Gas vs Electric vs Heat Pump Hot Water: A Melbourne Buyer’s Guide
Replacing a hot water system is one of the most expensive plumbing decisions a Melbourne homeowner makes - and one of the easiest to get wrong. The cheapest unit to buy is rarely the cheapest to run, and the Victorian rebate landscape changes the maths every year. Here is how the three main options compare in 2026.
Gas hot water systems
Gas continuous flow units (Rinnai Infinity, Rheem Continuous Flow, Bosch Highflow) dominate Melbourne’s east and south-east where natural gas is connected. They heat water on demand, do not run out, and have a 12-20 year typical life.
The catch: Victoria is gradually phasing gas out of new builds, and gas connection and tariff costs continue to rise. Replacing like-for-like gas still makes sense if you already have a gas connection and high hot water usage (large families, multiple bathrooms). For everyone else, electric heat pumps are now usually cheaper to run.
Electric storage hot water systems
Traditional electric storage units are the cheapest to buy and install ($1,500-$2,500 fitted) but the most expensive to run unless paired with solar PV. They are sensible for rental properties, low-use households, or as a stopgap. A typical 250L-315L unit lasts 8-12 years.
If you have rooftop solar, a basic electric storage unit on a timer that runs in the middle of the day can be surprisingly cheap to run. The WELS rating (waterrating.gov.au) only covers water efficiency, not energy efficiency.
Heat pump hot water systems
Heat pumps (Reclaim, Sanden, Stiebel Eltron, Rheem Ambiheat) are the dominant rebate-eligible upgrade in Victoria. They use 60-75% less electricity than a standard electric unit by pulling heat from the air.
Through 2026, the Victorian Energy Upgrades program (energy.vic.gov.au) and federal Small-scale Technology Certificates can knock thousands off the upfront cost. A heat pump fitted under the program often lands in the $1,800-$3,500 range after rebates, compared to $4,500-$6,000 without.
What we usually recommend
For most Melbourne homes in 2026: heat pump if you have outdoor space and use 4kWh+ of electricity per day. Continuous flow gas if you already have gas and a household of 5+. Electric storage if you have solar PV and lower usage.
We assess your situation as part of a hot water service callout in Burwood, Blackburn, Mount Waverley, or anywhere across Melbourne’s east. All installs include a Certificate of Compliance issued via the VBA (vba.vic.gov.au).
FAQ
Are gas hot water systems being banned in Victoria?
Not retroactively. From 1 January 2024, new homes requiring a planning permit must be all-electric. Existing homes can still replace gas with gas.
How much can I save with the Victorian heat pump rebate?
Currently $1,000-$3,000 depending on the unit and your installer’s approval status. The federal STC discount stacks on top.
How long does a hot water system last in Melbourne?
Gas continuous flow: 12-20 years. Electric storage: 8-12 years. Heat pump: 10-15 years on the compressor.
Can I install my own hot water system?
No. Hot water installation in Victoria is licensed work. A homeowner installation voids manufacturer warranty and insurance.
Phone Newton Plumbing - +61 414 951 362. Licence #107733.