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Why buying an electric hot water system is a terrible idea

Okay, you’re thinking about getting a new electric hot water system.  Perhaps your old one just died, or maybe you need one for your new house. But it’s easily fixed, right?  Your plumber can bring around a new electric hot water unit, install it in a few hours, cheap as chips, and you’re good for another ten years.

Wrong!  That is a seriously bad idea.  Let’s take a look at why.

Electric hot water systems are hopelessly inefficient, which means they use a lot of electricity

Let’s face it, electric hot water systems are about as sophisticated as an electric kettle. And that means they use a lot of electricity.  To heat up the water for a typical three-person Canberra household, an electric hot water system would use around 8-10 kWh a day . That’s up to 3,500 kWh of electricity a year.  A heat pump hot water system – the state of the art alternative – would use little more than a third of that.  And if you have a rooftop solar system, and you use it to power your heat pump, you will hardly use grid electricity at all. Here’s how the numbers look:

Table 1: Annual electricity consumption, typical three-person Canberra household
Hot water system typeGrid electricity
Grid electricity
Electric hot water system8 – 103,500
Heat pump hot water system3 – 41,400
Heat pump hot water, 90% powered by rooftop solar0.5140

Sources: Electricity consumption data is based on a household using 200L/day of hot water. Above data is averaged out from several sources: Pitt & Sherry 2012, Running costs and operational performance of residential heat pump water heaters, Table 6; Energy Consult Pty Ltd (2010), Estimated hot water system running costs in Victoria, Table 10: Zone 4; and Harvest Hot Water, Canberra, heat pump electricity consumption data drawn from energy monitoring of several locally installed heat pumps.

An electric hot water system means electricity bills will hurt

Using all that electricity means you’re bills are going to be pretty high.  A 3-person household can expect to pay close to $900 a year if they’re on the day rate for electricity.  Over a ten-year period, the household would be paying nearly $9,000 in their electricity bills.

Of course, the electric hot water system people will say, `Ah yes, but you can run it cheaply on off-peak electricity!’   Well, at 17c per kWh, off-peak is not so cheap any more.  You’ll be paying over $600 a year, or around $6,000 over ten years.

With a heat pump hot water system, you would pay no more than about $350 a year, and if you have rooftop solar, your hot water energy bill will be hardly anything.  Here is that information in a table:

Table 2: Annual and ten-year hot water electricity cost, three-person Canberra household
Hot water system typeGrid electricity kWh/yearAnnual cost @ 25c/kWh or 17c/kWh $Ten year running cost $
Electric hot water system, standard day tariff3,5008758,750
Electric hot water system, off-peak tariff3,6006106,100
Heat pump hot water system, day tariff1,4003503,500
Heat pump hot water, 90% powered by rooftop solar14035350

Source: ActewAGL, Our ACT Electricity Prices. Schedule of charges from 1 July 2018.

But heat pumps are expensive, right?

Sure, the upfront cost (purchase and installation) is higher.  But it’s a big mistake to just look at the upfront cost and not think about how much you’re going to be paying year after year in electricity bills.  That cheap electric hot water system that sets you back just $1500 might cost you another $9000 over the next ten years.

The smart way to think about it is this: How long will my heat pump hot water system take to pay for itself?  By saving you the heavy running cost of an electric system, most heat pumps will pay for themselves in about 5 years.  After that, your hot water is free!

And there’s more …

You can get government rebates to help reduce the cost

Renewable energy-based hot water systems are good for your pocket and good for the environment, and so the government provides rebates to people who install these systems.  Depending on the going rate for the renewable energy credits, we will give you a discount of between $800 and $1000 off the installed price of your system.

That makes our heat pumps hot water systems pretty well-priced.  Want to know more?  Click here for our prices for the Midea 170 litre heat pump for smaller households, and here for our prices for the Midea 280 litre heat pump for larger households.

You can help out the environment at the same time

Another thing to think about is greenhouse emissions.  Electric hot water systems are the worst by a long margin.  The typical 3-person household would be generating 3 tonnes of carbon emissions a year, or close to 30 tonnes over a ten year period.  A heat pump hot water system using grid electricity generates a little more than a quarter of that.  And if you power your hot water system using rooftop solar, you’ll hardly generate any emissions at all:

Table 3: Annual and ten-year greenhouse emissions, three-person Canberra household
Hot water system typeGrid electricity
Emission factor for NSW electricityTonnes CO2-e/yrEmissions over 10 years (tCO2-e)


Electric hot water system, standard tariff3,5000.842.929
Heat pump, grid electricity1,4000.841.212
Heat pump, 90% powered by rooftop solar1400.840.11

Source: Grid electricity emission factor for NSW and ACT is 0.84 kg CO2-e/kWh (Scope 2: indirect emissions from consumption of purchased electricity). Cth of Australia 2018, National greenhouse accounts factors, p. 19.

Want to find out more?

Get in touch with us! You can give us a call on 0422 986 470, or fill in the contact form on this page.  We look forward to hearing from you.

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