Hot water systems are one of those things you’ll find in just about every Aussie home. But, when it comes time to replace or upgrade your system, a lot of homeowners suddenly realise they’re not quite sure what they actually need.
From traditional electric storage tanks to gas, solar, instant, and heat pump systems, there’s no shortage of options on the market. But,each one works a little differently, comes with its own pros and cons, and suits different households, budgets, and lifestyles. Add in factors like household size, energy efficiency, running costs, and available space, and the decision can feel quite complicated!
In this post, we’ll break down the most common hot water systems found in Australian homes and help you understand which option makes the most sense for your home.
Hot Water System Types Available
When it comes to hot water systems, there’s no one-size-fits-all solution. Australian homes use a range of systems, each with its own strengths, limitations, and ideal use cases. Some of the most common include:
1. Electric Storage Hot Water Systems
Electric storage systems are the most common hot water systems in Australian homes, making up over half of all installations due to their simple design, affordability, and reliability.
| Category | Details |
| How They Work | Cold water enters an insulated tank and is heated by one or two electric elements. Hot water rises to the top and is stored at around 60°C until needed. As hot water is used, cold water refills the tank and reheats. |
| Pros | Lower upfront cost; Simple installation indoors or outdoors; Works well with off-peak electricity; Easily paired with solar PV systems; Suitable for multiple taps running at once |
| Cons | Higher running costs without solar or off-peak power; Limited hot water supply; Heat loss from stored water; No operation during power outages |
| Best Suited For | Homes without gas, properties with solar panels, and households looking for a budget-friendly option. Families of four typically need 125–160L tanks, while off-peak users may require 250–315L. |
2. Gas Storage Hot Water Systems
Gas storage systems provide faster recovery times than electric models and are ideal for homes with an existing gas connection.
| Category | Details |
| How They Work | A gas burner heats water stored in an insulated tank. When the temperature drops, a thermostat activates the burner to reheat the water. Hot water naturally rises to the top for use. |
| Advantages | Faster reheating than electric systems; Strong performance for multiple bathrooms; Lower running costs than standard electric systems; Some models operate during power outages |
| Disadvantages | Requires gas supply and proper ventilation; Usually installed outdoors; Heat loss due to tank design; Ongoing maintenance of valves and anodes |
| Ideal For | Medium to large households, homes with natural gas connections, and families that use hot water heavily during peak times. |
3. Instant (Tankless) Hot Water Systems
Instant systems heat water on demand, eliminating the need for a storage tank.
| Category | Details |
| How They Work | When a hot tap is turned on, cold water passes through a heat exchanger where it’s heated instantly by gas or electricity. Water is heated only when required. |
| Benefits | Endless hot water; High energy efficiency; Compact, space-saving design; Longer lifespan than storage tanks |
| Limitations | Higher upfront and installation costs; Flow rate limits during simultaneous use; May require gas or electrical upgrades |
| Best For | Smaller households, homes with limited space, and families who want continuous hot water without running out. |
4. Solar Hot Water Systems
Solar hot water systems use energy from the sun to heat water, making them one of the most environmentally friendly options available.
| Category | Details |
| How They Work | Roof-mounted collectors absorb solar heat and transfer it to water stored in a tank. A gas or electric booster provides backup heating when sunlight is limited or demand is high. |
| Advantages | Can reduce water heating costs by 65–90%; Significantly lowers greenhouse gas emissions; Eligible for government rebates; Long system lifespan |
| Drawbacks | Higher upfront cost; Requires suitable roof space and orientation; Performance depends on weather conditions |
| Best Suited For | Homes in sunny locations with north-facing roof space, especially larger households that use significant amounts of hot water. |
5. Heat Pump Hot Water Systems
Heat pumps are among the most energy-efficient hot water systems and are rapidly increasing in popularity.
| Category | Details |
| How They Work | Heat pumps extract warmth from the surrounding air and transfer it to water through a refrigeration cycle, similar to a reverse-cycle air conditioner. |
| Key Benefits | Uses up to 75% less electricity than electric storage systems; Very low running costs; Works well with solar PV; Eligible for government rebates |
| Potential Downsides | Higher upfront cost; Requires good airflow and outdoor space; Reduced efficiency in very cold climates; Produces some operational noise |
| Best For | Energy-conscious households, homes with solar panels, and properties aiming for long-term savings and lower emissions. |
5 Key Factors to Consider Before Choosing a Hot Water System
Choosing the right hot water system isn’t just about what’s cheapest or most popular, it’s about what works for your home, your household, and your long-term running costs. Hot water alone accounts for around 15–30% of a home’s total energy use and up to a quarter of household greenhouse gas emissions, so getting this decision right can make a real difference to both your bills and efficiency.
1. Household Size & Daily Hot Water Usage
The number of people living in your home plays a huge role in determining the right system size. As a general guide, one person uses around 50 litres of hot water per day, while a family of four can easily require 200 litres or more.
But, it’s not just about headcount, though. You’ll also want to consider:
- Peak usage times: Do multiple people shower back-to-back in the morning, or is hot water spread out across the day?
- Lifestyle habits: Are you a quick-shower household, or do baths and long showers feature regularly?
- Appliance use: Some washing machines and dishwashers heat their own water, while others draw from your hot water supply.
- Future plans: If you’re planning to grow the family or renovate, it’s smart to size your system for tomorrow, not just today.
Choosing a system that’s too small often leads to running out of hot water, while oversizing can mean paying more upfront and wasting energy.
2. Energy Source Availability
What energy sources are available at your property may narrow down your options quickly.
- Electric systems are the most flexible and can be installed almost anywhere, as they don’t require gas connections or special ventilation.
- Gas systems need a natural gas connection or LPG supply and usually must be installed outdoors due to ventilation requirements.
- Solar systems perform best on homes with good roof orientation (ideally north-facing) and plenty of sun exposure.
- Heat pump systems rely on ambient air temperature and need sufficient outdoor space to operate efficiently.
3. Installation Space & Location
The amount of space you have available, and where that space is located, can heavily influence which hot water systems are suitable for your home. While some systems are compact and flexible, others require specific placement, clearance, and ventilation to operate safely and efficiently.
- Electric storage systems are the most adaptable and can be installed indoors or outdoors, making them a good option for homes with limited space.
- Gas systems are typically installed outside to meet ventilation and safety requirements, which can limit placement options.
- Solar hot water systems need adequate roof space for solar collectors, along with room for a storage tank either on the roof or at ground level.
- Heat pump systems require sufficient airflow and outdoor space to perform efficiently and can produce some operational noise.
4. Budget vs Long-Term Running Costs
Hot water systems vary widely in price. A basic electric storage unit might only cost a few hundred dollars upfront, while solar and heat pump systems can run into the thousands for installation. However, upfront cost is only part of the story.
- Electric storage systems are cheaper to buy but generally cost more to run unless paired with solar PV.
- Gas systems often offer lower running costs, depending on gas prices and availability.
- Heat pump systems can use as little as 30% of the energy of conventional electric systems.
- Solar systems can significantly reduce energy bills over time, especially in sunny climates.
Government rebates and incentives for energy-efficient systems like solar and heat pumps can also help offset higher upfront costs, making them more affordable in the long run.
5. Environmental Impact & Energy Efficiency
If reducing your environmental footprint matters to you, energy efficiency should be high on your checklist. More efficient systems not only lower emissions but also reduce ongoing energy costs.
Ask yourself:
- Is energy efficiency a priority for your household?
- Would you prefer a system that can integrate with solar PV?
- Are rebates or sustainability goals influencing your decision?
Questions to Ask Before You Decide
Before committing to a hot water system installation, it’s worth taking a step back and looking at how your household actually uses hot water day to day. Answering the right questions upfront can save you from under- or over-sizing your system and help you choose an option that performs reliably without unnecessary running costs.
☐ How many people will be using hot water each day?
Household size directly affects demand. More people generally means higher daily usage and a greater need for consistent supply, especially during peak times.
☐ Will showers, laundry, and dishes often run at the same time?
If multiple fixtures and appliances are used simultaneously, your system needs to handle higher demand without running out of hot water or losing pressure.
☐ Do we mainly shower, or do we use baths regularly?
Baths use significantly more hot water than showers. A household that relies on baths may need a larger storage system or a continuous supply option.
☐ What energy connections are already available?
Existing access to electricity, natural gas, LPG, or solar can narrow your options and influence both installation complexity and ongoing costs.
☐ How important are long-term savings versus upfront cost?
Some systems cost less to install but more to run, while others require a higher initial investment but deliver lower energy bills over time. Balancing short-term budget with long-term efficiency is key.
Common Hot Water System Mistakes to Avoid
A hot water system is a long-term investment, and getting the choice wrong can cost you far more than you expect. Because water heating is one of the biggest energy users in the home, poor decisions can lead to higher power bills, unreliable hot water, and systems that struggle to keep up with demand. Avoiding these common mistakes will help you get the best performance and value from your system:
Choosing Based on Price Alone
It’s tempting to go for the cheapest option, but the lowest upfront price rarely delivers the best value. Budget systems often don’t include the full cost of installation, compliance upgrades, or rebate processing. They can also be less energy-efficient, meaning higher running costs year after year. Spending a little more upfront on a system that’s efficient and properly sized often leads to significant savings over its lifespan.
Underestimating Household Demand
One of the most common issues homeowners face is choosing a system that’s too small. When demand outpaces supply, hot water runs out quickly, usually during the busiest times of day.
To avoid this, consider:
- The number of people in your household (around 50 litres per person per day)
- Peak usage times, such as morning or evening showers
- Whether multiple showers, taps, or appliances run at the same time
A system that can’t handle peak demand will constantly struggle, no matter how energy-efficient it is.
Ignoring Future Family or Renovation Plans
Hot water systems typically last 10–15 years, and household needs often change in that time. Choosing a system that only suits your current situation can lead to problems later on. Planning for extra bedrooms, a growing family, or bathroom renovations ensures your system won’t need replacing sooner than expected. Many professionals recommend sizing systems based on the number of bedrooms rather than current occupants for this reason.
Attempting DIY Installation
Installing a hot water system yourself might seem like a way to save money, but it carries serious risks. Incorrect installation can lead to electrical hazards, gas leaks, scalding risks, water damage, and non-compliance with Australian standards. DIY work can also void warranties, invalidate insurance, and leave you legally exposed. Professional installation ensures safety, compliance, and long-term reliability.
Comparison At A Glance
| Hot Water System Type | Upfront Cost | Running Cost | Energy Efficiency | Hot Water Supply | Space Required | Best For |
| Electric Storage | Low | High (unless off-peak or solar) | Moderate | Limited by tank size | Medium (tank storage) | Small to medium homes, budget-focused households, homes without gas |
| Gas Storage | Medium | Medium to Low | Moderate | Limited by tank size | Medium (outdoor install) | Medium to large families, homes with gas connection |
| Instant (Tankless) | High | Low to Medium | High | Continuous (within flow limits) | Low (wall-mounted) | Small households, space-limited homes, frequent hot water use |
| Solar | High | Very Low | Very High | Limited by tank size (boosted) | High (roof + tank) | Large families, sunny locations, eco-conscious homeowners |
| Heat Pump | Medium to High | Very Low | Very High | Limited by tank size | Medium (outdoor unit) | Homes with solar PV, energy-efficient households, long-term savings |
Choosing the Right Hot Water System
Choosing the right hot water heater comes down to matching your household’s needs with the right system. Electric systems offer affordability, gas systems deliver faster recovery, instant systems provide continuous hot water, solar reduces energy costs, and heat pumps lead the way in efficiency. Each option has its place, depending on your usage, space, and energy setup.
Before deciding, consider your household size, daily hot water demand, available energy sources, and future plans. The cheapest option upfront isn’t always the most cost-effective long term, and the right system should deliver reliable performance without wasting energy.
Ready to upgrade your hot water with confidence? Don’t leave it to guesswork. The licenced hot water experts at GA PERRY will assess your home, usage, and energy options to recommend the right system, and install it properly the first time. Get reliable hot water, lower running costs, and total peace of mind. Book a consultation today and start saving on energy tomorrow.
