Better energy

A Guide to Heat Pump Hot Water

heat pump

Whether you’re on the hunt for a new hot water system or you’re keen to upgrade your existing system to something a little more energy efficient, a heat pump hot water system could be the right choice for you. But what exactly is a heat pump water heater system and how does it work?  

We’ve pulled together all the important information as well as the advantages and disadvantages of heat pump hot water to help you figure out if this could be the right system for you and your home. 

What is a heat pump hot water system?

As the name suggests, a heat pump hot water system is one of several ways to warm the water in your home. From showers to laundry and handwashing dishes, chances are your hot water system gets a good workout around your home. While these heat pump water heaters are similar to a conventional electric hot water system, heat pump hot water systems are much more energy efficient, typically using up to 70% less energy to heat water. 

With roughly 23% of the energy used in the average Australian home going towards powering hot water systems, investing in a more energy-efficient system can help to save you on your power bill. 

How does a heat pump hot water system work?

Heat pump hot water works in much the same way as refrigeration systems, only in reverse. To cut a long story short, heat pump hot water systems work by absorbing heat from the surrounding air and transferring it to the water inside the heater rather than generating heat themselves.  

If you’re a fan of the finer details, here’s a step-by-step version of how a heat pump works: 

  1. The heat pump uses a fan to draw external air into the evaporator, 

  1. The evaporator’s piping contains a refrigerant that turns into gas courtesy of the warm outside air,  

  1. This gas is then pumped through a valve by a compressor, which generates heat,  

  1. The heat exchanger then moves the heat from the gas pipes through to the water storage tanks, which creates hot water. 

  1. Once the gas has passed through to the water storage tanks it turns back into a liquid, flows into an expansion valve where it cools further and finally returns to the evaporator to repeat the cycle once more. 

While hot water heat pumps commonly use an air-sourced system that works by extracting heat from the air, there are also ground source heat pumps that draw heat from the ground or a body of water.  

Air-source heat pumps can use either an integrated or split system. Integrated or compact systems refer to a single-unit system where both the compressor and water storage tank are combined. Split systems consist of a separate heat pump unit, that includes the evaporator, compressor and fan, which is placed away from the hot water tank. Similar to that of a split system air conditioner.  

How much do heat pump hot water systems cost?

Although heat pump hot water systems are more expensive to buy than conventional electric hot water systems, they’ll help to save you over the long run. Heat pump hot water systems cost roughly $3000-$4000 not including installation. On the other hand, electric hot water systems typically cost between $1000-$2000, including labour and materials. 

With that being said, there are several incentives and rebates on offer from both the Federal and State or Territory Governments that could help you save if you choose to make the switch to a heat pump hot water system. This includes the NSW Energy Savings Scheme and the Victorian Energy Upgrade Program*. The Australian Government offers incentives for purchasing heat pump hot water systems in the form of small-scale technology certificates (STC). These certificates can be used to recoup a portion of the cost of purchasing and installing your heat pump hot water system. You might also be eligible for additional incentives through your State or Territory Government. To find out more about the rebates and assistance on offer, fill in the boxes on the website.  

The advantages of heat pump hot water

Heat pump hot water systems offer several advantages as compared to other hot water systems. Here are some of the main benefits of heat pump hot water: 

Connect to solar

Heat pump hot water systems can be connected to your existing solar system to use excess solar power to warm water using a smart controller, helping you to save more on your power bill. 

Reduce greenhouse gas emissions

When used in the right environment, heat pump hot water systems can help to reduce greenhouse gas emissions by using less energy. 

Greater energy efficiency

Rather than directly heating the water like conventional electric water heaters, heat pump hot water systems only use power to drive the compressor and the fan, making them a much more energy-efficient system. 


Unlike solar hot water systems, heat pumps are ground-mounted so there's no need for roof strength or space. They can also operate in spaces where shade is an issue. 

The disadvantages of heat pump hot water 

While heat pump hot water systems come with a range of benefits, they're not without their disadvantages too. Here are some of the drawbacks of heat pump systems: 

Noisy to run

Just like an air conditioning unit makes a low-level humming noise when it's turned on, the heat pump compressor can also generate noise when it's running.   

Require ventilated space

In order for a heat pump system to work efficiently, fresh air needs to be able to flow across the evaporator so the heat can be absorbed, so it needs a well-ventilated space to operate. 

Expensive to purchase

Heat pump hot water systems can be costly to purchase and install compared to other hot water systems.

Suited to warm climates

For a heat pump hot water system to work, there needs to be a difference in temperature between the outside temperature and that of the water in the tank. Ultimately, they're better suited to warmer climates and less effective in colder climates.

A heat pump hot water system could help you to save on your power bill and minimise your carbon footprint. If you’re looking for a new hot water system do check out the offer on heat pump hot water systems by EnergyAustralia and its partner Ecovantage for both New South Wales and Victorian households. 

* The Victorian Energy Upgrade program Code of Conduct can be downloaded here.