Hot Water System Running Costs: Electric vs Gas vs Heat Pump vs Instant

Jun 25, 2026

Hot water can be one of the bigger ongoing energy uses in a home, so running cost matters when choosing a replacement system. The cheapest hot water system to buy is not always the cheapest to run, and the most efficient system on paper is not always the best fit for every property.

The running cost of a hot water system depends on the system type, energy source, household size, shower habits, electricity tariff, gas price, rooftop solar setup, tank size, recovery rate, timer settings, installation location and maintenance.

This guide compares electric storage, instant electric, gas storage, instant gas and heat pump hot water running costs so you can choose a system that suits the home, not just the product price.

You can compare Hot Water Systems, Electric Hot Water Systems, Instant Electric Systems, Gas Hot Water Systems, Instant Gas Hot Water Systems, Heat Pump Hot Water Systems and Installation Add-Ons online with Installed Today.

Quick answer: which hot water system is cheapest to run?

The cheapest hot water system to run depends on your home, energy prices and usage pattern.

As a general guide:

System type	Running cost potential	Best suited to
Heat pump hot water	Often low in suitable conditions	Homes replacing electric storage with good airflow and drainage
Instant gas hot water	Can be efficient where gas supply suits	Homes already using natural gas or LPG
Gas storage hot water	Can suit existing gas storage homes	Households wanting stored gas hot water
Electric storage hot water	Often higher running cost, but simple	Homes needing straightforward electric replacement
Instant electric hot water	Depends heavily on application	Point-of-use or low-demand applications
Solar hot water	Can be low in suitable homes	Properties with suitable roof space and setup

For many homes replacing standard electric storage, heat pump hot water is often worth comparing.

For homes already set up for natural gas or LPG, instant gas may be worth comparing.

For customers wanting the simplest replacement, electric storage may still be practical even if running costs are not the lowest.

What affects hot water running costs?

Hot water running costs are affected by more than the system type.

Important factors include:

Number of people in the home
Number of bathrooms
Shower length
Shower head flow rate
Bath use
Laundry use
Dishwasher use
Electricity tariff
Gas tariff
Controlled-load or off-peak setup
Rooftop solar timing
Tank size
System age
Recovery rate
Boost heating use
Water temperature setting
Pipe length
Heat loss
Maintenance
Climate for heat pumps
Installation location

Two homes with the same hot water system can have different running costs because usage and tariffs are different.

Product price vs running cost

The cheapest system upfront may not be the cheapest over time.

A hot water decision usually includes:

Product price
Installation cost
Valves
Electrical work
Gas work
Pipework changes
Drainage
Old unit removal
Disposal
Maintenance
Energy use
Future repairs
Warranty terms

A lower product price may suit some households, especially for a simple replacement. But if the system costs more to run every year, a more efficient option may be worth comparing.

Electric storage hot water running costs

Electric Hot Water Systems are common in Australian homes, units, townhouses and rental properties.

Electric storage systems heat water in a tank using an electric element.

Running cost may be affected by:

Tank size
Element size
Number of people
Shower habits
Off-peak or controlled-load tariff
Timer setup
Heat loss from stored water
Pipe length
Thermostat setting
System age
Maintenance
Whether the system is oversized or undersized

Electric storage can be simple and reliable, but it is often compared against heat pump hot water when households want a more efficient electric upgrade.

When electric storage can still make sense

Electric storage may still be a good option where:

The home already has electric storage
Budget is focused on lower upfront product cost
The replacement needs to be straightforward
The property has limited outdoor space
Heat pump airflow is unsuitable
Condensate drainage is difficult
Noise placement is a concern
The home is a unit or townhouse
The customer wants a familiar storage system
A licensed installer confirms the setup suits

Electric storage is not always the lowest running cost option, but it can be the most practical replacement in some homes.

Heat pump hot water running costs

Heat Pump Hot Water Systems use electricity to transfer heat from surrounding air into stored water.

Because they move heat rather than relying only on an electric element, heat pumps can use less electricity than standard electric storage in suitable conditions.

Running cost may be affected by:

Outdoor air temperature
Airflow around the unit
Condensate drainage
Tank size
Timer settings
Rooftop solar setup
Boost heating use
Household demand
Recovery rate
Maintenance
Installation quality
Noise placement
System age

A heat pump can be efficient, but it still needs to suit the site.

When heat pump hot water can make sense

Heat pump hot water may suit:

Homes replacing old electric storage
Homes with suitable outdoor airflow
Properties with safe condensate drainage
Rooftop solar households
Customers wanting efficient electric hot water
Families needing stored hot water
Homes without gas
Customers moving away from gas
Supply-only customers with their own licensed installer arranged

Heat pump hot water is often worth comparing when long-term running cost matters, but it should not be chosen if the location is tight, enclosed, poorly drained or noise-sensitive.

Instant gas hot water running costs

Instant Gas Hot Water Systems heat water only when a hot tap or shower is used.

They do not keep a storage tank heated all day.

Running cost may be affected by:

Natural gas or LPG price
Flow rate
Number of showers
Shower length
Gas pipe sizing
Water pressure
Temperature setting
Controller use
Pipe length
Household demand
Maintenance
System age

Instant gas can be a strong option where the home already has suitable gas supply and the unit is correctly sized.

When instant gas can make sense

Instant gas may suit:

Homes already using natural gas or LPG
Customers replacing an existing instant gas unit
Homes wanting compact wall-mounted hot water
Properties with suitable gas pipe sizing
Homes with suitable water pressure
Customers wanting continuous flow gas hot water
Larger homes where flow rate is matched correctly

Natural gas and LPG are not interchangeable. The selected instant gas system must match the property’s gas type.

Gas storage hot water running costs

Gas Hot Water Systems include gas storage systems that heat and store water in a tank.

Running cost may be affected by:

Tank size
Natural gas or LPG price
Burner efficiency
Standing heat loss
Household demand
Recovery rate
Pipe length
Temperature setting
System age
Maintenance
Whether the tank is oversized or undersized

Gas storage can suit homes already using gas storage, especially where the existing system worked well and the household still wants stored gas hot water.

When gas storage can make sense

Gas storage may suit:

Homes already using gas storage
Customers wanting stored hot water
Properties with suitable natural gas or LPG supply
Families with regular hot water use
Homes where instant gas is not practical
Like-for-like gas storage replacements
Customers who prefer familiar tank-style hot water

Before replacing gas storage, confirm gas type, tank size, pipework, valves and household demand.

Instant electric hot water running costs

Instant Electric Systems heat water as it flows through the unit.

Running cost depends heavily on the application.

Instant electric may be practical for:

Hand basins
Small sinks
Point-of-use hot water
Low-demand areas
Compact spaces
Remote fixtures
Small kitchenettes
Selected applications with suitable electrical supply

It may not be the best whole-home option unless electrical supply, flow rate and temperature rise are carefully assessed.

When instant electric can make sense

Instant electric may suit:

Point-of-use applications
Smaller fixtures
Low hot water demand
Homes or areas without gas
Compact spaces
Renovations where a remote fixture needs hot water
Granny flats or sheds where demand is low and electrical supply suits

Instant electric can be compact, but electrical requirements can be significant. Always confirm electrical capacity before ordering.

Electric vs heat pump running costs

Electric storage and heat pump hot water are both electric options, but they work differently.

Feature	Electric storage	Heat pump hot water
Heating method	Direct electric element	Transfers heat from air
Running cost potential	Usually higher	Often lower in suitable conditions
Upfront product cost	Often lower	Usually higher
Installation complexity	Often simpler	More site-specific
Outdoor airflow	Usually less critical	Very important
Condensate drainage	Standard discharge drainage	Required
Noise	Generally quiet	Fan and compressor noise
Best suited to	Simple replacement	Efficient electric upgrade

If you are replacing electric storage and want lower electricity use, heat pump hot water is worth comparing.

If the site does not suit a heat pump, electric storage may still be the more practical option.

Gas vs heat pump running costs

Gas and heat pump hot water suit different homes.

Gas may suit:

Homes already connected to natural gas or LPG
Customers replacing existing gas hot water
Properties with suitable gas pipe sizing
Homes wanting instant gas continuous flow
Sites where heat pump airflow or drainage is difficult

Heat pump may suit:

Homes replacing electric storage
Homes with rooftop solar
Homes without gas
Customers wanting efficient electric hot water
Properties with suitable outdoor airflow and drainage
Customers moving away from gas

The better choice depends on existing energy source, installation cost, running cost goals and site suitability.

Instant gas vs gas storage running costs

Instant gas and gas storage both use gas, but running costs can differ because they heat water differently.

Feature	Instant gas	Gas storage
Heating style	On demand	Stored in a tank
Standing heat loss	No storage tank heat loss	Tank heat loss can occur
Space	Compact wall-mounted unit	Tank space required
Gas pipe sizing	Often critical	Important
Water pressure	Very important	Important
Best suited to	Continuous flow gas hot water	Stored gas hot water replacement

Instant gas may have better running cost potential in some homes, but gas pipe sizing, water pressure and installation requirements must suit.

Instant electric vs instant gas running costs

Instant electric and instant gas both heat water on demand, but they use different energy sources.

Instant electric may suit:

Small point-of-use applications
Homes without gas
Low-demand fixtures
Compact spaces with suitable electrical supply

Instant gas may suit:

Homes already using natural gas or LPG
Whole-home continuous flow hot water
Higher hot water demand where gas supply supports it
Properties with suitable water pressure

For whole-home use, instant gas is often more commonly compared than instant electric, but only where gas supply is suitable.

Heat pump vs solar hot water running costs

Heat pump and solar hot water are both compared by customers wanting lower-energy hot water options.

Heat pump hot water may suit:

Homes with rooftop solar PV
Homes without suitable roof space for solar thermal collectors
Properties with outdoor airflow
Customers wanting an efficient electric upgrade
Homes replacing electric storage

Solar hot water may suit:

Homes with suitable roof space
Strong sun exposure
Minimal shading
Customers wanting solar thermal water heating
Properties where roof collectors and booster setup are practical

Solar hot water can involve different installation and maintenance requirements. Heat pump hot water needs airflow, drainage and noise placement.

Running costs and rooftop solar

Rooftop solar can affect hot water running costs where the system is set up to heat during solar generation hours.

This may apply to:

Heat pump hot water
Electric storage hot water
Some timer-controlled setups

Solar timing depends on:

Solar system size
Electricity tariff
Controlled-load arrangement
Timer setup
Household usage pattern
Tank size
Recovery rate
Electrical configuration
Installer advice

Do not assume a hot water system automatically uses solar power efficiently. Setup matters.

Running costs and off-peak electricity

Some electric storage systems use off-peak or controlled-load electricity.

This can affect running cost and reheating times.

Before choosing an electric system, check:

Whether the home has controlled load
When the system reheats
Whether the tank is large enough
Whether boost heating is available
Whether hot water runs out before the next heating period
Whether a timer is used
Whether a heat pump would suit better

Off-peak setups can work well, but sizing matters.

Running costs and household size

Household size affects hot water use.

As a general guide:

Household	Running cost consideration
1 to 2 people	Smaller systems may be enough, but usage habits still matter
3 to 4 people	Medium storage, heat pump or suitable gas option often compared
5+ people	Larger tanks, recovery rate and flow rate become more important
Two bathrooms	Simultaneous shower use affects system choice
Homes with baths	Stored capacity and recovery matter
Short-stay homes	Size for peak guest use, not average use

A larger household usually uses more hot water, but shower habits can matter more than headcount alone.

Running costs and shower habits

Showers are one of the biggest hot water uses in many homes.

Running costs can increase with:

Long showers
High-flow shower heads
Back-to-back showers
Multiple showers running at once
Teenagers or large families
Guest use
Short-stay accommodation
Baths
Hot laundry use

Before choosing a system, think about real usage, not ideal usage.

Running costs and tank size

Tank size affects both comfort and running cost.

An undersized tank may:

Run out of hot water
Use boost heating more often
Struggle with back-to-back showers
Create poor user experience

An oversized tank may:

Cost more upfront
Take up more space
Store more hot water than needed
Increase standing heat losses in some systems

Choose a tank size based on real household demand.

Running costs and system age

Older hot water systems may cost more to run if they are inefficient, poorly insulated, scaled, poorly maintained or no longer operating as designed.

Signs an older system may be costing more include:

Running out more often
Longer reheating time
Unusual noises
Rust or corrosion
Frequent repairs
Higher energy bills without another explanation
Inconsistent hot water
Error codes
Poor recovery

If the system is old and unreliable, replacement may be worth comparing.

Running costs and maintenance

Maintenance can affect efficiency and reliability.

Maintenance may include:

Relief valve checks
Tempering valve checks
Anode inspection or replacement where applicable
Burner inspection for gas systems
Heat exchanger checks for instant gas
Airflow checks for heat pumps
Condensate drain checks for heat pumps
Electrical checks where required
Leak inspections
General system inspection

A neglected system may cost more to run and fail earlier.

Running costs and water temperature

Water temperature settings can affect running cost and safety.

Too high can waste energy and increase scalding risk.

Too low can create safety and performance issues depending on the system and storage requirements.

Temperature settings should follow manufacturer instructions and relevant plumbing requirements. Do not make unsafe adjustments yourself.

Running costs and pipe length

Pipe length affects how long hot water takes to reach the tap.

Long pipe runs can waste water and heat, especially where the hot water system is far from bathrooms or kitchens.

This can affect:

Wait time
Water waste
Heat loss
User experience
Perceived system performance

During renovations, plan hot water location carefully.

Running costs and insulation

Heat loss from pipework and storage tanks can affect performance.

Efficiency may be improved by:

Choosing the right system size
Locating the system sensibly
Avoiding unnecessarily long pipe runs
Maintaining valves and controls
Using appropriate pipe insulation where suitable and compliant
Replacing very old systems where practical

Licensed professionals should handle plumbing or electrical changes.

Running costs for rental properties

Rental properties need reliable hot water sized for likely occupancy.

For rentals, running cost considerations include:

Number of bedrooms
Number of bathrooms
Likely tenant count
Tenant shower habits
System simplicity
Maintenance access
Warranty terms
Replacement cost
Energy source
Whether tenants previously ran out of hot water

A system that is cheap to buy but undersized can create tenant issues.

Running costs for Airbnb and short-stay homes

Short-stay homes can have higher peak demand than normal owner-occupied homes.

Running cost and sizing considerations include:

Maximum guest count
Number of showers
Back-to-back use
Bath use
Laundry between bookings
Guest expectations
Recovery rate
System simplicity
Maintenance access
Noise placement

Size for peak guest use, not average owner use.

Running costs for units and townhouses

Units and townhouses can have extra constraints.

Running cost and system choice may be affected by:

Indoor cupboard location
Limited outdoor space
Body corporate or strata rules
Electrical supply
Gas availability
Drainage
Noise restrictions
Access
Existing system type

Electric storage may be common, but heat pump, gas or instant options depend on site suitability.

Running costs and brand choice

Brand can affect product features, warranty terms, capacity options and availability, but running cost depends on more than brand name.

Installed Today’s homepage-linked hot water brands include:

Compare by system type, capacity, flow rate, energy source, installation requirements and household use.

Rheem running cost considerations

Rheem Hot Water Systems are commonly compared across electric, gas and heat pump hot water.

Running cost depends on:

System type
Tank size or flow rate
Electric, gas or heat pump model
Household demand
Tariff or gas price
Installation location
Maintenance
Usage habits

Choose the Rheem system type that suits the home, not just the brand name.

Rinnai running cost considerations

Rinnai Hot Water Systems are commonly compared across instant gas, electric and heat pump options.

Running cost depends on:

Whether the system is gas, electric or heat pump
Flow rate or tank size
Gas pipe sizing
Water pressure
Household use
Controllers
Tariff or gas price
Maintenance

Rinnai instant gas may suit homes already set up for natural gas or LPG where continuous flow hot water is preferred.

Dux running cost considerations

Dux Hot Water Systems are commonly compared for electric storage, gas and broader hot water replacement.

Running cost depends on:

Tank size
System type
Household demand
Tariff or gas price
Installation location
Maintenance
Whether the system is correctly sized

Dux may suit customers wanting a mainstream hot water brand across multiple categories.

Vulcan running cost considerations

Vulcan Hot Water Systems may suit customers comparing value-focused hot water replacement options.

Running cost depends on:

Product type
Storage capacity
Energy source
Usage pattern
Maintenance
Tariff or gas cost
Correct sizing

A lower upfront product cost should still be weighed against long-term running cost.

iStore running cost considerations

iStore Hot Water Systems are commonly compared by customers wanting heat pump hot water.

Running cost depends on:

Tank size
Airflow
Timer setup
Rooftop solar timing
Household demand
Boost heating use
Installation location
Maintenance

iStore may suit homes replacing electric storage where heat pump site requirements are met.

Enviroheat running cost considerations

Enviroheat Hot Water Systems may suit customers comparing heat pump options.

Running cost depends on:

Tank size
Outdoor airflow
Drainage
Household demand
Timer settings
Climate
Maintenance
Boost heating

Enviroheat may be worth comparing for customers looking at heat pump hot water where the property suits.

Aquatech / Hydrotherm running cost considerations

Aquatech / Hydrotherm Hot Water Systems are worth comparing as alternative heat pump options.

Running cost depends on:

Model
Tank size
Household use
Airflow
Condensate drainage
Timer setup
Electrical setup
Maintenance

Check product suitability before ordering supply only.

Bosch running cost considerations

Bosch Hot Water Systems are commonly compared for gas hot water and continuous flow options.

Running cost depends on:

Gas type
Flow rate
Water pressure
Gas pipe sizing
Household demand
Controller settings
Maintenance
Installation suitability

Bosch gas options should be matched carefully to natural gas or LPG supply.

Rebates and running costs

Some energy-efficient hot water systems may be eligible for rebates, certificates or incentives depending on product, location, installer, scheme rules and installation pathway.

Rebates may reduce upfront cost, but they do not automatically make a system the best choice.

Before relying on any incentive, check:

Current eligibility
Product eligibility
Installer requirements
State or territory rules
Documentation requirements
Whether the price includes the incentive
Whether the incentive is applied upfront or claimed later
Whether the old system type affects eligibility

Choose the system that suits the home first.

Supply-only hot water systems and running costs

Supply-only ordering can suit customers who already have their own licensed installer arranged.

Supply only may suit:

Builders
Renovators
Landlords
Property managers
Trade customers
Homeowners managing their own installation
Customers outside supplied-and-installed service areas

Supply-only product pricing generally does not include installation, valves, old unit removal, disposal, electrical work, gas work, pipework changes, drainage, access upgrades or compliance upgrades unless clearly selected or included.

Before ordering supply only, your licensed installer should confirm the system suits your property and running cost goals.

Supplied-and-installed hot water options

Supplied-and-installed options may be available on selected products in eligible Brisbane and Gold Coast service areas where shown.

This can suit customers who want the product and installation pathway arranged together.

Before ordering supplied and installed, check:

Service area eligibility
Existing system type
Product suitability
Installation inclusions
Valve requirements
Gas work
Electrical work
Pipework changes
Drainage
Old unit removal
Disposal
Access
Base or slab condition
Compliance upgrades

Do not assume every possible site requirement is included. Check the selected product and installation options carefully.

How to reduce hot water running costs

Ways to reduce hot water running costs may include:

Choosing the right system type
Avoiding undersizing
Avoiding unnecessary oversizing
Comparing heat pump hot water where suitable
Comparing instant gas where gas supply suits
Using suitable timer settings
Matching hot water heating to rooftop solar where practical
Reducing excessive shower time
Fixing leaks
Maintaining valves
Replacing very old inefficient systems
Improving pipework layout during renovations
Using licensed installers for compliant setup

Do not make unsafe plumbing, gas or electrical changes yourself.

Common mistake: choosing by upfront price only

The cheapest system upfront may not be the cheapest long term.

Compare product price, installation cost, energy use, maintenance and suitability together.

Common mistake: ignoring tariffs

Electricity and gas tariffs can change the running cost picture.

The same system can cost different amounts to run in different homes.

Common mistake: assuming heat pumps suit every property

Heat pump hot water can be efficient, but it needs suitable airflow, drainage, electrical setup, access and noise placement.

A poor location can reduce performance.

Common mistake: assuming gas is always cheaper

Gas running costs depend on gas price, system type, household demand, gas supply and maintenance.

Gas can suit many homes, but it is not automatically best for every property.

Common mistake: assuming instant means instant at the tap

Instant gas and instant electric heat water on demand at the unit.

Pipe length still affects how long hot water takes to reach the tap.

Common mistake: oversizing the system

A bigger system is not always better.

Oversizing can increase product cost, space requirements and heat loss in some storage systems.

Common mistake: undersizing the system

An undersized system can run out, rely on boost heating, or struggle with peak demand.

Size based on real household use.

Common mistake: ignoring maintenance

A poorly maintained system may cost more to run and fail earlier.

Follow manufacturer guidance and use licensed professionals where required.

Common mistake: DIY hot water changes

Hot water systems can involve plumbing, electrical work, gas fitting, pressure control, drainage, scalding safety and compliance.

DIY work can create:

Water leaks
Electrical risks
Gas leaks
Carbon monoxide risk
Fire risk
Scalding risks
Poor performance
Warranty issues
Insurance problems
Non-compliant work
Property damage

Use the right licensed professionals.

Final verdict: which hot water system has the best running cost?

The best hot water system for running costs depends on the home.

Heat pump hot water is often worth comparing when replacing electric storage, especially where the property has suitable outdoor airflow, condensate drainage, electrical setup and noise placement.

Instant gas can be worth comparing for homes already using natural gas or LPG where gas pipe sizing and water pressure support the selected unit.

Electric storage can still be practical for simple replacements, units, townhouses and homes where heat pump or gas options do not suit.

Instant electric is usually best for selected point-of-use or low-demand applications where electrical capacity supports it.

Start by comparing Hot Water Systems, Electric Hot Water Systems, Instant Electric Systems, Gas Hot Water Systems, Instant Gas Hot Water Systems, Heat Pump Hot Water Systems and Installation Add-Ons.

The lowest running cost system is the one that suits your household demand, energy source, tariff, installation location, access, maintenance expectations and long-term budget.

Long-tail FAQs

What is the cheapest hot water system to run?

The cheapest hot water system to run depends on the home. Heat pump hot water can be efficient where the site suits, while instant gas can suit homes already set up for natural gas or LPG.

Is heat pump hot water cheaper to run than electric storage?

Heat pump hot water can use less electricity than standard electric storage in suitable conditions, but running cost depends on airflow, climate, timer settings, household demand and installation quality.

Is gas hot water cheaper to run than electric?

It depends on gas prices, electricity tariffs, system type, household usage and installation suitability. Gas may suit homes already connected to natural gas or LPG.

Is instant gas cheaper to run than gas storage?

Instant gas can reduce storage heat loss because it heats water on demand, but running cost depends on gas price, flow rate, household demand and installation suitability.

Is instant electric cheap to run?

Instant electric running cost depends on the application. It may suit small point-of-use fixtures, but whole-home use requires careful electrical and flow-rate assessment.

Does rooftop solar reduce hot water running costs?

Rooftop solar may help where electric storage or heat pump hot water is timed to run during solar generation hours. Timer setup, tariff and household use matter.

Does tank size affect running costs?

Yes. An oversized tank can store more hot water than needed, while an undersized tank may run out or rely on boost heating more often.

Do long showers increase hot water running costs?

Yes. Shower length and shower head flow rate can have a major impact on hot water use and running costs.

Does maintenance affect hot water running costs?

Yes. Poor maintenance can reduce performance and reliability. Valves, burners, heat exchangers, airflow and drainage should be checked as required for the system type.