Gas or Electric Hot Water: Which System Is Better for Your Home?

Choosing a hot water system is not simply a matter of comparing the purchase prices of two appliances. The decision can affect household energy bills for many years, determine how effectively rooftop solar is used and even decide whether the property needs a gas connection at all.

Water heating accounts for approximately one quarter of the energy used in an average Australian home, so the difference between an efficient and inefficient system can be significant. The right choice depends on household size, daily hot water demand, available space, existing services, solar generation and the electrical capacity of the property.

Electric hot water is not just one type of system

Before comparing gas and electricity, it is important to understand that there are several different types of electric hot water systems.

The main options are:

• conventional electric storage, which uses an element inside a tank;
• heat pump hot water, which extracts heat from the surrounding air and transfers it into a storage tank;
• electric instantaneous, which heats water as it passes through the unit; and
• solar hot water, which uses roof-mounted collectors and normally has an electric or gas booster.

These systems have very different purchase prices, power requirements and running costs. A basic electric storage tank should not be confused with an efficient heat pump simply because both use electricity.

Gas instantaneous hot water

A gas instantaneous, or continuous-flow, system heats water only when a tap is opened. It does not store hot water in a tank, so it is relatively compact and does not lose energy by keeping a full tank hot throughout the day and night.

Its main advantages are convenience and continuous supply. A correctly sized unit does not run out of stored hot water, making it useful for households where several people shower one after another. Some systems also allow temperature controllers to be installed in bathrooms or the kitchen.

However, “continuous” does not mean that every unit can supply an unlimited number of taps simultaneously. A standard unit may adequately serve only one or two outlets at a time, while a larger-capacity model and appropriately sized gas pipework may be required for several bathrooms operating together.

Gas systems also have several disadvantages:

• they cannot make direct use of electricity generated by rooftop solar panels;
• heat is lost through the combustion and exhaust process;
• the property requires a gas connection, meter and associated pipework;
• gas bills generally include a fixed daily supply charge in addition to actual usage;
• indoor units require suitable ventilation, while outdoor units require compliant clearances;
• some instantaneous models may perform poorly at very low flow rates; and
• retaining gas for only one or two appliances can become difficult to justify financially.

Gas storage hot water is another option, but it combines combustion losses with heat losses from the storage tank. Instantaneous gas is generally more efficient than gas storage, although the final result still depends on the model, installation and household usage.

Conventional electric storage hot water

A conventional electric storage system works like a large electric kettle. An element heats the water inside an insulated tank, which stores it until it is required.

These systems are usually simple, familiar and comparatively inexpensive to purchase. They contain fewer mechanical components than heat pumps and may be a practical replacement when an old electric tank fails and the owner needs a straightforward solution.

Their main disadvantage is efficiency. A conventional element must generate all the heat directly, and the tank loses some heat while the water is being stored. When the system relies entirely on standard-priced grid electricity, running costs can be relatively high, particularly in a large household.

The calculation changes when the property has rooftop solar. An appropriately controlled electric tank can be scheduled to heat during the middle of the day, when the solar system is producing electricity. Instead of exporting surplus solar energy to the grid, the household can store some of that energy as hot water for later use.

A timer, smart controller or compatible home energy management system can help align the heating cycle with solar generation. Actual savings depend on the solar system size, weather, tariff, tank capacity and hot water usage, but daytime solar operation can make electric storage substantially more economical.

Heat pump hot water

A heat pump is also electric, but it does not create most of its heat directly through an element. It extracts heat from the surrounding air and transfers that heat into the water, operating on a similar principle to a reverse-cycle air conditioner.

This makes a heat pump far more efficient than a conventional electric storage system. Australian Government guidance indicates that heat pumps may use approximately 30 per cent of the energy required by conventional electric water heating. They generally cost more to purchase, but their lower energy consumption can make them considerably cheaper to operate over time.

Heat pumps are particularly attractive where the home has solar panels. The system can be programmed to run during daylight hours, allowing solar electricity to power the compressor while the insulated tank stores the resulting hot water. For many households, rooftop solar combined with heat pump hot water is one of the strongest long-term combinations available.

A heat pump does, however, require careful selection and installation. Important considerations include:

• the number of people in the household;
• tank capacity and recovery time;
• the climate and the model’s cold-weather performance;
• the amount of outdoor airflow available;
• fan and compressor noise;
• distance from bedroom windows and neighbouring properties;
• condensate and relief-valve drainage;
• access for servicing and future replacement; and
• whether the system includes a booster element for unusually high demand.

A very cheap or undersized heat pump may depend heavily on its electric booster, take too long to recover or create an unacceptable noise issue. The model, location and control settings are just as important as the technology itself.

Electric instantaneous hot water

Electric instantaneous systems avoid storage-tank heat losses and occupy relatively little space, but they require a substantial amount of electricity while operating.

Whole-house models may require three-phase power and can create a very high instantaneous electrical load. They also cannot normally be scheduled to heat water during periods of surplus solar generation because they must operate at the exact time hot water is being used.

For this reason, electric instantaneous hot water may suit particular apartments, basins or space-restricted installations, but it is not automatically the best electric option for a freestanding family home.

Why solar panels favour electric hot water

A gas system must burn gas regardless of how much electricity the solar panels are producing. An electric storage or heat pump system can use that electricity directly.

This is especially useful because household solar generation is often highest during the day, when many homes have relatively low electricity demand. A controlled hot water system can become a practical form of thermal energy storage: solar electricity heats the water during the day, and the household uses the stored hot water that evening or the following morning.

The system must still be configured correctly. A hot water service connected only to a traditional overnight controlled-load circuit may not have access to electricity from the home’s solar panels. Depending on the system and tariff, an electrician may recommend a timer, smart controller or a different circuit arrangement.

The objective is not merely to install an electric tank. It is to coordinate the hot water system, solar installation, switchboard, tariff and household usage pattern.

Can the house operate without gas?

For many homes, hot water and cooking are the only remaining uses of gas. If gas hot water is replaced with an electric system and the gas cooktop is replaced with induction or another electric option, the property may no longer require gas at all.

Any other gas appliances must also be considered, including space heating, fireplaces, ovens, pool heating and external barbecue points. Once there are no gas appliances remaining, the owner can investigate temporary disconnection or permanent abolishment of the gas connection.

This can remove ongoing gas network charges, which may otherwise continue even when very little gas is used. Disconnection and abolishment are different processes and may involve different costs, so the energy retailer should be contacted before a decision is made. All appliance removal, pipe capping and supply work must be completed by appropriately licensed professionals.

For a new home, the simplest approach may be not to install gas in the first place. An all-electric design can use:

• an efficient heat pump or solar-compatible electric hot water system;
• an induction cooktop and electric oven;
• reverse-cycle air conditioning for heating and cooling; and
• rooftop solar, with a battery if appropriate.

This avoids constructing a separate gas service that may later become unnecessary. It also allows the electrical and solar systems to be designed around the home’s full anticipated demand from the beginning.

What should be planned during construction?

The hot water system should be selected during the design and services-planning stage rather than treated as a last-minute appliance choice.

For a new home, the builder and relevant trades should consider:

• the proposed system type and capacity;
• the number of bedrooms, bathrooms and expected occupants;
• whether several showers or appliances may require hot water simultaneously;
• the distance between the unit and the kitchen, bathrooms and laundry;
• an appropriate concrete base or mounting position;
• ventilation and manufacturer clearances;
• noise transmission from a heat pump;
• pressure relief and condensate drainage;
• insulated hot water pipework;
• the dedicated electrical circuit and isolator;
• switchboard and incoming supply capacity;
• integration with solar panels, timers or smart controls;
• safe delivery temperatures and required tempering controls; and
• practical access for maintenance and replacement.

The electrical demand should be assessed as part of the whole house. A property may include an induction cooktop, several air conditioners, a heat pump, pool equipment, an electric vehicle charger and other large loads. Each appliance may be reasonable individually, but the combined demand must be considered when designing the switchboard and electricity supply.

The physical location also matters. Installing the system a long distance from the bathrooms may cause occupants to wait for hot water while cooled water is discharged from the pipe. This wastes both water and energy. A compact pipe layout, appropriate insulation and sensible system positioning can improve everyday performance without changing the appliance itself.

Can an existing home be converted?

Changing from gas to electric does not necessarily require rebuilding the house. It can often be completed as a targeted upgrade, although the scope depends on the existing layout.

Before selecting a replacement, the property should be assessed for:

• available space for the new tank and heat pump components;
• access for delivery and installation;
• existing hot and cold water connections;
• switchboard condition and spare circuit capacity;
• the route for a new electrical cable;
• solar generation and suitable operating times;
• noise-sensitive windows and boundaries;
• drainage for condensate and relief discharge;
• removal of the old appliance; and
• disconnection or capping of redundant gas services.

A switchboard or electrical supply upgrade may be required, particularly if the conversion is being combined with an induction cooktop, electric vehicle charger or other major electrical loads. This additional work should be identified before the old hot water system is removed.

Eligible heat pump and solar hot water installations may also qualify for federal certificates or NSW energy-saving incentives. Program rules and discounts change, so current eligibility should be checked when quotations are obtained.

Which system is the better choice?

Gas instantaneous hot water can remain practical where gas is already connected, installation space is limited and the household values rapid continuous-flow performance. However, retaining a complete gas connection solely for hot water or a cooktop may not offer the best long-term value.

Conventional electric storage is comparatively simple and can be economical when operated with daytime solar or a suitable tariff, although it uses more electricity than a heat pump.

A correctly sized heat pump will often be the strongest electric option for a freestanding home, particularly where rooftop solar is available. Its purchase price is higher, but its lower energy use and ability to operate during solar-generation hours can substantially reduce ongoing costs.

The best result comes from considering the whole property rather than choosing each appliance separately. Hot water, cooking, heating, cooling, solar generation and electrical capacity should be planned as one coordinated energy system.

How ARK Houses can help

At ARK Houses, we can plan the hot water solution as part of a new house, dual-key home or duplex, or convert an existing property from gas to an efficient electric system. We consider household demand, solar generation, system location, noise, electrical capacity, pipe routes, drainage, controls and the practical option of removing gas altogether. Whether the project begins on a vacant block or in an established home, the objective is reliable hot water, sensible running costs and services designed for the way the property will actually be used.

Discuss Your New Home