How you can reduce the cost of your water heater

Did you know that for the average household, a hot water system will account for around a quarter of your energy bill? In fact, water heaters are generally thought to be one of the most significant contributors to household energy consumption and expenditure – second only to heating and cooling.

With that said, there are plenty of ways to cut your hot water costs without resorting to cold showers in the morning. Here we give an overview of different hot water systems, and look at ways that you can cut costs.

Types of hot water systems

The two basic types of water heaters available for domestic use are known as storage and instantaneous (continuous) flow systems.

Storage systems:

  • Heat up water and store for when needed.
  • Poorly insulated systems must regularly reheat water, adding to energy costs.
  • Are usually cheaper upfront than instantaneous models.

Instantaneous flow systems:

  • Only heat water when needed.
  • No loss of heat since water is used immediately and not stored.
  • Only available with electricity or gas powered systems.
  • Usually cheaper long term.

Hot water systems are usually powered by one of four methods. They are electric, gas, solar and heat pump.

  • Electric hot water: This is generally the most expensive if it’s on the continuous (full day rate). While running your system on off-peak electricity can be much cheaper, off-peak electricity isn’t available to all homes. Electric systems will generally cost from $300-$1,500 according to CHOICE, however that figure doesn’t include installation.
  • Gas systems: If your home has access to natural gas, then this may be a good option in terms of long-term costs. Natural gas is cheaper than electricity, and because gas rates don’t usually fluctuate based on time of day, you won’t have any issues with your system being more expensive to use at any given time of day. LPG bottles are also a viable option, but will be much more expensive to run. Gas systems will generally cost from $900-$1,200 excluding installation.
  • Solar hot water systems: This is hands down the most expensive type to buy, but very possibly the cheapest to run over the long term if you’ve got the space. You’ll need four square metres of solar collector area in order to satisfy the needs of a four-person household, which equates to about two panels. Solar hot water systems are able to be boosted by either gas or electricity to make sure that you have water even on a rainy day. Solar water systems will generally cost from $2,000-$7,000.
  • Heat pump: A rather efficient way of heating your water, heat pump systems are expensive to install, but cheap to run. They’re a form of storage system but can be quite noisy, so keep that in mind if you’ve got grumpy neighbours! Heat pump systems will generally cost from $2,500-$4,000, not including installation.

Below is a breakdown of the distribution of hot water systems in Australian households according to the Energy Ratings website.

Electric Storage Gas Storage Instantaneous Gas Solar electric boost Solar gas boost Heat pump Instantaneous electric
36% 24% 21% 10% 3% 3% 3%

How do I save on water heating?

Perhaps the reason many of us overlook our water heating costs is because it seems rather difficult to manage – after all, you can’t just switch off the hot water system when you’re not using it. That’s not to say there isn’t still room to save, so ask yourself these questions.

Is your hot water tank the right size?

If you have a storage hot water system and always seem to run out of hot water, then it’s probably time to upsize. Not just because running out of hot water is a tragedy that no one should have to endure, but also because the more your hot water system has to fill and heat a tank of water, the more energy it will consume. With that said, you shouldn’t get a water heater that’s larger than necessary either, as it will take more energy to heat the larger volume of water despite you not even using it.

Are you on the right tariff?

Ensuring you’re not spending more than necessary for hot water requires an understanding of your energy tariff.

  • If you own a storage hot water system… A time of use tariff might be your cheapest option, assuming your system is set to refill and heat during off-peak and shoulder periods.
  • If you own an instantaneous system… A time of use tariff might be the most expensive option if you shower in the morning and night. Flat rates or block flat rate tariffs might be the better option.

Another option for those with electric hot water systems is to have it put on a ‘controlled load’. This refers to a tariff where your hot water is metered and charged at a lower rate to the rest of your home energy consumption. Controlled loads won’t be available in all areas, or with certain models of water heaters, but it can be a great choice if you have access to it.

Have you maintained your hot water system?

Hot water systems might be sturdy, but they still need maintenance. In storage models for example, If the sacrificial anode (which attracts rust inducing minerals) inside the hot water tank is not replaced, the system will rust from the inside. At first, your hot water system will have to consume more energy to produce the same amount of hot water, but left too long and your hot water system may blow out completely. This task requires a qualified technician, but you should only have to get it checked once every 5 years.

So there you have it. Like many things, the hot water system that’s right for you will depend on a number of factors – there’s no ‘one-size-fits-all’ solution. If it comes time to buy a new system, remember to think energy efficient and you will hopefully see noticeable savings in your next bell.

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