Short answer
A heat pump uses about a third of the electricity of an electric storage tank to heat the same water: about 1,716 kWh a year against 5,110 kWh for a 300 litre tank, on the ACT Government's figures. It costs more upfront, but replacing an electric tank is the swap that saves the most energy and attracts the biggest state discounts.
On this page
Around half of Australian households use electric storage hot water (energy.gov.au). It is cheap to buy and simple, and on a controlled load tariff it heats overnight at a lower rate. It is also one of the least efficient ways to heat water. A heat pump does the same job with a fraction of the power.
How much less power does a heat pump use than an electric tank?
| Source | What it says |
|---|---|
| energy.gov.au | A heat pump uses 30% of the energy of a conventional electric hot water system |
| Victorian Government | Around 60 to 75% less electricity |
| Renew | At least 50% and up to 78% less, depending on climate, brand and model |
| ACT Government | About 4.7 kWh a day vs 14 kWh to heat a 300 L tank to 60°C |
The reason is COP. Your Home puts new electric storage at about 0.95 and heat pumps at about 3 to 5 (Your Home). See how heat pumps work.
What about instantaneous electric hot water?
Instantaneous (continuous flow) electric units heat water as it flows, with no tank. energy.gov.au notes that minimum energy performance standards are not in place for solar, heat pump or electric instantaneous water heaters. Because they heat water at the moment you use it, they can't shift heating to solar or off-peak hours the way a tank can. A heat pump stores heat, which is what makes timing possible.
Which costs less over time?
It depends on your electricity price. The running costs page works through it at several example prices. On a controlled load tariff, the electric tank's power is cheaper, so the gap is smaller. On a general tariff, or if the heat pump can run on solar or free midday power, the gap is wider. The NSW Government estimates savings of $200 to $800 a year compared with a traditional system (energy.nsw.gov.au).
Why are rebates bigger for replacing electric?
Because the energy saving is bigger. NSW offers up to $640 when a heat pump replaces an electric water heater, against $330 replacing gas (energy.nsw.gov.au). Victoria's VEU offers up to $630 from electric against $560 from gas (VEU). Federal STCs apply to both.
Is a heat pump a straight swap for an electric tank?
Often, with an integrated unit. Your Home describes the integrated type as a simple swap for an electric storage unit. Check:
- Airflow around the spot. An electric tank can sit in a cupboard; a heat pump needs outside air.
- Noise near bedrooms and neighbours. See the noise guide.
- Tariff compatibility. Some heat pumps can't run on controlled load, and some only on Controlled Load 2 (Your Home).
- An indoor tank may suit a split system better. See all-in-one vs split.
Will electric storage tanks be phased out?
I haven't found a national rule banning them. Heat pumps themselves are getting new minimum efficiency standards: federal energy ministers approved the regulation review recommendations on 16 December 2025, with minimum standards first and labelling likely in 2028 (Energy Rating, Decision RIS).
Sources for this page
- Hot water systems, energy.gov.au (Australian Government). Last checked: November 2026.
- Hot water buyers guide (Victorian Energy Upgrades), Victorian Government (energy.vic.gov.au). Last checked: November 2026.
- Heat pump hot water systems, Renew (non-profit). Last checked: November 2026.
- Singing in the shower: a guide to hot water heat pumps, ACT Government (Climate Choices). Last checked: November 2026.
- Hot water systems, Your Home (Australian Government, DCCEEW). Last checked: November 2026.
- Heat pump water heaters, NSW Government (energy.nsw.gov.au). Last checked: November 2026.
- Hot water upgrade incentive, NSW Government (energy.nsw.gov.au). Last checked: November 2026.
- Hot water system discounts (Victorian Energy Upgrades), Victorian Government (energy.vic.gov.au). Last checked: November 2026.
- Minimum energy efficiency standards: hot water standard, Consumer Affairs Victoria. Last checked: November 2026.
- Decision Regulation Impact Statement: heat pump water heaters, Energy Rating (Australian Government). Last checked: November 2026.
- Decision Regulation Impact Statement: energy efficiency policy options for heat pump water heaters (April 2026), Energy Rating (Australian Government). Last checked: November 2026.
Every source used on the site is listed on the sources page.