Hot water isn’t just a convenience in Australia it’s essential. From morning showers to dishwashing and laundry, an efficient hot water system directly affects household comfort, energy bills, and even property value.
But with rising electricity prices, gas supply changes, and rapid improvements in heat pump and solar technology, choosing the right system is more complicated than ever. Understanding how hot water systems work helps homeowners:
- reduce running costs
- choose the most suitable system for their climate
- improve energy efficiency
- maintain safety and compliance
- avoid costly replacements or incorrect installations
This complete guide breaks down every major type of hot water system used in Australia electric, gas, instantaneous (continuous flow), solar, and heat pump with clear diagrams (in words), real-world cost expectations, maintenance tips, and professional-level insights you won’t typically find on standard comparison pages.
Key Takeaways (Expanded & Improved)
✔ Australia’s main types of hot water systems:
- Electric storage
- Gas storage
- Gas instantaneous (continuous flow)
- Electric instantaneous
- Solar hot water (thermosiphon & split-system)
- Heat pump hot water
✔ Running cost comparison (general trend, lowest → highest):
- Solar + heat pump booster
- Heat pump
- Gas instantaneous
- Gas storage
- Electric storage
- Electric instantaneous (depends on tariffs)
✔ Lifespan expectations:
- Electric storage: 8–12 years
- Gas storage: 8–10 years
- Gas instantaneous: 15–20 years
- Solar: 15–20 years collectors & 10–15 years tank
- Heat pump: 10–15 years
✔ Safety devices every system uses:
- Tempering valve (delivers 50°C to bathrooms)
- PTR valve (pressure & temperature relief)
- Thermostat & thermal cut-out
- Gas systems: flame failure & draft diverter
✔ Approximate installed cost ranges in Australia:
- Electric storage: $1,000–$2,200
- Gas storage: $1,800–$3,000
- Gas instantaneous: $2,000–$4,500
- Solar: $4,000–$7,500 (after STCs)
- Heat pump: $2,500–$5,000 (after rebates)
What a Hot Water System Actually Does
A hot water system’s job is to heat cold inlet water, store or deliver it, and maintain safe, regulated temperature at the tap.
The Water Pathway
- Cold water enters the system under mains pressure.
- The water is heated (using electricity, gas, solar energy or a heat pump).
- In storage systems: hot water stratifies (hot layer rises to the top).
- When a tap opens, pressure forces hot water out of the system.
- A tempering valve mixes in cold water so bathrooms receive 50°C, not the 60°C+ inside the tank (to prevent Legionella).
The Basics of Heat Transfer
- Electric systems: use a resistive element → heat transfers directly into water.
- Gas systems: burner flame heats a metal tank or heat exchanger.
- Instantaneous systems: heat exchanger heats water on demand.
- Solar: sun heats fluid in collectors → transfers to tank.
- Heat pumps: extract heat from air using refrigeration cycle → transfer to water.
Delivery Temperature Rules in Australia
- Bathroom outlets: max 50°C (tempering valve required).
- Kitchen & laundry: can exceed 50°C (for hygiene).
- Inside storage tanks: usually 60°C–70°C to prevent Legionella.
Energy Inputs
- Electricity (single-phase or three-phase)
- Natural gas or LPG
- Solar radiation
- Ambient heat (for heat pumps)
Deep Dive: How Each Hot Water System Works
A. Electric Storage Hot Water Systems
How They Work
Inside a typical electric storage tank:
- Cold water enters at the bottom through a diffuser.
- The heating element warms the surrounding water.
- A thermostat cycles the element on/off to maintain set temperature.
- Hot water rises to the top of the tank (stratification).
- When a tap opens, the hottest water at the top exits first.
Recovery Time
- Standard electric: 2–4 hours
- Off-peak tariff systems may heat only at night → slower recovery
Efficiency & Running Costs
- Electric storage systems are 100% energy-efficient at the appliance but still costly because electricity itself is expensive.
- Running cost: high, especially on peak tariffs.
Pros
- Simple, reliable, cheap upfront
- Easy to install
- Works anywhere (even rural)
Cons
- Slow recovery
- Higher running costs
- Large tank required (many homes 250–315 L)
Best Suited For
- Homes with off-peak electricity
- Low hot-water-use households
- Rental properties and budget installations
B. Gas Storage Hot Water Systems
How They Work
- A gas burner at the bottom heats the tank.
- Hot combustion gases travel up the flue, transferring heat.
- Thermostat controls burner operation.
- Pilot light or electronic ignition lights the burner.
Pilot vs Electronic Ignition
- Pilot light: small flame always burning (small gas use).
- Electronic ignition: more efficient, no pilot flame.
Recovery Rate
- Faster than electric – typically 30–40 L/hour more than electric of same size.
Pros
- Good recovery rates
- Reliable
- Reasonable running costs
Cons
- Lower energy efficiency than gas instantaneous
- Needs gas supply
- Outdoor installation preferred
Ideal Applications
- Homes already using natural gas
- Families needing fast recovery
Common Failure Points
- Thermocouple
- Flue corrosion
- Pilot ignition blockages
- Tank rust/corrosion
C. Gas Instantaneous (Continuous Flow) Systems
How They Work
[Water inlet] → [Flow sensor] → [Modulating gas burner] → [Heat exchanger] → [Hot water outlet]
- When a tap opens, water flows through the unit.
- A flow sensor detects movement and ignites the burner.
- A modulating burner adjusts flame size based on flow rate.
- Water passes through a heat exchanger and rapidly heats.
- The system maintains set outlet temperature (e.g., 50°C).
Minimum Activation Flow
Most units require 2–3 L/min before they start heating.
Temperature Stabilisation
Modern units use:
- inlet temperature sensors
- outlet sensors
- burner modulation
- water flow valves
This ensures stable temperature even with pressure changes.
Proper Sizing (Common Examples)
- 16 L/min: small unit, 1 bathroom
- 20 L/min: 1–2 bathrooms
- 26 L/min: 2+ bathrooms, typical family home
Pros
- Endless hot water
- Highly efficient
- Small footprint
- Long lifespan
Cons
- Needs correct gas pipe sizing
- Slower temperature changes if taps are mixed
- Minimum flow may not suit some low-flow taps
D. Electric Instantaneous Hot Water Systems
Why They Require Large Electrical Loads
To heat water instantly, enormous power is required.
A typical unit may need:
- 40–60 amps single-phase, or
- Three-phase power for larger units.
Many Australian homes lack the necessary wiring capacity.
When Electric Instantaneous Works
- Small apartments
- Offices with low demand
- Where three-phase is already available
When It Doesn’t Work
- Large families
- Rural homes without strong electrical supply
- Homes intending to run multiple hot taps simultaneously
E. Solar Hot Water Systems
Two Main Configurations
1. Roof-Mounted Thermosiphon System
- Collector + tank both on roof
- Hot water naturally rises into tank (no pump required)
Sun → Collector heats water → Hot water rises to roof tank
2. Split-System With Pumped Circulation
- Collectors on roof
- Tank on ground
- A small pump circulates heat transfer fluid or water
Collector Types
- Flat-plate collectors
- Cheaper, durable
- Work well in warmer climates
- Cheaper, durable
- Evacuated tubes
- Higher efficiency
- Great in cooler climates
- Better winter performance
- Higher efficiency
Solar Gain & Booster Heating
- Solar contributes 50–90% of annual hot water energy depending on location.
- Boosters (electric or gas) automatically assist in cloudy or wintery conditions.
Frost Protection
- Glycol fluid loops
- Frost valves
- Closed-loop heat exchangers
F. Heat Pump Hot Water Systems
Heat pumps work like a refrigerator in reverse.
How They Work (Simplified Refrigeration Cycle)
Outside air → Evaporator → Compressor → Condenser → Hot water tank → Expansion valve → Back to evaporator
- Evaporator absorbs heat from outdoor air.
- Compressor increases refrigerant pressure/temperature.
- Condenser transfers heat into the water tank.
- Expansion valve cools refrigerant before cycle repeats.
COP Efficiency
- COP (Coefficient of Performance) of 2–4
- Meaning for every 1 kWh of electricity, 2–4 kWh of heat goes into water.
Where Heat Pumps Excel
- Warm to temperate climates
- Homes with solar PV
- Medium to high hot water demand
Where They Struggle
- Very cold climates (<5°C)
- Indoor installations without airflow
- Areas with noise restrictions (compressor hum)
Safety Controls & Compliance
Tempering Valve
- Required by law for bathrooms
- Mixes cold water with 60°C tank water → safe 50°C
- Must be installed by a licensed plumber
PTR Valve (Pressure & Temperature Relief)
- Opens to release pressure if tank overheats
- Normal to drip during heating cycles
- Heavy, continuous flow = fault
Legionella Prevention
- Storage systems must heat water to ≥60°C
- Solar + heat pump systems use automatic boosting
Sizing Guide
Recommended Storage/Flow Rates
| Household | Storage System | Instantaneous (L/min) |
| 1–2 people (unit) | 80–160 L | 12–16 L/min |
| 2–3 people | 160–250 L | 16–20 L/min |
| 3–5 people | 250–315 L | 20–26 L/min |
| 5+ people | 315+ L | 26–32 L/min |
| Airbnb (multiple guests) | Oversize by one tier | 26–32 L/min |
| Rural low-pressure | Larger tank + gravity-fed | Instant often unsuitable |
Running Costs & Energy Efficiency Comparison
Most Efficient → Least Efficient
- Solar (with electric or gas boost)
- Heat pump hot water
- Gas instantaneous
- Gas storage
- Electric storage
- Electric instantaneous (varies)
Rebates & STCs (General Guidance)
- Solar and heat pumps earn STCs (Small-scale Technology Certificates).
- STC value reduces installation cost.
- Additional rebates exist in VIC, NSW, ACT, and SA (varies by year).
- Check current state schemes for specifics.
Maintenance & Troubleshooting
Early Signs of Failure
Electric Storage
- Rust-coloured water
- Slow heat recovery
- Tripping circuit breaker
- Leaking tank
Gas Storage
- Pilot going out
- Yellow flame (incomplete combustion)
- Rumbling in tank (sediment)
Gas Instantaneous
- Fluctuating temperature
- Error codes
- Slow ignition
Solar Systems
- Booster running constantly
- Poor winter performance
- Leaking collector loop
Heat Pumps
- Ice buildup on evaporator
- Excessive noise
- Long heat cycles in cold weather
When to Repair vs Replace
- Tank leaking → replace
- Element/thermostat failure → repair
- Gas valve issues → repair OR replace depending on age
- Heat pump compressor failure → often replacement recommended
General Lifespan
- Storage tanks: 8–12 years
- Instantaneous: 15–20 years
- Solar collectors: 15–20 years
- Heat pumps: 10–15 years
Which System Works Best? (Decision Framework)
Flowchart-Style Guide
- What energy sources are available?
- Gas available? → Consider gas instantaneous or gas storage
- Solar PV installed? → Heat pump or solar hot water
- Electric only? → Electric storage or heat pump
- Climate:
- Warm/temperate → Any system
- Cold climate (e.g., Canberra, Tasmania) → Evacuated tube solar or high-end heat pump
- Household size:
- 1–2 people → Small storage or 16–20 L/min instantaneous
- 3–5 people → 250–315 L storage or 20–26 L/min instantaneous
- Budget:
- Low → Electric storage
- Medium → Gas instantaneous
- Long-term savings → Heat pump or solar
- Environmental goals:
- Best → Solar or heat pump
- Good → Gas instantaneous
Common Scenarios
- Small apartment → Electric instantaneous or compact storage
- Family home with gas → 20–26 L/min gas instantaneous
- Homes with solar PV → Heat pump
- Rural property → Electric storage or solar thermosiphon
- High occupancy Airbnb → Oversized gas instantaneous (26–32 L/min)
FAQ
1. What’s the best system for small homes?
Electric instantaneous or a small electric storage tank (80–125 L) typically works best.
2. Are heat pumps noisy?
Yes — they produce a low compressor hum, similar to an outdoor AC unit. Modern units are quieter (40–50 dB).
3. What causes fluctuating hot water temperature?
Usually undersized instantaneous units, clogged filters, or incorrect gas supply.
4. Do solar systems work in winter?
Yes, but require more boosting. Evacuated tubes perform better than flat panels in cold climates.
5. How long do storage tanks last?
Typically 8–12 years depending on water quality and anode replacement.
6. Is a tempering valve mandatory?
Yes — for bathroom outlets in all new installations.
7. What is a PTR valve supposed to do?
Release pressure and temperature during heating cycles. Occasional dripping is normal.
8. Do instantaneous systems need maintenance?
Annual servicing is recommended — cleaning filters, checking burner and heat exchanger.
9. Are electric storage systems still allowed?
Yes, but some states restrict electric-only replacements in certain situations.
10. Can heat pumps run on solar power?
Absolutely — pairing a heat pump with rooftop solar PV dramatically reduces running costs.
Final Thoughts
Understanding how hot water systems work in Australia empowers homeowners to make smarter decisions, reduce energy bills, improve safety, and select systems that match their climate, lifestyle, and budget.
Whether you’re upgrading an old tank, building a new home, or trying to cut energy bills, use this guide as your roadmap — and always consult a licensed plumber for installation and compliance.