Electric vs heat pump hot water: is upgrading worth it?

If you have an old electric storage tank and the power bill makes you wince, you have probably wondered whether a heat pump is worth the switch. In most cases Terry's answer is yes, but there is a bit of nuance depending on your tariff and how old your current tank is. Here is the plain version.

The core difference

A standard electric tank makes heat by running current through an element, a bit like a giant kettle. It works, but it is the dearest way to heat water on a normal tariff because you pay full rate for every litre it heats.

A heat pump uses electricity too, but instead of making heat it moves it, drawing warmth from the surrounding air into the water. That is why it uses only about a third of the power for the same hot water. Same job, roughly a third of the energy.

Same footprint, easy swap

One reason the upgrade is so straightforward is that a heat pump takes up about the same space as a tank and connects to the same plumbing and power. For a lot of homes it is close to a like-for-like swap in the same spot the old electric tank stood, so there is no major reworking of your laundry or side passage.

The main things Terry checks are airflow around the new unit, since it needs to breathe, and that the location is not boxed into a tight, shaded corner where it would work harder in winter.

What it costs and the rebate

Up front, a heat pump costs more than a plain electric tank. A fitted electric storage tank sits around $1,500 to $2,500, while a heat pump runs roughly $3,500 to $5,500 before rebates.

The rebate closes most of that gap. In NSW you can usually combine federal STCs, worth roughly $640 to $860 depending on the system and postcode, with the NSW Energy Savings Scheme incentive of up to around $640 for replacing an electric system. Together that is commonly worth roughly $1,000 to $2,500, applied as an up-front discount at installation through accredited suppliers, so there is nothing to claim back later. After the rebate, a heat pump can land surprisingly close to a good tank.

Payback and when to stay electric

Because a heat pump uses roughly a third of the power, the running-cost saving on a normal tariff usually pays back the extra up-front spend within a few years, then keeps saving for the rest of its 10 to 15 year life.

There are a couple of cases where staying electric can still make sense:

• You run your tank entirely on off-peak or controlled load, which is much cheaper than normal tariff and narrows the saving.
• Your current tank is nearly new and working fine, so there is no failure forcing the decision.
• You have no suitable outdoor spot with airflow for a heat pump.

Even then, when the old tank eventually fails, a heat pump is usually the smarter replacement thanks to the rebate and the lower running cost.

Terry's verdict

For most homes heating water on a normal electric tariff, upgrading to a heat pump is worth it. You get roughly a third of the running cost, an easy swap in the same footprint, and the NSW rebate taking a big chunk off the up-front price. The main reasons to hold off are a cheap off-peak tariff, a near-new tank, or no room for a heat pump to breathe.

Terry will not push you into it if the numbers do not work. He looks at your tariff, your tank's age and your install spot, gives you an honest payback estimate, and quotes a fixed price before any work starts.

Thinking about swapping an electric tank for a heat pump around Berala, Lidcombe, Bankstown or Guildford? Call Terry on 0415 274 542 and he will tell you whether it pays off for your home.