How to reduce the cost of your hot water bill

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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 usage and expenditure – second only to heating and cooling.

With that said, there are plenty of ways to reduce hot water costs without resorting to cold showers in the morning. In this Canstar Blue guide we give an overview of different hot water systems and what they could costs you run each year as well as take look at how you can save on hot water bills.

Types of hot water systems in Australia

To understand just how much you can expect to pay for hot water, you’ll first need to know your options when it comes to hot water systems in Australia.

There are two basic types of water heaters available for domestic use; storage and instantaneous (continuous) flow systems. Storage systems, as the name suggests, heat hot water and store it for use as needed. An instantaneous flow system however, only heats water as it is needed. Storage systems are typically cheaper to purchase upfront, but consumers may find more long-term savings with an instantaneous system.

Hot water systems are usually powered by one of these methods:

A storage hot water system can use any one of the above power methods. An instantaneous system however, is typically powered using electricity, natural gas or LPG.

What is the average cost of hot water?

The average cost of heating water will vary greatly depending on a number of factors such as; the number of people in a household, what you use hot water for, the type of system, energy tariff and the insulation of connection pipes.

As a general guide, Sustainability Victoria provides an example of estimated running costs for different types of hot water systems. These figures are based off calculations for a three-person, household in Victoria, using 120L a day. Please note, this information should be treated as general only. Running costs may vary depending on household size, as well as the different states, territories and distribution networks across Australia.

Water Heater Type Energy Star Rating Annual Energy Cost
Gas
Natural gas – storage 5.3 $245
4 $280
Natural gas – instant 7 $210
6 $225
LPG – storage 5.3 $580
4 $660
LPG – instant 7 $470
6 $515
Electric
Peak tariff – storage n/a $765
Peak tariff – instant n/a $645
Off-peak tariff – storage n/a $605
Solar
Natural gas boosted High efficiency $50
Standard $65
LPG boosted High efficiency $95
Standard $130
Electric boosted – peak tariff High efficiency $215
Standard $305
Electric boosted – off-peak tariff High efficiency $165
Standard $230
Heat Pump
Peak tariff High efficiency $200
Standard $320
Off-peak tariff High efficiency $135
Standard $215

Annual costs based on Melbourne household with average daily hot water use. For gas instantaneous and gas boosted solar water heaters, running costs take electricity use into account. Electricity tariffs based on general usage rate of 26.16 c/kWh, and off-peak rate of 17.93 c/kWh. Natural gas tariffs based on typical declining block structure for house with gas heating, water heating and cooking. Natural gas tariffs used for gas storage and instantaneous water heaters: 1.68 c/MJ; 1.65 c/MJ. For solar-natural gas boost, tariff of 1.74 c/MJ has been used. LPG tariff based on bulk supply (210kg cylinder) in Melbourne area: $1 per litre or 4.0 c/MJ. Energy tariffs do not include pay on time discounts or the annual supply charge or cylinder rental fee.

Solar and heat pump water heaters efficiency levels are based on the following STC allocations in Zone 4 (southern Victoria): solar gas boosted – standard (29), high efficiency (33); electric boosted solar – standard (27), high efficiency (31); heat pump – standard (28), high efficiency (35).

How can I reduce hot water costs?

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. Below we’ve shared five easy things you can do to save on your hot water bill.

Find ways to use less hot water

Seems an obvious answer but the fact remains – if you’re looking to reduce your hot water bill, it will probably help to reduce your hot water usage. Now this doesn’t mean you have to go cold turkey. Some quick ways to cut down on usage could be:

  • Running your washing machine with cold water.
  • Cutting back your shower time.
  • Reducing the water used while hand washing dishes.
  • Running the dishwasher on an eco or economy setting.

Ensure you have the right sized system

If you have a storage hot water system that 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.

It might also be worth considering a more energy-efficient model too, if you are the market for a new system. Although, keep in mind, this may cost you more upfront.

Consider if you are on the right electricity 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 a cheaper 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 may be the more 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 usage. 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.

Cheap Single Rate Electricity Plans in Australia

Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Ausgrid network in Sydney but prices may vary depending on your circumstances. This comparison assumes general energy usage of 3900kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.

Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Citipower network in Melbourne but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.

Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Energex network in Brisbane but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4600kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.

Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the SA Power network in Adelaide but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.

Insulate the pipes and heater

It might also help reduce costs if you insulate the pipes running off your hot water system. This can help to keep the water at maximum heat as it makes its way to you. Most insulation jobs can be done fairly cheap and easy as a DIY, but if in doubt, it may be best to reach out to a handyman for assistance. For more information on insulating your hot water system pipes, check out Energy.gov’s guide.

Keep your system well maintained

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 five years.

Cheap Natural Gas Plans

Gas Plans Compared in VIC

Here are some of the cheapest gas deals on our database for VIC. These estimated annual costs are based on the Australian Gas Network in Melbourne and yearly gas usage of 29,830MJ, but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest estimated cost. This table includes products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

Gas Plans Compared in NSW

Here are some of the cheapest gas deals on our database for NSW. These estimated annual costs are based on the Jemena Gas Network in Sydney and yearly gas usage of 18,542MJ, but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest estimated cost. This table includes products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

Gas Plans Compared in WA

Here are some of the cheapest gas deals on our database for WA. These estimated annual costs are based on the ATCO Network in Perth and yearly gas usage of 27,620 (units), but prices may vary depending on your circumstances. We show one product per retailer, listed in order of lowest estimated cost. This table includes products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

Gas Plans Compared in SA

Here are some of the cheapest gas deals on our database for SA. These estimated annual costs are based on the Australian Gas Network in Adelaide and yearly gas usage of 11,875MJ, but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest estimated cost. This table includes products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

Gas Plans Compared in QLD

Here are some of the cheapest gas deals on our database for QLD. These estimated annual costs are based on the Australian Gas Network in Brisbane and yearly gas usage of 6,842MJ, but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest estimated cost. This table includes products from referral partners†. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

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 though, it might be worth considering an energy efficient model. It may end up costing you more upfront but hopefully with time, you’ll start to see some noticeable savings on your next hot water bill.

If you’re spoilt for choice when it comes to hot water system brands and models though, be sure to check out our annual ratings of hot water systems. Here we list the brands everyday Aussies have rated best in the biz across a range of categories – from reliability to effectiveness, value for money and overall satisfaction. Just click the link below to find out more.

Best-Rated Hot Water Systems

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