater transfers heat energy from one place to another instead of generating it directly.

This allows the system to provide the same hot water, however uses about 1/3rd of the electricity of a standard electric system.

A heat pump water heater has three main components:

An outdoor unit that extracts latent heat from ambient air and amplifies it using refrigerant gases and a compressor. This generates 3-5 units of heat energy for every 1 unit of electricity it consumes.

An indoor unit with an in-built storage tank to hold the heated water. Quality systems have enamel-coated tanks to prevent corrosion.

Refrigerant coils that transfer the heat generated outdoors to the water stored indoors.

Efficiency and Cost Savings

When comparing hot water systems, there are two key factors that matter – one is how efficiently they use energy and the other are the long-term running costs.

Heat pumps excel in both factors when compared to alternatives

According to Australia’s energy regulator, heat pump water heaters are 2-3 times more energy efficient than electric storage systems. Even when compared with gas systems, the efficiency gain is considerable at 1.5 to 2 times.

Translating this into dollar savings, households that switch from electric water heating to a heat pump system save about $300 to $400 annually on hot water costs.

The savings are slightly lower than gas, which are approximated at $150 to $250 per year.

Depending on whether there is a source switch from gas to electric, total energy bill savings over 10 years range between $2000 and $5000.

In terms of carbon emissions – heat pumps emit about half to one-third of the greenhouse gases of conventional electric or gas heaters.

This makes them a clearly greener choice as Australia pushes towards renewable energy and sustainability goals.

How Much Does a Heat Pump Hot Water System Cost in Australia?

Upfront Costs and Payback Period

There is no escaping the fact that heat pumps have a significantly higher upfront cost, ranging from $2000 to $4000 installed, depending on capacity, as compared to a price of $1000 or less for basic electric and gas heaters.

However, the energy efficiency offsets the higher cost over time. An average heat pump water heater has a payback period of 4 to 8 years when switching from electric and 6 to 12 years from gas.

Generous government rebates and subsidies at both the federal and state levels help reduce the initial purchase price. As an example, households can save up to $1000 on installation under the Federal Renewable Energy Target scheme.

Consumers should check with their state energy authority about additional rebates while making a purchase. For example, NSW has up to $400 rebates exclusively on heat pump water heaters under the Empowering Homes program.

Considering you save money from year one itself, and the system lasts over 15 years – the long-term return on investment is substantial.

Ideal Installation Locations

While heat pumps work year-round, they perform best in warmer Australian climates where there is abundant ambient heat to extract. This allows the system to operate more efficiently, saving you more money.

Heat pump heaters are therefore ideal for locations like Queensland, the Northern Territory, the north and central coast of NSW, and northern WA.

The only essential requirement is to have 5 meters of unobstructed outdoor space for airflow around the external unit.

Before installing, check with the brand whether the system is optimized for your local climate. Modern inverter heat pumps can maintain efficiency even when ambient air temperatures drop as low as -5 °C to -7 °C.

A hybrid heat pump system might be a better option if you live in the cooler regions of Victoria, Tasmania, or southern NSW and WA.

In a hybrid system, the heat pump is coupled with a secondary heating method, like gas or electric coils, for peak winter periods.

Maintenance Requirements

A common perception is that heat pumps require high maintenance, and while an annual service by a qualified technician is recommended, modern quality heat pumps run for over a decade without any major issues.

Basic maintenance is similar to that of other systems: checking water pressure valves and anode rods to prevent tank corrosion, leaks, etc. The only additional task is periodic cleaning of the outdoor unit’s air filters, especially if located in dust-prone regions.

As the systems have few moving parts and do not burn fuel, the breakdown issues are also minimal in comparison to gas or electric heaters. Over 15+ years of operation will mainly require replacing parts like fans and refrigerant top-ups.

The 7 Best Heat Pump Water Heaters to Buy in Australia

Are Hot Water Heat Pumps Worth It?

Heat pump hot water systems make economic and environmental sense for households looking to reduce energy bills over the long term while contributing to sustainability.

The sheer efficiency of the technology allows heat pumps to save between $150 to $400 per year on hot water costs.

Despite the higher upfront costs, you start saving from day one. Additional federal and state rebates give heat pumps a solid return on investment over their lifespan.

Make sure the unit is properly sized for your household, suited for your climate, and installed by an accredited technician.

Once setup, it will only require standard performance maintenance to efficiently provide hot water for over 15 years at a fraction of standard heating costs.