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How to Calculate the Cost of a Hot Water System

Avoid being scalded by surprisingly high hot-water bills. 

Review the charges for different types of hot water systems then monitor your household usage so you can calculate better ways to reduce your bills.

While both homeowners and renters can ease the budget by calculating running costs and adjusting hot water consumption, home-owners can make big savings by selecting a cost-effective water heating system.

Project the costs of installing and running different hot water systems before a new-build, major renovation or energy system upgrade. A good decision can save you a lot of money over the next decade and also benefit the environment. It may involve looking beyond high installation costs, forecasting future annual usage and factoring in rebates for the full picture of what a particular system would cost your household.

Following is a guide to the key types and charges for water heating systems in Australia.

Which system?

Size

The appropriate size of hot water system may be depend on:

  • Its position in your home – Consider the challenges of: allocating room space for indoor systems, especially large tank models; positioning bulky outdoor systems, such as gas and heat pumps; and keeping noisy systems, such as heat pumps, away from sleeping quarters and neighbouring homes.
  • Additional reno costs – Remodelling rooms just to fit in your water heater will increase your outlay
  • It’s capacity and running costs – a large tank will provide a big household with hot water for longer, but have higher running costs than a tankless system.

Type – Electric, Gas, Solar, Heat Pump

Your home’s location may limit options for the type of system you choose. Natural gas may not be available in the area. A cooler climate could make heat pumps less effective. Your property’s position and climate may not suit solar panels. Also find out the local government restrictions. Some councils, aiming to encourage energy-efficient systems, will restrict local new-builds from installing certain water heating systems.

For more details of electric, gas, solar and heat pump systems click here. Following are some of the key cost implications for each system.

  • Electricity – installation is cheaper but running costs are generally high. An off-peak electricity system, where available, costs less but requires a larger water tank and working round certain times.
  • Gas – natural gas running costs are cheaper than electricity and rates don’t vary throughout the day; LPG gas running costs are higher than natural gas.
  • Solar – installation is expensive but solar is much cheaper to run, and costs can be further offset by government incentive programs and feeding excess energy back to the grid. 
  • Heat pump – installation is expensive but heat pump running costs are moderate and could be further offset by government incentive programs.

Brand

The best brands to consider are well-known ones that have quality products and will be around to service warrantees if required. 

Poor quality products affect cost-effectiveness over time especially with components requiring early replacement such as sacrificial anodes and corroding mild-steel tanks. 

Leading brands in water heating include Rinnai, AquaMax, Rheem, Solahart, Vulcan, Dux and Bosch.  Plumbing companies like Curran Plumbing can access high quality products from known brands and offer you a good deal.

If you prioritise goods that are locally made and available, check which brands are certified to offer the ‘Australian made’ logo.

Delivery Cost and Accessibility

You will need to factor in the cost of delivering the water heating system components to your home, before the installation begins. Most water heating systems – especially the tanks – are too bulky and heavy for homeowners to transport without assistance. Delivery costs will be based on the size and weight of equipment, combined with the total travel distance. Extra fees may apply for delivery to hard-to-access properties, like multi-storey buildings without lifts, as access impacts the people and equipment required for handling, and increases delivery times.

Hot Water Installation

The installation costs should be itemised in your professional plumber’s quote. Homeowners should only use certified plumbers – and DIY is definitely not an option for water heating installations.

When calculating installation charges for any replacement hot water system, a key factor is whether you are replacing it with a different type, which increases the complexity of the task. Replacing a water heater with a new one of the same type is the simpler task. Replacing it with a different type of system is a more complex job that may require other kinds of pipes and fittings, even new power cables or gas lines that may involve extra tradespeople. To relocate your water heater to a different part of the house will cost more.

A solar system requires the installation of a storage tank and solar collector panels. It is a costly process that takes longer as the installer will need to inspect the site to plan the installation. 

Disposal of old system

One of the more significant ‘forgotten fees’ is the charge to remove the old hot water system during its replacement.

Regulations applying to disposal will trigger expenses for the disposer to pass on, so check whether a disposal service is included in the quote.

Factors like distance and difficult access might make disposal more expensive.

Government schemes, rebates and feed-in tariffs

Government incentive programs and rebates encourage renewable energy solutions such as solar water heaters and air source heat pumps. Do the research on eligible systems and calculate the advantages – it could lead to savings of as much as $1200. 

Currently the federal government incentivises new solar or heat pump systems through Small-Scale Technology Certificates (STC). For example, if the high rate of $40 per STC applies, an average qualifying 30 STC system is worth a $1200 subsidy. Typically, you would ‘sell’ your STC to the hot water system supplier, who would ‘pay’ you with a $1200 discount on the solar or heat pump system you are buying. You can also trade the STCs yourself.

There are state-based government incentives. For example, the new South Australia home battery scheme makes solar battery installation a more economical option. Your local council can help provide details on how to qualify.

A solar feed-in tariff may also be available for every kilowatt hour of electricity you export back to the grid. Your home uses the electricity produced by your solar panels first then any excess is transported to the grid. The excess is bought from you according to rates set by your electricity retailer or the government.

Hot water system running costs

Over the life of a long-lasting hot water system, the running costs become more significant than the initial outlay on installation. 

The table provides a guide to the annual running costs for different systems. 

Table: Water heater annual running costs [source: https://www.canstarblue.com.au/hot-water-systems]

Water Heater TypeAverage Annual Running Costs
Electric
– Peak tariff tank
– Peak tariff tankless
– Off-peak tariff tank
$700–$925
$925
$780
$700
Gas
Natural gas tank
Natural gas tankless
LPG tank
LPG tankless
$295–$665
$350–$415
$295–$340
$560–$665
$465–$535
Solar
Natural gas boosted
LPG boosted
Electric boosted peak tariff
Electric boosted off-peak tariff
$65–$365
$65–$85
$95–$130
$260–$365
$185–$265
Heat Pump
Peak tariff
Off-peak tariff
$160–$385
$245–$385
$160–$250

Get the right advice

There are many options you can consider when replacing your hot water system. 

Get in touch with us today for the right advice to ensure you are not spending too much on your water bills.

Need a plumber? Call Curran.