Solar Hot Water Systems & Costs


More and more Australians are making an effort to reduce their energy bills, but many of us still struggle. We all know we could save power by switching off lights and installing energy-efficient appliances, but have you ever considered just how much energy your hot water system is using? In fact, around 25% of the average household’s energy usage is attributable to water heating, costing households hundreds of dollars every year.

There are plenty of ‘efficient’ hot water systems on the market that promise bill savings, however, none are as cheap to run as solar hot water systems. So, what are solar hot water systems? What do they cost to purchase and run, and how much can you save? Canstar Blue answers these questions and more in this article.

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What is a solar hot water system?

Solar hot water systems utilise energy from the sun to heat water for your home. Solar hot water systems are capable of providing anywhere from 40 to 90 per cent of your home’s hot water needs and are particularly effective in warm climates. However, since you can’t always count on the sun to shine, most solar hot water systems come with electric or gas boosters to ensure your home has enough hot water.

Types of solar hot water systems

Flat-plate collector HWS

There are three main types of solar hot water system – flat-plate collectors, evacuated tube collectors and heat pump systems.

  • Flat-plate collectors: This system uses a large solar panel–like collector to catch the sun’s rays and transfer the heat to an insulated hot water tank. Flat-plate collectors tend to be the more affordable solar hot water option, however, they are not terribly effective in cooler climates. There are two variants of these systems – roof mounted – where the tank is connected to the collector on the roof, and split – where the panel is installed on the roof while the tank is on the ground.
  • Evacuated tube collectors: These work similarly to flat-plate collector hot water systems. The difference is that this model collects sunlight using a series of glass tubes that have a vacuum seal. This allows for the efficient transferral of solar energy. As such, evacuated tube collector hot water systems are widely considered to be the most effective, however they are also the most expensive.
  • Heat Pump systems: Unlike the other solar hot water systems which collect sunlight, heat pump solar systems draw solar heat from the air and use this to heat water. Heat pump solar systems do use some electricity to pump in hot air, but this is a fairly negligible amount.

Solar hot water system purchase costs

A solar hot water system costs between $3,000 and $7,000 fully installed. Prices vary depending on the type of system:

  • Flat plate collectors: Prices start at $3,000 and usually don’t exceed $4,500.
  • Evacuated tub collectors: Prices are usually upwards of $6,000.
  • Heat pumps: These are comparatively affordable, costing between $3,000 and $4,000.

In addition, solar hot water systems with gas boosters can cost around $500 to $1,000 more compared with their electric-booster counterparts. Further, split systems are more expensive than roof-mounted hot water storage tanks.

For comparison, non-solar hot water systems generally cost anything from $300 to $2,000.

  • Electric storage: $500 – $1,000
  • Gas storage: $700 – $1,800
  • Electric instantaneous: $500 – $1,400
  • Gas instantaneous: $300 – $2,000

Solar hot water system running costs

While solar hot water systems are expensive to purchase, they are much cheaper to run than gas or electric storage hot water systems. The exact amount it costs to run a hot water system varies wildly depending on your location, climate and energy tariff. With that said, an average household with a solar hot water system and moderate weather should see at least a 50%-75% reduction in their water heating bill compared to a storage hot water system.

               Electric storage vs solar hot water case study:

A typical Australian household with an electric storage hot water system consumes 20kWh of electricity each day. About a quarter of this daily usage (5kWh) is attributable to water heating. The below costs illustrate the expected annual cost of an electric storage hot water system versus a solar hot water system with electric boosters. The calculations also assume a controlled load tariff with a usage rate of 19c/kWh. The ‘sunny’ calculation assumes that solar meets 75% of a household’s hot water needs every day for one year, while the ‘cloudy’ calculation assumes solar only meets 50% of the household’s needs.


Annual hot water electricity usage:

Electric storage Solar hot water system (Sunny) Solar hot water system (Cloudy)
$346.75 $86.69 $173.38

*Prices are illustrative only and may not be reflective your home’s electricity usage.


You can see in our example that an average household could save hundreds of dollars every year with solar hot water, and depending on your water usage habits and the climate, you could stand to save even more. Remember than hot water systems are quite hardy and often come with long warranty periods, so there’s plenty of time to make a return on your investment.

Is solar hot water right for me?

If you live in a warm and dry area, then installing solar hot water should be a no-brainer – while solar is more expensive upfront, the energy savings should see you make your money back in no time. However, the decision to install solar hot water is a little trickier for those in some of the colder areas in Australia’s southern states.

Most households in cooler climates should still be able to make their money back over the long-term with a solar hot water system, but if you’re on the fence about it, then you should get a personalised quote to ensure that you’re making the best choice for your budget.

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