Gas hot water running costs
| System | Energy a day | Melbourne a year | Sydney a year |
|---|---|---|---|
| Gas water heater | 35.3 MJ | $537 | $638 |
| Electric storage | 7.8 kWh | $916 | $949 |
| Heat pump | 2.4 kWh | $275 | $285 |
The heat pump comes out cheapest, and runs for almost nothing if timed to midday solar. Electric storage on general usage is the dearest; on a cheaper controlled load tariff it narrows the gap. Gas storage systems also lose heat through the flue and tank, which these figures leave out.
Types of gas hot water
Gas continuous flow
Instantaneous- Heats only what you use
- No tank losses
- Never runs out
- Needs a large gas supply
- Usually installed outdoors
Gas storage
Tank- Simple and cheap to buy
- Heat lost through the tank and flue
- energy.gov.au calls gas storage systems particularly inefficient, especially in cold climates
Switching from gas hot water
Heat pump water heaters earn STCs, and NSW and Victoria add discounts when replacing gas. See solar and heat pump hot water and the NSW hot water upgrade discount. If hot water is your last gas appliance, switching also lets you drop the gas supply charge.
Victorian rule from 2027
From 1 March 2027, a gas hot water system in an existing Victorian home that reaches the end of its life must be replaced with an electric one. Repairs to a working system are still allowed. See gas phase-out rules.
Common questions
It depends on how much hot water you use and your gas rate. Our worked example for 150 litres a day, heated by 45°C, comes to about $500 to $600 a year on typical Melbourne and Sydney gas rates, before supply charges.
Usually, yes. A heat pump uses about 30% of the energy of an electric storage system, which on current prices makes it cheaper to run than gas in our worked example, and cheaper still on solar.
Only when it reaches the end of its life from 1 March 2027. It must then be replaced with an electric system. You can still repair a working one.
Sources
Efficiency and energy-share figures come from energy.gov.au; gas prices from the AER plan data; the worked example uses stated assumptions. Last checked October 2026. Prices include GST unless we say otherwise.