Wondering how much a hot water system costs? Prices can vary a lot—anywhere from $300 to $7,000, depending on the type you choose. On top of that, installation can cost between $1,000 and $7,000.
In this guide, we’ll break down the costs of different systems—electric, gas, solar, and heat pumps—so you know what to expect when investing in a new hot water system.
Key Takeaways
- The total hot water system cost includes the price of the unit, installation fees, and ongoing maintenance. Prices vary depending on the type you go for.
- Solar hot water systems and heat pump water heaters cost more upfront but save money in the long run while reducing greenhouse gas emissions.
- Government rebates, such as the NSW Energy Savings Scheme, can help cut down the cost of energy-efficient hot water systems, making them more affordable for Aussie households.
Table of Contents
Understanding Hot Water System Costs
Buying a hot water system isn’t just about the upfront price—there are a few other costs to think about too.
First, there’s the purchase price, which depends on the type of system you choose:
- Electric storage hot water systems: $300 – $1,500
- Gas storage water heaters: $900 – $2,000
- Heat pump hot water systems and solar water heaters: $2,500 – $7,000 (They cost more upfront, but they can save you money over time)
Next, you’ll need to factor in installation costs, which can add quite a bit to the total price. These fees vary based on the complexity of the job and the type of heating system chosen.
But it doesn’t stop there! You also have running and maintenance costs to think about. Some systems are cheaper to run than others—electric systems tend to have higher energy bills than natural gas or solar power alternatives. Regular maintenance is also important to keep your water heating system running efficiently and lasting longer.
Taking all these costs into account will help you choose the right hot water system for your budget and long-term savings.
Types of Hot Water Systems
Choosing a hot water system in 2025 isn’t a one-size-fits-all decision. You’ve got a few options, including electric systems, gas instantaneous water heaters, solar hot water systems, and heat pump water heaters, and each has its own pros and cons. The right one for you depends on things like your budget, energy efficiency needs, and how much hot water your household uses.
Understanding the differences can help you select the best hot water system for your home.
Electric Hot Water Systems
Electric hot water systems are one of the simplest and most budget-friendly options to buy, with unit costs ranging from $300 to $1,500 and $1,000 to $2,000 for installation. But here’s the catch—electric water heaters often have higher water heating running costs. Depending on your energy rates and how much hot water you use, you might pay $700 to $925 per year on electricity bills on the lower end of the scale. But this number depends on various factors.
That said, electric systems have some big advantages:
- Easy to install and maintain
- Newer energy-efficient electric-boosted models can help reduce household energy use
- If you don’t have a gas connection, an electric split system may be the right hot water system for you.
If you’re after an affordable upfront option, electric hot water systems can be great. Just make sure you consider the long-term running costs! Learn about the best electric hot water system for you.
Gas Hot Water Systems
Gas hot water systems are efficient and reliable, especially if you already have a natural gas connection. They’re also handy during power outages because they don’t rely on electricity. They cost between $900 and $2,000 to buy, with installation adding another $1,500 to $3,000.
One of the biggest perks is that gas systems, such as instantaneous gas water heaters and continuous flow systems, are cheaper to run than electric ones. Many models heat water on demand (only when needed), making them more energy-efficient than electric storage systems. Running costs for gas systems are around $803 per year.
Another bonus—natural gas is cleaner than other fossil fuels, so it’s a slightly greener choice. There’s also LPG but they are usually more expensive than natural gas.
But before you decide, think about:
- How much hot water you use
- Your budget for upfront vs. long-term costs
- Whether natural gas or LPG is available in your area
If you want lower running costs and efficient performance, a gas hot water system (natural gas or LPG) could be the way to go! You may find the best gas hot water systems that suit your needs.
Solar Hot Water Systems
Want to cut your power bills and go green? A solar hot water system might be the perfect choice! Prices range from $3,000 to $7,000, and long-term savings are huge as you’ll rely on electricity or gas.
These systems use the sun’s energy to heat water, and they often come with backup systems, such as electric-boosted or gas-storage water heaters, for cloudy days.
There are two main designs of solar water heaters: roof-mounted systems (where the solar panels and water tank are both installed on the roof) and split systems (where the storage tank is separate). There are also two different operating methods: active and passive systems. Active systems use pumps to move water, while passive systems rely on natural convection (hot water rises, cold water sinks).
While the initial cost is high, their low running costs and potential government rebates make them a smart long-term choice.
Take note that the cost-effectiveness of a solar hot water system depends on:
- Climate – Works best in sunny areas but may need a booster in colder regions.
- System Size – Larger households need bigger systems, which cost more upfront but save more in the long run.
- Hot Water Usage – The more hot water you use, the more you’ll save with solar.
Heat Pump Hot Water Systems
Heat pump systems are one of the most energy-efficient hot water services available. Instead of using electricity to heat water directly, heat pump units pull from the air or ground heat water—kind of like a fridge in reverse! They cost between $2,500 and $5,500 but can be up to three times more efficient than traditional electric water heaters.
Here are a few things to keep in mind, though:
- Some heat pump systems can be noisy due to the compressor
- They work best in warmer or moderate climates.
- If LPG is your only alternative, a heat pump water heater can be a more cost-effective and energy-efficient option.
Overall, heat pump hot water systems could be your best bet if you’re looking for a cost-effective, energy-saving system without solar panels. To determine the right fit, consider our blog on What Size Heat Pump Hot Water System Do I Need.
Installation Costs for Hot Water Systems
Installation costs depend on the type of hot water system, which can range from $1,000 to over $7,000. The final price depends on a few key things, like whether you’re installing a brand-new system or replacing an existing hot water system. For example:
- Replacing an electric system? It’ll likely cost between $300 and $700.
- Switching out a gas system? Expect to pay around $500 to $800.
But that’s not all. The price can also go up if you need extra pipes, valves, or fittings—these little things add up! Knowing what affects the cost can help you plan your budget and avoid surprise expenses.
Factors Affecting Installation Costs
One of the biggest factors is labour costs. Hot water plumbers in Melbourne usually charge $100 to $150 per hour.
Other things that can increase the price include:
- Complex installation process – If your system needs extra electrical work or is tricky to access, you’ll pay more.
- Tank size – Bigger tanks need more materials and labour, which bumps up the price.
By understanding these factors, you’ll have a better idea of what to expect when installing your new hot water system.
Comparing Installation Costs by System Type
Not all hot water systems cost the same to install. Here’s a quick breakdown:
- Electric hot water systems – Easiest and cheapest to install, costing $1,000 to $2,000.
- Gas hot water systems – More expensive ($1,500 to $3,000) because they need gas connections and venting.
- Solar hot water systems – The most expensive to install ($3,000 to $7,000), since they require solar panels and extra setup work.
Even though solar is pricier upfront, it saves you money in the long run by cutting down your energy bills. Knowing these costs can help you pick the right system that fits your budget and long-term needs.
Running Costs of Hot Water Systems
The cost of running your hot water system can vary a lot depending on the type of system you have and how much hot water your household uses. Here’s a rough idea of the average yearly running costs for different systems:
- Electric storage systems: around $1,442 (one of the more expensive options)
- Instant gas hot water heaters: approximately $803 (more economical)
- Solar hot water systems with gas boosters: about $502 (even more cost-effective)
Your running costs depend on things like how energy-efficient your system is and what you pay for electricity or gas (local energy tariffs). Heat pump systems are great for saving energy because they pull heat from the air or ground instead of using lots of electricity. Investing in an insulated tank or tankless system (also called instant or on-demand systems) only heats water when you need it, so it wastes less energy.
Energy Efficiency and Running Costs
The more energy-efficient your hot water system is, the less it costs to run. Heat pump systems are nearly three times more efficient than traditional electric systems, which means they use a lot less power and can save you money in the long run.
Solar hot water systems are another energy-saving option, with annual energy costs ranging from $65 to $365. That’s a big saving over time! Plus, using solar power reduces your carbon footprint, which is great for the environment.
Things like climate and system size also affect how efficient your system is. If you get plenty of sunshine, a solar system will work better and save you even more. Choosing an energy-efficient system means lower power bills and less impact on the environment.
Tips to Reduce Running Costs
Want to lower your hot water bills? Here are some easy ways to cut costs:
- Use a timer – Set your hot water system to heat water only when needed (like during off-peak hours).
- Maintain your system – Regular servicing keeps it running efficiently and prevents costly repairs.
- Insulate your pipes – This helps keep water hotter for longer, so your system doesn’t have to work as hard.
- Choose energy-efficient appliances – If you’re upgrading, go for a system with a high energy rating.
- Think about solar – If you can, switching to solar hot water could save you heaps in the long run.
A few small changes can make a big difference in how much you spend on hot water every year.
Government Rebates and Incentives
Did you know the government offers rebates to help you save money when installing an energy-efficient hot water system? These incentives make it easier to switch to a system that not only lowers your power bills but also helps the environment.
In 2025, both the federal and state governments are offering financial incentives for eco-friendly hot water systems. The federal rebate can take a big chunk off the purchase price, making energy-efficient options much more affordable.
Different states have their own rebate programs too. For example, if you live in Victoria, you could get up to $1,000 back on an eligible system. These rebates help cover the higher upfront costs of systems like solar and heat pumps, making them a great investment for your home.
State-Specific Rebates
Each state has its own rebate scheme, offering different amounts depending on where you live.
- Victoria – Up to $1,000 for heat pump or solar hot water systems.
- Queensland – Up to $1,500 for energy-efficient hot water systems.
- New South Wales – Rebates available under the NSW Energy Savings Scheme for installing heat pump systems.
To qualify for these rebates, you’ll usually need to show proof of purchase and installation. This helps make sure your hot water system meets your state’s requirements. These rebates are designed to encourage people to replace old, inefficient systems with newer, energy-saving ones. This not only saves you money but also reduces energy use and lowers greenhouse gas emissions.
How to Apply for Rebates
Applying for a rebate is pretty simple, and it can save you a lot of money! Here’s what you usually need to do:
- Check if you’re eligible – Look up your state’s rebate program to see if your system qualifies.
- Buy an approved system – Make sure the hot water system you choose meets the rebate requirements.
- Use an accredited installer – Most rebates require proof that a licensed professional installed your system.
- Submit your application – Fill out the rebate form, including proof of purchase and installation, and send it in.
Every state has its own rules and deadlines, so it’s worth checking early to ensure you don’t miss out. These rebates can take a big chunk off the cost of installing an energy-efficient hot water system, so why not take advantage of them?
Environmental Impact and Savings
Picking an energy-efficient hot water system isn’t just good for your wallet—it’s great for the planet too! Some systems, like gas storage heaters, release a lot of CO₂ emissions, making them less eco-friendly. But solar hot water systems are a much greener choice because they mostly use sunlight to heat your water, cutting down on pollution.
Heat pump systems are another smart option. They work by pulling in heat from the air or ground, which means they use way less electricity and produce fewer emissions. By choosing a system that uses renewable energy—like solar or heat pumps—you can lower your energy bills and help the environment at the same time!
Choosing the Right Hot Water System
The best hot water system depends on several factors, including:
- Hot water system size: Choose a storage tank or continuous flow system based on household hot water usage.
- Energy efficiency: Consider systems with lower running costs, like solar or heat pumps.
- Unit cost vs. long-term savings: While some systems cost more upfront, they can save money in the long run.
- Ongoing maintenance: Some systems require regular servicing to maintain efficiency.
Before deciding, it’s a good idea to:
- Compare different systems
- Read reviews and get recommendations
- Get quotes from professionals
Summary
Understanding hot water system prices, installation process, and running costs can help you make a smart investment. While solar water heaters and heat pump hot water systems typically cost more upfront, they save money in the long run through lower running costs. Government rebates make energy-efficient systems more affordable, and selecting the right system can lower your energy bills while reducing greenhouse gas emissions.
By consulting a professional from a reliable plumbing service in Melbourne and considering your household energy use, installation costs, and available government rebates, you can find a hot water system that fits your budget and provides long-term savings.
Frequently Asked Questions
What are the initial costs of different hot water systems?
The price of a new hot water system depends on the type you choose: electric systems range from $300 to $1,500, gas systems from $900 to $2,000, heat pumps from $2,500 to $5,500, and solar systems from $3,000 to $7,000. Choose based on your budget and how much energy you want to save!
How do installation costs differ among hot water systems?
Installation costs can vary depending on the type of system and your home’s setup. Electric systems range from $1,000 to $2,000, gas systems from $1,500 to $3,000, and solar systems from $3,000 to $7,000. Bigger systems or those that need extra plumbing or electrical work will usually cost more.
What are the running costs for different hot water systems?
Running costs add up over time, so choosing an energy-efficient system can save you heaps on bills. Here’s what different systems might cost per year: electric systems average $1,442, instant gas systems cost around $803, and solar systems with gas boosters can be as low as $502. Solar and heat pump systems cost more to install but can save you money in the long term.
What government rebates are available for hot water system installations?
Government rebates for hot water system installations vary by state, with Victoria offering up to $1,000, Queensland up to $1,500, and New South Wales providing incentives specifically for heat pump systems. These rebates change over time, so check your state’s latest offers before buying!
How do I apply for government rebates?
Applying for a rebate is easy! Just follow these steps: fill out your state’s rebate application form, provide proof of purchase for your hot water system, and show proof that an accredited installer set it up. Make sure everything is correct before submitting to avoid delays in getting your rebate.
