Gas vs Electric vs Heat Pump: Which Hot Water System Is Best?
The three choices that matter, compared honestly: what each costs to buy, what each costs to run, which qualify for rebates, and which is the best hot water system for your home. No brand bias — just the trade-offs.
The three hot water types, in a nutshell
Almost every decision comes down to three options: gas (storage or continuous flow), electric (a standard element tank), and a heat pump (an efficient electric system). Solar is a fourth, roof-dependent option, but for most replacements it's these three in the ring.
There's no single best hot water system for everyone — the right answer depends on what you've got connected, how much hot water you use, and whether you're optimising for the lowest price today or the lowest cost over the system's life. Here's how they actually compare.
See also: gas
Gas vs electric vs heat pump at a glance
The headline trade-offs. Running cost is the one most people underestimate — it's where a heat pump pulls ahead.
| Upfront (installed, Sydney) | Running cost | Rebate? | |
|---|---|---|---|
| Electric storage | Lowest ($760–$2,850) | Highest on peak; cheaper off-peak | No |
| Gas storage / continuous | Mid ($1,150–$3,325) | Lower than electric | No |
| Heat pump | Highest ($2,850–$5,700, less rebates) | Lowest — ~a third of electric | Yes — ESS + STCs |
| Solar (boosted) | Highest ($3,325–$6,650) | Lowest where roof suits | Yes — STCs |
Upfront vs running cost, and rebates
The cheapest system to buy and the cheapest to own are rarely the same one — and rebates change the maths.
Upfront cost
Electric storage is cheapest to install, gas sits in the middle, and a heat pump or solar costs the most before rebates. If the only goal is the lowest price today, electric wins.
Running cost
This flips the order. A heat pump uses roughly a third of the electricity of a standard element, so it's cheapest to run; gas is next; peak electric is the most expensive. Over years, running cost usually outweighs the upfront gap.
Rebate eligibility by type
Heat pumps attract the biggest combined incentive — the NSW Energy Savings Scheme plus federal STCs — which can bring a typical Sydney heat pump from around $4,000 to roughly $3,000 installed. Solar gets federal STCs. Gas and electric get neither.
Which hot water system is best for you
There's a clear winner for each situation — here's how to place yourself.
Gas or electric wins when...
- You want the lowest upfront price today (electric).
- You're on gas and want a ready tank or endless flow at mid cost.
- The spot has no airflow for a heat pump, or it's a quick rental swap.
- Off-peak electric keeps a tank cheap to run.
A heat pump wins when...
- You want the lowest running cost and bills that stay down.
- You can access the ESS + STC rebates that cut the upfront price.
- You have a sensible outdoor spot with airflow.
- You're pairing hot water with solar, or going all-electric.
So, which is the best hot water system?
The best on paper and the best for your site aren't always the same.
For most Sydney homes replacing an old electric or gas system, a rebated heat pump is now the best hot water system on total cost of ownership — the running-cost saving and the rebates usually outweigh the higher upfront price within a few years. If the upfront budget is tight, or the spot won't suit a heat pump, a good gas system or an off-peak electric tank is a sound, lower-cost call.
The honest answer is that the most efficient hot water system on paper isn't always the right one for your site — airflow, budget and what you've already got connected all matter. Weigh up the electric, gas and heat pump options against your situation, check the rebates, and we'll give you a straight recommendation with an itemised quote.
Gas vs electric vs heat pump, answered
The questions we're asked most when people compare.
What is the best hot water system?
Is gas or electric hot water cheaper?
Which is the most efficient hot water system?
Are heat pumps worth the higher upfront cost?
Do gas and electric systems get rebates?
How do I choose between them for my home?
Get a straight recommendation
Tell us your situation and we'll recommend the right system — gas, electric or heat pump — with the rebates and an itemised quote. Sydney-wide, and we come to you.