Where the saving comes from
An electric storage tank turns power into heat with a resistive element, much like a kettle: nearly all the electricity it draws becomes heat in the tank, plus a small amount lost overnight to standing heat loss (our calculator uses a 90% element efficiency and 1.2 kWh a day of standing loss, the same standing loss we apply to a heat pump's cylinder, since both are similarly sized insulated tanks). A heat pump does something different: rather than manufacturing heat, it moves heat that's already sitting in the surrounding air into the tank, the same trick a reverse-cycle air conditioner uses to heat a room for about a third of a plug-in heater's running cost. Our calculator prices a heat pump at a coefficient of performance of 3, meaning roughly three units of heat land in the tank for every unit of electricity it draws. That's the entire gap the table above shows: the same 200 litres a day for the same household, at a bit over a third of the electricity once the identical standing loss is added back on both sides.
What this costs, state by state
A family of four (200 litres a day between them, the same worked example our hot water calculator uses) on an electric storage tank against a heat pump doing the identical job, at each state's current reference electricity rate.
| State | Rate | Electric storage tank | Heat pump | Yearly saving |
|---|---|---|---|---|
| New South Wales | 32.4¢ | $1,351 | $505 | $846 |
| Victoria | 29.8¢ | $1,242 | $464 | $778 |
| Queensland | 31.2¢ | $1,301 | $486 | $815 |
| South Australia | 38.1¢ | $1,588 | $593 | $995 |
| Western Australia | 33.6¢ | $1,401 | $523 | $878 |
| Tasmania | 28.9¢ | $1,205 | $450 | $755 |
| Australian Capital Territory | 27.4¢ | $1,142 | $427 | $716 |
| Northern Territory | 31.7¢ | $1,322 | $494 | $828 |
Reference rates for 2026–27. Your row is highlighted once you set your location.
What it costs to switch, and how fast it pays back
A basic electric storage tank installs for roughly $800 to $2,500 depending on tank size and access, while a heat pump system runs $3,500 to $7,000 installed before any rebate. That gap looks large until the federal Small-scale Technology Certificate scheme is counted: it's a national, point-of-sale discount worth roughly $800 to $1,200 for a heat pump hot water system in most postcodes, more in warmer climate zones and less in cooler ones, which typically lands the after-rebate installed price somewhere between $2,500 and $5,000. Four states and territories add a scheme of their own on top of that federal discount, and three currently don't, the table below has your own state's program, not just the one example (Victoria's) this page used to lead with.
Against a $700-to-$1,000-a-year saving from the table above, even the higher end of that after-rebate price gap typically pays for itself in three to five years, and every year after that is straight saving on a system that's rated to run 10 to 15 years. It's the same logic our hot water calculator's own copy already makes about replacing before failure, not after: an electric tank over ten years old is going to fail on its own schedule regardless, so pricing a heat pump before that happens turns the switch into something planned rather than whatever the emergency plumber has on the truck.
State and territory top-up schemes
The federal STC discount above applies everywhere in Australia. What sits on top of it is a state-by-state patchwork, some governments add a second rebate, some ran one that's since closed, and some never had one.
| State | Scheme | Typical value | Who it’s for |
|---|---|---|---|
| New South Wales | Energy Savings Scheme (ESS), Hot Water Upgrade Incentive | Up to $640 off replacing an electric tank, up to $330 for a gas one | Any household using an accredited installer, applied as an upfront discount, no separate claim |
| Victoria | Solar Homes hot water rebate | Up to $1,000 (up to $1,400 for a locally made system from 1 Jul 2026) | Owner-occupiers, household income under $150,000/yr (from 1 Jul 2026), property under $3m, current system at least 3 years old |
| Queensland | Climate Smart Energy Savers | , | Closed to new applications; the scheme that offered $800–$1,000 no longer takes bookings |
| South Australia | Retailer Energy Productivity Scheme (REPS) | No fixed amount: retailers set the discount, commonly $300–$450 with gas connected or $1,000–$1,300 without, plus a $33 fee (waived for priority households) | Households via a REPS-accredited retailer or provider; value depends on the provider and gas connection status |
| Western Australia | , | , | No current state scheme; the former Solar Hot Water Heater Subsidy has closed |
| Tasmania | , | , | No current state scheme; the Energy Saver Loan Scheme (interest-free loans, not a rebate) closed to new applications in Sept 2025 |
| Australian Capital Territory | Home Energy Support Program | Up to $2,500 | Concession-card holders only (Pensioner Concession, DVA Gold or Health Care Card), property under $750,000, after a free workshop |
| Northern Territory | , | , | No state heat pump hot water scheme; a separate $1,000 rebate exists for solar (not heat pump) hot water |
On top of the federal STC rebate above, which applies nationwide regardless of state. Scheme values verified July 2026: state and territory programs open, close and change value without notice, so confirm the current figure on the linked source before relying on it. Your row is highlighted once you set your location.
Try it with your own household's hot water use
The table above prices one fixed 200-litre-a-day household. Set your own daily hot water use and state below and watch the cheaper side get the stamp.
Common questions
How much does a heat pump hot water system cost in Australia?
Roughly $3,500 to $7,000 installed before any rebate, and commonly $2,500 to $5,000 after the federal STC rebate, which is typically worth $800 to $1,200 depending on the system and postcode. A basic electric storage tank installs for $800 to $2,500 by comparison.
How much does a heat pump save on hot water running costs?
For a family of four, roughly $700 to $1,000 a year against an electric storage tank on today's rates, depending on the state, because a heat pump moves about three units of heat into the tank for every unit of electricity it draws instead of generating that heat directly.
How long does a heat pump hot water system take to pay for itself?
Commonly three to five years, comparing the after-rebate purchase-price gap against the yearly running-cost saving. Heat pump systems are typically rated to run 10 to 15 years, so most of that lifespan ends up saving money outright once the difference is repaid.
Are there state government rebates for heat pump hot water, on top of the federal one?
In four states and territories, yes: NSW (Energy Savings Scheme, up to $640), Victoria (Solar Homes rebate, up to $1,000 or $1,400 for a locally made system), South Australia (REPS, a retailer-set discount commonly $300 to $1,300, not a fixed government rebate) and the ACT (Home Energy Support Program, up to $2,500, restricted to concession-card holders). Queensland's Climate Smart Energy Savers rebate has closed, and WA, Tasmania and the NT currently have no equivalent state scheme, all eight still get the federal STC discount regardless.
Does switching the tank save more than changing shower habits?
Usually yes, the tank switch is the bigger single lever, but the two stack rather than compete. See our companion guide on what a shower actually costs per minute for how much a shorter shower or a better showerhead saves on top of whichever tank is heating the water.
Sources
Installed cost ranges for electric storage and heat pump systems: Same Day Hot Water Service, Hot Water System Cost 2026. Federal STC rebate mechanism and value range: PumpSwap Australia, STC Rebate Guide for Heat Pump Hot Water. State scheme figures and eligibility: NSW Energy Savings Scheme hot water upgrade incentive, NSW Climate and Energy Action; Victorian Solar Homes hot water rebate, solar.vic.gov.au; SA Retailer Energy Productivity Scheme, ESCOSA REPS FAQs (confirms REPS is not a fixed government cash rebate) and AGL's REPS page ($33 one-off fee); ACT Home Energy Support Program, up to $2,500 for Category B products confirmed in the ACT Government's own Home Energy Support participant guidelines PDF; Queensland Climate Smart Energy Savers closure, qld.gov.au. Electricity rates and the heat pump coefficient of performance: same AER/state-regulated sourcing and registry_constants.py assumptions as our hot water running cost calculator, current for 2026–27. All fetched July 2026.