For most people, buying a hot water system is only a priority when building a new home, moving in, or […]
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After thousands of hot water system installations, we confidently recommend a properly sized commercial heat pump for many Australian businesses with high and consistent hot water demand.
These systems move heat from the surrounding air into the water, so they can deliver substantial hot water capacity with significantly less electricity than conventional electric systems.
That said, the right system still depends on the business, the property and how hot water is used. In certain cases, gas continuous-flow systems can be a better fit where rapid recovery or existing gas infrastructure is important.
Similarly, conventional electric systems can suit smaller or intermittent hot water requirements, while solar hot water can work well where the property has suitable roof space, good solar exposure and an appropriate backup system.
Ultimately, the right system should match how the business uses hot water.
How This Guide Was Prepared
We prepared this guide by looking at the decisions businesses actually need to make before replacing or installing a commercial hot water system.
That means looking beyond the equipment itself to questions such as whether the system can keep up during the busiest periods, what happens when demand changes, how much it will cost to operate, what the site can accommodate, and what a failure could mean for the business.
We also considered the very different demands of hotels, restaurants, gyms, aged-care facilities, apartment buildings and smaller commercial premises.
The result is a guide designed to help you work out what you actually need, what to compare and what to check before committing to a system.
Why Commercial Hot Water Needs Are Different
Commercial hot water systems are different because they must supply larger volumes of water, handle higher peak demand and maintain reliable supply over longer operating periods.
A residential system usually serves a smaller number of people with more predictable demand. Commercial systems can serve many people or processes at the same time, which creates much larger and more concentrated demand.
The system therefore needs to account for how much hot water is used, when it is used and how quickly the supply needs to recover. A business can use the same total volume of water across a day as another property but still require a larger system if more of that demand occurs within a short period.
That is why commercial hot water design focuses on peak demand, storage capacity and recovery rate, rather than daily consumption alone.
What Are the Main Commercial Hot Water Options?
There are several established technologies for commercial hot water, and each has situations where it can make sense.
Commercial Water Heater Comparison
| System | Energy efficiency | Upfront cost | Running cost | Space requirement | Best suited to |
| Commercial heat pump | High; often COP 3–4+ | Higher | Low | Storage and airflow required | Hotels, gyms, aged care, laundries and restaurants |
| Electric storage | Approximately 1:1 heat output | Low–moderate | High | Tank space required | Small businesses with low or intermittent demand |
| Electric instantaneous | Approximately 1:1 | Moderate | Potentially high | Low storage space | Low-volume, point-of-use applications |
| Gas storage | Moderate | Moderate | Depends on gas prices | Tank, flue and gas connection | Sites already equipped for gas |
| Gas continuous flow | High output and fast recovery | Moderate–high | Depends on gas prices | Less tank space; gas and flue needed | Sites with variable demand and limited storage |
| Solar hot water | Low purchased-energy use | High | Low–moderate | Suitable roof and storage required | Properties with strong solar exposure and daytime demand |
Note: Performance and cost vary by equipment, tariff, climate, incoming water temperature and operating pattern.
Heat Pump Water Heaters
A commercial heat pump uses a refrigeration cycle to move heat from the surrounding air into the water. A compressor raises the temperature of the refrigerant, which then transfers that heat into the water through a heat exchanger.
Unlike a conventional electric water heater, it does not use an electrical element to produce all of the heat directly.
Instead, it uses electricity to move heat rather than generate all of it through an element. This process uses significantly less electricity to produce hot water and ends up lowering ongoing energy costs.
That lower electricity consumption and overall running cost is not the only reason why we often consider heat pumps for businesses with substantial hot water use.
The systems are also available in different capacities, including larger models that can heat and store huge volumes of hot water ready for use.
And even if demand temporarily exceeds the stored supply, our modern commercial heat pumps with high recovery rates can quickly reheat water and restore the available supply, ensuring your business operations keep going.
Electric Water Heaters
Electric water heaters can be either storage or instantaneous systems. Storage systems use electrical elements to heat water inside an insulated tank, where it remains ready for use.
Instantaneous electric systems heat water as it passes through the unit, so they do not need a large tank of stored hot water.
We consider electric storage systems for businesses with relatively modest or intermittent hot water use, particularly where suitable electrical capacity is already available.
They are a straightforward technology and can be practical for offices, small commercial premises and other businesses that do not need large volumes of hot water throughout the day.
Instantaneous electric systems can suit businesses that want hot water without maintaining a large storage tank.
However, they can require substantial electrical power when there is high water flow or several outlets operating at the same time, which is something we consider when assessing whether this type of system is suitable for a commercial property.
Gas Water Heaters
Gas water heaters can also be either storage or instantaneous systems.
Gas storage systems use a burner to heat water held inside an insulated tank, while instantaneous gas systems heat water as it passes through a heat exchanger. Because the burner can produce a high level of heat, gas systems can heat water quickly.
We often consider gas storage for businesses that need a ready supply of hot water and already have suitable gas infrastructure. Instantaneous gas systems can be particularly useful where a business wants high hot water output without dedicating space to a large storage tank.
The property itself is an important part of the decision. Gas systems require an appropriate gas supply, ventilation and flue arrangement, so we assess these requirements as part of the installation rather than treating the water heater as a standalone appliance.
Solar Water Heaters
We recommend and install solar water heaters for businesses that have high hot water usage during the day and are located in areas with abundant sunlight. These systems use solar collectors to capture heat from the sun and transfer it to water stored in a tank. The heated water is then stored and made available for use.
Because the system uses heat from the sun to produce hot water, it reduces the amount of electricity or gas needed for water heating and lowers ongoing energy costs.
However, the amount of heat available from the collectors changes with the weather, season and available sunlight.
Where solar energy is not enough to meet the hot water demand, a supplementary heating source such as an electric or gas booster can provide additional heat.
This helps maintain the hot water supply during periods when the solar collectors cannot provide enough heat on their own. It can, however, increase running costs.
What Should You Consider Before Choosing a Commercial Hot Water System?
The most important question is not “Which technology is best?” but “What does your business actually need?” Consider how you use hot water, what your property can support and what the system will cost to operate over time. Here is what to consider.
- How Much Hot Water Does Your Business Need?
Start with how much hot water your business actually uses. Look at water use, operating hours and, where available, energy bills and equipment records. This gives you a better idea of the amount of hot water you need and helps you avoid paying for equipment that is larger than necessary.
- When Is Demand Highest?
It is also important to know when your business uses the most hot water. For example, a business that uses 3,000 litres steadily throughout the day has different requirements from one that uses most of that water within two hours. Knowing when your demand occurs helps determine how the system needs to supply hot water throughout the day.
- What Temperature Is Required?
The required water temperature depends on what you use the hot water for. A commercial kitchen, accommodation business and workplace may not have the same requirements. Consider how the hot water will be used so the system can produce water at the temperature your business actually needs.
- How Quickly Must the System Recover?
Once hot water has been used, the system needs to heat more water. Recovery is simply how quickly it can do that. This matters for businesses such as hotels, gyms and accommodation facilities where a lot of hot water can be used within a short period.
- What Infrastructure Does Your Property Have?
Your property can affect which hot water systems are suitable. Check the available electrical supply, gas connection, space for the equipment, ventilation, roof area, existing pipework and access for installation and servicing. There is little point choosing a system that your property cannot properly support.
- What Will It Cost Over Its Lifetime?
The price of the equipment is only part of what you will pay. Consider installation, energy use, maintenance and the expected operating life of the system. A system that costs less to buy can end up costing more to operate, so looking at the longer-term cost gives you a clearer picture of what you are actually getting.
5 Reasons Heat Pumps Are Becoming More Attractive for Commercial Hot Water
Heat pumps are becoming a more attractive option for commercial hot water because they can reduce the amount of electricity used to heat water while giving businesses several ways to manage when and how that energy is used.
From our experience installing hot water systems, these are some of the main reasons businesses are looking more closely at commercial heat pumps.
- Lower Electricity Consumption
A heat pump does not create all the heat through an electrical element. It uses electricity to move heat from the surrounding air into the water. This means it can produce hot water using significantly less electricity than conventional electric heating, which can make a noticeable difference for a business with high hot water use.
- Lower Running Costs
Using less electricity can also reduce the ongoing cost of producing hot water. In our commercial comparison, we found annual running costs of approximately $36,065 for electric heating, $16,338 for a gas boiler and $8,795 for the Q-TON heat pump system.
These figures are based on our published comparison and are not a guaranteed saving for every commercial installation. Actual running costs will depend on factors such as hot water usage, energy prices, operating conditions and the system installed.
- Thermal Storage Can Help With High Demand
Commercial heat pumps can work with storage tanks that heat water before it is needed. This gives your business a supply of hot water that is already heated when demand increases, rather than relying on the system to produce the entire volume at the exact moment it is needed.
- Scheduling Can Reduce Energy Costs
Many commercial heat pump systems can be programmed to heat water at particular times. If your business has predictable operating hours or access to cheaper electricity at certain times, scheduling hot water production around those periods can help reduce energy costs.
- They Can Work With Solar
A commercial heat pump can also work alongside rooftop solar. If your business generates solar electricity during the day, some of that electricity can be used to run the heat pump and produce hot water. This can help your business make better use of the electricity it generates rather than purchasing as much electricity from the grid.
Best Commercial Water Heater by Business Type
| Business type | Likely best starting option | Main reason |
| Hotel or accommodation | Modular heat pump with storage | Predictable morning and evening peaks |
| Restaurant or commercial kitchen | Heat pump with sufficient recovery and backup | Heavy daily washing and cleaning demand |
| Gym or aquatic facility | Heat pump with large thermal storage | Concentrated shower demand |
| Aged-care facility | Redundant heat-pump configuration | Reliability and continuous availability |
| Apartment complex | Centralised modular system, subject to metering design | High combined demand |
| Small office or retail premises | Small electric or heat-pump system | Relatively low demand |
| Industrial process site | Engineered system assessment | Temperature and process requirements vary significantly |
These are starting points, not guarantees. Industrial processes in particular can require a more specialised assessment.
Commercial Heat Pump Case Study: Sydney Apartment Complex
We recently worked on a commercial hot water project for a mid-sized Sydney apartment complex. The building replaced electric storage tanks with a centralised heat pump system.
Before the upgrade, the building had inconsistent hot water, rising energy bills and complaints during peak periods. After the upgrade, the building used more than 50% less energy. Hot water reliability also improved, and maintenance issues fell.
The project involved a multi-tenant building where dozens of residents could use hot water at similar times. The system therefore needed enough storage, recovery capacity and effective water distribution to meet demand during peak periods.
The project reinforced something we see across commercial hot water installations: energy efficiency matters, but the system also needs to match the way the property actually uses hot water.
How Commercial Hot Water Systems Are Sized
Commercial hot water systems need to account for both total water consumption and peak demand. The main factors include:
- Daily hot-water consumption in litres
- Peak-hour demand
- Required delivery temperature
- Incoming cold-water temperature
- Simultaneous outlet use
- Storage volume
- Recovery rate in litres per hour
- Operating hours
- Redundancy requirements
- Available electrical supply and plant-room conditions
Thermal Energy Formula
The basic calculation for the energy required to heat water is:
Thermal energy (kWh) = Litres × 4.186 × Temperature rise (°C) ÷ 3600
Each part of the formula has a specific purpose:
- Litres tells you how much water needs heating.
- 4.186 is the specific heat capacity of water. It represents the amount of energy needed to raise 1 litre of water by 1°C, measured in kilojoules.
- Temperature rise shows how much the water temperature needs to increase. You calculate this by subtracting the incoming cold-water temperature from the required hot-water temperature.
- 3600 converts kilojoules into kilowatt-hours because 1 kWh equals 3,600 kJ.
For example, consider a business that uses 3,000 litres of water per day. If the incoming water temperature is 18°C and the required water temperature is 60°C, the temperature rise is:
60°C − 18°C = 42°C
The calculation then becomes:
3,000 × 4.186 × 42 ÷ 3600 = approximately 146.5 kWh
This means the business needs about 146.5 kWh of thermal energy to raise 3,000 litres of water from 18°C to 60°C, before accounting for heat losses or other system factors.
For a heat pump, the electrical energy required will be lower because the system moves heat from the surrounding air into the water rather than producing all the heat directly. The COP tells you how much thermal energy the heat pump can provide for each unit of electricity it uses.
Heat-pump electricity use = Required thermal energy ÷ COP
With a COP of 3.5:
146.5 ÷ 3.5 = approximately 41.9 kWh
So, under these simplified conditions, the heat pump would use about 41.9 kWh of electricity to provide 146.5 kWh of heat.
Actual electricity use can vary with ambient temperature, incoming water temperature, storage losses, system controls and equipment performance.
A Commercial System Example: Mitsubishi Heavy Industries Q-TON
The Mitsubishi Heavy Industries Q-TON is our featured commercial heat pump for high-volume hot water applications. We use it for demanding sites such as hotels, apartment buildings, gyms, aged care facilities and other properties with substantial hot water requirements.
The Q-TON delivers 30 kW of heating capacity, giving a single unit the output required for many commercial applications. When a property needs more hot water than one unit can provide, the system can scale by connecting multiple 30 kW units together, with up to 16 units providing a combined 480 kW of capacity.
The high-temperature output is another reason Q-TON suits commercial applications. It can produce 60°C to 90°C hot water, while its anti-Legionella sanitary cycle supports hot water hygiene.
Q-TON also handles cold conditions well. It can operate at ambient temperatures as low as −25°C and maintain full heating capacity down to −7°C, which helps maintain hot water production when temperatures fall.
Efficiency is another main reason we use Q-TON. Its published COP of 4.3 under intermediate-season conditions means the system produces about 4.3 units of heat for every unit of electricity it consumes, which helps reduce the electricity cost of producing hot water.
Are Commercial Heat Pump Rebates Available in NSW?
Yes. NSW businesses can get financial help when they replace an eligible existing hot water system with an approved heat pump water heater under the NSW Government’s Energy Savings Scheme (ESS). The support is provided as an incentive that can reduce the upfront cost of the installation. The amount is not a fixed rebate for every business. It depends on the equipment, the existing hot water system and the energy savings calculated under the scheme. For commercial and industrial businesses, the ESS currently requires a minimum customer payment of $1,000 for an eligible heat pump water heater installation.
In simple terms: if a business is considering replacing an old commercial hot water system with an eligible heat pump, it may be able to have part of the project cost covered through the ESS incentive. The installer or accredited provider handles the certificate process, so the business does not simply apply for a standard “$X rebate” from the NSW Government.
How Much Could a Commercial Heat Pump Save?
There is no single saving percentage that applies to every business. The potential saving depends on the existing hot water system, energy consumption, hot water demand, energy prices and the proposed heat pump’s performance.
A commercial estimate should therefore start with the actual cost of running the existing system and compare it with the expected cost of running the proposed heat pump.
For example, in our commercial comparison, annual running costs were approximately $36,065 for electric heating, $16,338 for a gas boiler and $8,795 for the Q-TON heat pump system.
Based on those figures, replacing the electric system with Q-TON would reduce annual running costs by approximately $27,270, or about 76%.
The same calculation can be used for your own project:
Existing annual energy cost − proposed annual energy cost = estimated annual saving
You can then use the estimated saving to work out how long it could take to recover any additional upfront cost:
Additional upfront cost ÷ annual saving = simple payback period
These figures are an example rather than a guaranteed saving for every commercial property. Actual results depend on the site’s hot water demand, energy prices, existing equipment and proposed system.
Frequently Asked Questions
What Is the Most Energy-Efficient Commercial Water Heater?
For high-volume commercial hot water, we recommend the Mitsubishi Heavy Industries Q-TON heat pump. It has a published COP of 4.3 under intermediate-season conditions and Mitsubishi Heavy Industries reports up to 76% lower running costs than electric water heaters under its stated comparison conditions.
How Do You Size a Commercial Hot Water System?
Size it from daily hot water use, peak demand, required temperature, storage and recovery rate. Peak demand matters because the system must handle the periods when hot water use is highest.
What COP Should a Commercial Heat Pump Achieve?
There is no single COP target for every application. For comparison, the Q-TON has a published COP of 4.3 under intermediate-season conditions. Always compare COP figures using the same test conditions.
How Much Can a Commercial Heat Pump Reduce Energy Use?
It depends on the existing system and how the property uses hot water. In our Sydney apartment project, replacing electric storage tanks with a centralised heat pump system reduced energy use by more than 50%.
Can a Commercial Heat Pump Produce Water at 60°C or Higher?
Yes. The Q-TON produces hot water from 60°C to 90°C, making it suitable for commercial applications that require high-temperature sanitary hot water. It also has an anti-Legionella sanitary cycle and can maintain its full heating capacity down to −7°C.
Can Heat Pumps Meet Hotel or Gym Peak Demand?
Yes. The system needs enough storage, recovery capacity and heating output to meet peak demand. Multiple Q-TON units can also operate together, with up to 16 units providing 480 kW of combined heating capacity.
Do Commercial Heat Pumps Work in Cold Weather?
Yes, depending on the model. Q-TON can operate at ambient temperatures down to −25°C and maintain full heating capacity down to −7°C under its published conditions.
Are Commercial Heat-Pump Incentives Available in NSW?
Yes. Commercial heat pump water heaters are currently covered by the NSW Energy Savings Scheme, including eligible replacements of existing gas or electric systems and certain new installations.
How Long Is the Typical Payback Period?
There is no standard payback period. Calculate it using:
Additional upfront cost ÷ annual energy saving = simple payback period
Can a Commercial Heat Pump Replace a Gas Boiler?
Yes, where the proposed system meets the property’s hot water requirements. The NSW ESS includes an activity for replacing eligible existing gas water heaters with air-source heat pumps.
Should a Commercial System Include Backup or Redundancy?
If hot water is critical to the business, yes. Multiple heat pumps, additional storage or supplementary heating can provide backup if one part of the system is unavailable.
How Much Storage Capacity Does a Business Need?
It depends on peak demand, daily consumption and recovery rate. A hotel with a large morning shower peak will need a different storage strategy from an office with steady, low-volume demand.
