Short answer
Both are low running cost options and both earn federal STCs. Solar hot water uses roof collectors to heat water directly from the sun, with a booster for cloudy days. A heat pump sits on the ground, needs no roof space, and pairs well with rooftop solar panels on a timer. energy.gov.au says that if you are getting a new hot water system to use your own solar, a heat pump is the most efficient and cost-effective option. Solar hot water still suits homes with spare sun-facing roof space.
On this page
Rooftop solar panels changed this comparison: once a home has panels, a heat pump on a midday timer gets much of the same free sunshine without a second set of panels on the roof. The right answer now depends on your roof, your climate and whether you have, or plan, rooftop solar.
How do solar hot water and heat pumps compare?
| Heat pump | Solar hot water | |
|---|---|---|
| Where it goes | Ground level, outdoors (or split with indoor tank) | Collectors on the roof, tank on the roof or ground |
| Energy source | Electricity running a compressor; most of the heat comes from the air | Direct sun on collectors, plus an electric or gas booster |
| Works at night or in cloud | Yes | Booster does the work |
| Pairs with rooftop PV | Yes, on a timer | Competes with PV for roof space |
| Noise | Fan and compressor hum | No compressor or fan |
| Federal STCs | Yes, if on the CER register | Yes, if on the CER register |
| Victoria VEU (replacing gas) | Up to $560 | Up to $700 (electric-boosted only) |
VEU figures from Victorian Energy Upgrades; only electric-boosted solar qualifies (VEU buyers guide). STC eligibility from the Clean Energy Regulator.
Which is cheaper to buy?
CHOICE's 2024 buying guide gives solar hot water a price range of $4,000 to $6,000 (CHOICE). Heat pumps run from about $2,000 to $7,500 installed in the government ranges I found. See what a heat pump costs.
Do I need roof space?
For solar hot water, yes, facing the sun. If your best roof space already carries solar panels, or will, the collectors compete with them. A heat pump needs only a spot on the ground with good airflow, away from bedrooms.
What about climate?
Both work best in warm, sunny places. Your Home says air source heat pumps "work best in relatively warm, humid climates" (Your Home). In the CER zones, the coldest heat pump zone (5) covers Canberra and Hobart, while Darwin is in zone 1 for both heat pumps and solar water heaters (CER postcode zones). In the south, solar collectors get less winter sun and rely more on the booster; heat pumps work harder in the cold air. See cold climates.
I already have rooftop solar panels. Which should I choose?
A heat pump with a timer is usually the simpler pairing. The Clean Energy Regulator suggests setting a heat pump's timer to run while your rooftop solar is generating (CER), and energy.gov.au says that if you're getting a new hot water system, "a heat pump system is also most efficient and cost-effective" for using your own solar (energy.gov.au). Note that solar diverters, which send surplus solar to an element, don't work with heat pumps (Your Home).
When does solar hot water still make sense?
- You have good sun-facing roof space that isn't needed for panels.
- You want the quietest possible system.
- You live somewhere very sunny, such as the Top End or inland, and want hot water directly from the sun.
- Your existing solar hot water tank only needs replacing, not the whole system.
For rentals in Victoria, both a heat pump and an electric-boosted solar water heater meet the 2027 hot water standard (Consumer Affairs Victoria). See rebates by state for what each attracts where you live.
Sources for this page
- Hot water system discounts (Victorian Energy Upgrades), Victorian Government (energy.vic.gov.au). Last checked: November 2026.
- Hot water buyers guide (Victorian Energy Upgrades), Victorian Government (energy.vic.gov.au). Last checked: November 2026.
- Solar water heaters and air source heat pumps, Clean Energy Regulator. Last checked: November 2026.
- Hot water systems buying guide (updated 5 April 2024), CHOICE (non-profit). Last checked: November 2026.
- Hot water systems, Your Home (Australian Government, DCCEEW). Last checked: November 2026.
- Postcode zones for air source heat pumps and solar water heaters (Version 3, 1 January 2020), Clean Energy Regulator. Last checked: November 2026.
- Get the most from your solar system, energy.gov.au (Australian Government). Last checked: November 2026.
- New minimum energy efficiency standards for rental properties, Consumer Affairs Victoria. Last checked: November 2026.
Every source used on the site is listed on the sources page.