A comparison of hot water systems

It’s easy to overlook your hot water system when it comes to saving energy, but did you know that hot water makes up 30% of an average household’s usage? Your hot water system could be costing you big time, so we’ve compared electric, gas, solar and heat pump hot water systems, to help you find the best and most cost-effective solution for your home.

There are two mechanisms in which an electric or gas hot water system can work. A storage hot water system heats and maintains warm water in a tank until it is ready to use. This provides instant hot water, but is limited in storage capacity. Continuous hot water systems rapidly heat up an unlimited amount of water when you need it. This means your system isn’t wasting gas or electricity on keeping water warm when you’re not going to use it, though it does take a few moments for the water to heat up.

Electric water heaters

  • How it works
    Electric storage hot water systems heat water using an electric-powered element which sits below the water tank. Continuous systems work in a similar way, but instead the element is coiled around the pipes to rapidly heat the water inside.
  • Advantages
    Electric hot water systems have quite low up-front costs and are a reliable way to keep your water warm. Some electric hot water systems can also be programed to do the majority of its heating during off-peak periods to help minimise your energy bill.
  • Disadvantages
    Electrical hot water systems are almost always the most expensive long-term hot water solution. They also have high greenhouse gas emissions and are generally discouraged.

Gas water heaters

  • How it works
    Storage systems use a gas burner to continuously heat and maintain water in a tank. Continuous flow systems also use a burner which ignites only when the water is needed.
  • Advantages
    Gas hot water systems produce less greenhouse gas emissions than electric systems. Additionally, depending on your location, gas systems are usually considered to have lower usage rates compared to electricity, making them the most cost-effective option long term.
  • Disadvantages
    Gas hot water systems are only really viable if you’re connected to mains gas, as using LPG bottles is more expensive and creates the risk of running out of hot water. Gas hot water systems must also be located outside, or have an exhaust vent if they are located inside.

Solar water heaters

  • How it works
    Solar hot water systems are storage units which generate heat from the sun using panels installed on the roof of the property. This heat is used to warm and maintain the water in your tank.
  • Advantages
    Solar hot water systems are able to reduce your hot water systems energy consumption by up to 90%. Being that hot water systems are notoriously energy hungry, this could mean significant savings on your power bills. Solar hot water systems are also the most environmentally friendly option.
  • Disadvantages
    Solar hot water systems have the highest up-front costs – anywhere from $2,000 to $7,000 after rebates depending on the system size, and excluding installation costs. Some solar hot water systems may also be unreliable on overcast days, though most models will kick-over to gas or electric back-up heating if the water isn’t hot enough.

Heat pump water heaters

  • How it works
    Heat pumps have a fan that draws warm air into the system, which is transferred to the water storage tank. It’s essentially a reverse fridge. Rather than pumping out hot air to keep your fridge cool, it pumps hot air in to heat the system up.
  • Advantages
    Heat pumps are one of the most energy efficient hot water solutions. While they need electricity to run, they are roughly three times more efficient than traditional electric water heaters.
  • Disadvantages
    Heat pumps are only suitable in warm environments. While some heat pumps do come with boosters, if the climate isn’t suitable, there is little benefit in spending the extra money on a heap pump.

So what’s the best?

If you’re connected to mains gas and your home gets moderate to good amounts of sunlight, the most ideal system for you could be a solar storage hot water system with gas boosters. If your home doesn’t get much sunlight, the next best thing is an instantaneous gas system.

There is never a ‘one size fits all’ solution when it comes to cutting your energy bill, but it can be said that you should avoid electric hot water systems if possible as they have high emissions and are often considered to be the most expensive option.

Hot water system costs graph
The annual cost of hot water systems according to smartchoice – a NSW government initiative.

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