What's the cheapest way to heat water in Australia?
Short answer: if you already have a working electric storage tank, the cheapest way to heat water over 10 years is usually to run that tank from solar. You can do that with dedicated solar panels and a solar water heating inverter like iHot, or with a PV diverter that sends your house solar's surplus to the tank. A heat pump is the most energy-efficient option and the best choice if you're replacing your tank anyway or have little roof space. Running an electric tank on grid power is the most expensive. Gas usually is too.
The figures below are for a typical 4-person home in Brisbane. All the assumptions are shown, so you can adjust them for your own home and tariff.
Running cost and 10-year cost compared
| System | Typical installed cost | Running cost per year | Rough 10-year cost |
|---|---|---|---|
| iHot on your existing electric tank | $2,000 to $3,000 after STCs, including 6 to 8 dedicated panels | About $50 to $150 (grid boost on cloudy days) | About $2,500 to $4,500 |
| PV diverter on your existing tank (needs house solar with surplus) | About $1,000 to $2,000 | About $150 to $400 (lost feed-in credits plus grid top-up) | About $2,500 to $6,000 |
| Heat pump | About $2,500 to $4,500 after STCs | About $40 to $250 (less on a solar timer) | About $3,000 to $7,000 |
| Rooftop solar thermal (collectors or evacuated tubes, electric boost) | About $4,000 to $7,000 after STCs | About $130 to $220 | About $5,300 to $9,200 |
| Electric tank on off-peak (controlled load) | $0 if you keep your tank; about $1,500 to $2,500 to replace | About $525 to $730 | About $5,000 to $10,000 |
| Gas continuous flow | About $1,800 to $3,500, plus a gas connection if you don't have one | About $400 to $900 for gas, plus $240 to $480 supply charges if hot water is your only gas use | About $6,500 to $17,000 |
| Electric tank on a standard tariff | $0 if you keep your tank; about $1,500 to $2,500 to replace | About $880 | About $8,800 to $11,300 |
The 10-year figure adds the upfront cost and 10 years of running costs. It ignores price rises, the time value of money and future tank replacement. The iHot and diverter figures assume you keep a working tank. If your tank also needs replacing, add $1,500 to $2,500.
Which is cheapest for your home?
- You have a working electric tank and room for 6 to 8 panels: iHot is usually cheapest over 10 years, and it doesn't depend on your house solar.
- You have a large house solar system with plenty of surplus and no export limit problems: a PV diverter can be cheaper upfront. It uses solar you'd otherwise export, so it competes with your feed-in credits and your home's daytime use. It won't help if your house system is small, already full or off-grid.
- Your tank is due for replacement anyway, or your roof is small or shaded: a heat pump is usually the best value. Run it on a timer in the middle of the day if you have house solar.
- You're off-grid: iHot heats water from its own panels without touching your battery. A heat pump or diverter would draw on your battery and inverter.
- You're on gas: in Queensland, gas hot water is usually one of the most expensive options to run once supply charges are included.
What's the most efficient hot water system?
It depends what you measure.
- Least electricity per litre of hot water: a heat pump. It turns 1 kWh of electricity into roughly 3.5 to 5 kWh of heat.
- Least grid energy: iHot or solar thermal. On most days in Brisbane, iHot heats the tank entirely from its dedicated panels and uses no grid power at all.
- Least roof space: a heat pump, then solar thermal. iHot needs 6 to 8 panels for a typical family.
An electric element turns all its electricity into heat, but from the grid it's the most expensive way to heat water. Running it from solar removes most of that cost.
Assumptions behind the numbers
- A 4-person home uses about 8 kWh of heat a day for hot water (about 2,900 kWh a year).
- Grid electricity costs 30c/kWh on a standard tariff and about 18c to 25c/kWh on controlled load (tariff 31 or 33). Feed-in credits are about 5c/kWh.
- A heat pump delivers about 3.5 kWh of heat per kWh of electricity.
- Gas costs about 3c to 7c/MJ in Brisbane, plus a daily supply charge of about 65c to $1.30. A continuous flow unit is about 80% efficient.
- Rooftop solar thermal covers about 75% of hot water from the sun. iHot with 6 to 8 north-facing 475 W panels covers about 85% to 95%. A PV diverter covers about 70% to 90%, depending on surplus.
- Installed prices are typical Brisbane ranges as at November 2026, after STCs where they apply. Your quote will vary.
Your result will depend on your hot water use, tariff, roof, shading and climate. Check the rates on your own power and gas bills.
Want to know what it would cost for your home? Tell us about your home and we'll give you an honest answer, even if a heat pump suits you better.
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Heat pump vs iHot · Off-grid solar hot water · How iHot works · FAQs