Hot Water Running Costs Compared 2026

Running costs vary dramatically between hot water system types. For a typical Gold Coast household of 3 to 4 people, here is what you can expect to pay each year to heat your water.

Solar hot water is the cheapest to run at $100 to $250 per year, averaging approximately $175 per year. The sun does most of the work, and the electric or gas boost element only activates during extended cloudy periods. On the Gold Coast, this means your boost runs for roughly 30 to 60 days per year. At the other end of the spectrum, electric storage systems cost $400 to $900 per year, averaging approximately $615 per year. The wide range reflects the difference between a well-insulated newer tank on a controlled load tariff and an older, poorly insulated unit on a standard electricity rate.

Heat pumps sit in an attractive middle ground at $180 to $350 per year, averaging approximately $265 per year. They consume electricity but at roughly one-third to one-fifth the rate of a standard electric element, thanks to their heat-extraction technology. Gas continuous flow systems cost $300 to $500 per year, averaging approximately $400 per year, while gas storage systems are slightly more expensive at $400 to $650 per year, averaging approximately $525 per year, due to standby heat losses from keeping the tank hot.

The headline takeaway: switching from an electric storage system to a heat pump saves approximately $350 per year. Switching to solar saves approximately $440 per year. Over a decade, these savings are substantial.

Upfront cost is only part of the equation. The total cost of ownership — purchase price plus running costs over the system's lifespan — reveals the true value of each system type.

Over 10 years, a heat pump typically delivers the lowest total cost of ownership for most Gold Coast households. With a net purchase price of $2,600 to $6,300 (after STC rebates) and running costs of $2,650 over the decade, the total sits at $5,250 to $8,950. An electric storage system with a lower purchase price of $1,200 to $2,200 accumulates $6,150 in running costs over the same period, totalling $7,350 to $8,350 — comparable to or more expensive than a heat pump despite the lower entry price.

Over 15 years, the economics shift further in favour of efficient systems. A heat pump's total cost reaches $6,575 to $10,275, while an electric storage system reaches $10,425 to $11,425. Solar hot water, with higher upfront costs of $3,200 to $8,600 but the lowest running costs of $2,625 over 15 years, totals $5,825 to $11,225. The sweet spot for solar is long ownership in a property with good roof orientation.

Gas systems fall in the middle. A gas continuous flow unit costs $2,200 to $4,500 upfront with $4,000 in running costs over 10 years, totalling $6,200 to $8,500. However, gas prices have been increasing at 5% to 8% per year, which could push actual costs higher than these estimates. The trend toward electrification makes electric-based systems (heat pumps and solar) a safer long-term bet.

Understanding the electricity and gas rates that drive your hot water costs helps explain why some systems are dramatically cheaper to run than others.

For electricity, the standard residential tariff (Tariff 11) on the Energex network is approximately 28 to 32 cents per kilowatt-hour (c/kWh) including supply charges. This is the rate that applies to most household appliances and is what standard electric storage hot water systems pay when connected to the main circuit. However, Energex offers a dedicated controlled load tariff — Tariff 31 — specifically for hot water systems and pool pumps. Tariff 31 is approximately 14.5c/kWh, roughly half the standard rate. The trade-off is that Energex controls when the system receives power, typically providing 8 to 18 hours of supply per day during off-peak periods.

Tariff 31 is one of the most significant cost-saving opportunities for Gold Coast hot water. A heat pump on Tariff 31 costs approximately 40% less to run than the same heat pump on the standard tariff. If your existing electric storage system is on the standard tariff, simply switching to Tariff 31 (without changing the system) can save $200 to $400 per year. When we install a new heat pump, we can arrange the Tariff 31 connection as part of the installation.

Natural gas rates on the Allgas network are approximately 4 to 6 cents per megajoule (c/MJ). LPG is significantly more expensive at 8 to 14 c/MJ equivalent, which is why we generally recommend against LPG hot water systems for Gold Coast properties without natural gas access — a heat pump or solar system will be substantially cheaper to run.

Beyond choosing an efficient system, there are practical steps every Gold Coast household can take to reduce hot water running costs further.

First, switch to Tariff 31. If your hot water system is on a standard electricity tariff, moving to the controlled load tariff can save $200 to $400 per year with no change to your system or usage. Contact your electricity retailer or ask us to arrange it during your installation. Second, take shorter showers. Reducing average shower time from 8 minutes to 4 minutes can save $100 to $200 per year in hot water costs alone. A shower timer is a small investment with a meaningful return.

Third, pair your heat pump with solar PV. If you have rooftop solar panels, running your heat pump during peak solar generation hours (typically 9am to 3pm) means you heat water with free solar electricity rather than grid power. This can reduce heat pump running costs from $265 per year down to just $50 to $150 per year. Many modern heat pumps and solar inverters support timer or smart scheduling to automate this.

Fourth, optimise your thermostat. The recommended storage temperature is 60°C — hot enough to prevent legionella bacteria but not excessively high. Every degree above 60°C wastes energy. Check that your system is not set higher than necessary. Fifth, fix dripping taps. A hot water tap dripping at one drip per second wastes approximately 10,000 litres per year, costing $50 to $100 in wasted energy. Sixth, schedule annual maintenance. A well-maintained system runs more efficiently. Sediment buildup in tanks, degraded anode rods, and dirty heat pump coils all reduce performance and increase running costs. An annual service keeps your system operating at peak efficiency.

The payback period measures how long it takes for the running cost savings of a new system to offset the upfront purchase cost. For Gold Coast households replacing an old electric storage system, the payback periods are compelling.

A heat pump typically pays for itself in 3 to 5 years. With a net cost of $2,600 to $6,300 after STC rebates and annual savings of approximately $350 compared to electric storage, the investment is recovered well within the system's 10 to 15 year expected lifespan. After payback, every year of operation is effectively money in your pocket — $350 per year in reduced energy bills for the remaining life of the system.

Solar hot water has a slightly longer payback period of 4 to 6 years, reflecting the higher upfront cost despite even greater running cost savings. The annual saving versus electric storage is approximately $440, but the higher purchase price means it takes an extra year or two to break even. However, solar's lower running costs mean it overtakes the heat pump on cumulative savings around the 8 to 10 year mark.

Over the full lifespan of the system, the total savings are substantial. A heat pump saves $4,000 to $6,000 over 10 to 15 years compared to running an electric storage system. Solar saves $5,000 to $8,000 over the same period. These figures account for the purchase price difference and use current energy rates — if electricity prices continue to rise (as they have historically), the actual savings will be even greater.

The bottom line: upgrading from an electric storage system to a heat pump or solar is not just an environmental decision — it is a sound financial investment with a strong, predictable return.