Short answer
A heat pump costs more to buy than gas but less to run. The Victorian Government says swapping gas hot water for a heat pump saves up to about $400 a year, more with solar. Gas instantaneous (continuous flow) never runs out, while a heat pump tank can. In Victoria, a replacement for a failed gas system must be electric from 1 March 2027.
On this page
With Victoria changing the rules from 1 March 2027 and rebates on offer in several states, a lot of gas households are making this comparison for the first time. Here is how the two stack up on the things that matter.
Is a heat pump cheaper to run than gas?
The official figures say yes, by a few hundred dollars a year:
- Victoria: replacing a gas system with a heat pump "can reduce annual operating costs by up to $400" (energy.vic.gov.au). The government's 2025 factsheet says efficient electric hot water will save households up to $400 a year "or $590 with solar" (DEECA).
- ACT (2021/22 prices, out of date): gas about $850 a year against about $478 for a heat pump, for a 300 litre tank heated daily (ACT Government).
- If hot water is your last gas appliance, disconnecting saves around $350 to $400 a year in fixed network charges in Victoria (VEU buyers guide).
Heat pump vs gas storage vs gas instantaneous
| Heat pump | Gas storage | Gas instantaneous | |
|---|---|---|---|
| Efficiency (Your Home) | COP about 3 to 5 | 0.75 to 0.96 | |
| Upfront cost | Higher; about $2,000 to $7,500 installed before rebates | Lower; most consumers paid $1,000 to $2,000 for gas or electric (federal review, 2024 data) | |
| Runs out of hot water? | Can, if the tank is too small or reheats slowly | Can, if the tank is too small | No tank to run out |
| Rebates | STCs plus state programs | None in the programs I checked | |
| Victoria from 1 March 2027 | Allowed | Can't replace a failed mains gas system with gas (exemptions apply) | |
Sources: Your Home, Decision RIS, VEU buyers guide, energy.vic.gov.au.
What about emissions?
energy.gov.au says water heating is the largest source of greenhouse gas emissions from an average Australian home, at up to 25% (energy.gov.au). A heat pump's emissions depend on where its electricity comes from. Run on rooftop solar, they are much lower; in the ACT, the government counts its electricity as 100% renewable in its cost table. Refrigerant matters too: Your Home lists natural refrigerants (CO2 and propane) with a global warming potential of 1 and 3, against 1,430 for R134a.
What do I lose by giving up gas hot water?
- Endless hot water, if you had a continuous flow unit. A heat pump tank has to be sized for your peak use. See the size guide.
- Hot water in a blackout, if you had a pilot light storage unit. Victoria lists a gas system that doesn't rely on electricity as an exemption to the 2027 rule.
- Silence. Heat pumps make a steady hum. See the noise guide.
What do I gain?
- Lower running costs, especially with solar or a free midday window.
- The option to disconnect from gas and drop the daily supply charge, if hot water was the last gas appliance.
- Rebates that don't exist for gas: in Victoria, up to $560 VEU plus a Solar Homes rebate for eligible owners; in NSW, up to $330 under the Energy Savings Scheme for a gas to heat pump swap.
What about LPG?
Your Home says LPG systems are "around two-to-three times more expensive to run" than piped gas, so the running cost case for a heat pump is stronger for homes on bottled gas. LPG isn't covered by Victoria's 2027 mains gas rule for owner-occupiers, according to the government's 2025 factsheet, but VEU does cover replacing an LPG water heater with a heat pump (Essential Services Commission).
Sources for this page
- Existing residential buildings: electric and efficiency standards, Victorian Government (energy.vic.gov.au). Last checked: November 2026.
- Building electrification for residential buildings in Victoria (factsheet, August 2025), Victorian Department of Energy, Environment and Climate Action. 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 buyers guide (Victorian Energy Upgrades), Victorian Government (energy.vic.gov.au). Last checked: November 2026.
- Hot water systems, Your Home (Australian Government, DCCEEW). 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.
- Hot water systems, energy.gov.au (Australian Government). Last checked: November 2026.
- Overview of VEU activities, Essential Services Commission (Victoria). Last checked: November 2026.
Every source used on the site is listed on the sources page.