How Much Can You Save by Upgrading to a Heat Pump Hot Water System?

If you are a homeowner in NSW using a traditional water heater, you must be paying huge bills for domestic hot water. As per the Department of Energy, you are spending 15 – 30% of your total utility bills on water heating.

This is a big portion, and you need a more efficient solution to save on these costs.

Among the options available, heat pump water heaters stand out as the newest, most efficient and cost-effective solution.

Their installation has gained momentum in recent years, with the Clean Energy Regulator reporting a 70% growth rate in 2023. The number is expected to soar higher with projections estimating over 450,000 installed units by 2036.

But what makes heat pumps such a popular choice, leading to the replacement of traditional hot water systems in NSW and across Australia?

The simple answer is their cost-saving potential. Read on as we explore how heat pump water heaters operate efficiently and what subsequent potential savings they can achieve. 

Heat Pump Water Heaters

In simple terms, heat pumps are units that heat water without generating any heat.

These devices use the opposite principle of a refrigerator to collect heat from the air and then transfer the same heat to the stored water using a refrigerant agent. 

During their operation, heat pumps only use electricity to move heat and not to generate it.

Consequently, a lot of electrical energy is saved, thus reducing pressure on utility bills.

They also help conserve the environment since they reduce the usage of energy derived from fossil fuels and avoid the direct combustion of such fuels.

Heat Pump Cost Structure in NSW

You need to understand the costs associated with heat pumps before jumping into how they can contribute to savings.

Regarding this, Solar Choice says that you need anywhere between $4,000 and $6,000 when purchasing and installing a heat pump in NSW.

The final amount will vary as per the installer charges, the model, size of the heat pump you are installing, and the scope of work.

How Much Can a Heat Pump Save You?

Now we know heat pump water heaters save on electricity because they don’t use it for heat generation.

But the big question looms – just how much can you save with heat pumps installed in 2024 and beyond? And how do these units even save costs, considering their high prices?

Well, below is a rough overview of what you can expect: 

Heat Pump Water Heater Savings Compared to Electric Heaters

Electric heaters rely 100% on electricity to heat water. On the other hand, Heat pumps rely on the ambient air to provide hot water. They capture heat and only use electric energy to transfer it. 

This technology only uses 30% of what an electric heater would consume to heat the same volume of water – as per the Energy Department. So, you can save up to 70% on your water heating bills by switching to a heat pump water heater!

In monetary terms, you can expect the following:

As shown in the above table, you can save roughly $890 on your hot water per year when you replace electric heaters with HPWH.

Savings of Heat Pump Water Heaters Compared to Gas Heaters

Usually, gas water heaters are less efficient than heat pump heaters.

In fact, the International Energy Agency states that modern heat pump efficiency exceeds gas efficiency by up to 3– 5 times. 

The running costs of heat pumps compared to gas heaters are illustrated in the table below:

As shown in the table, switching from a gas hot water system to a heat pump can help you achieve savings of up to $420 per year.

Graph: Water heaters running costs summary 

Heat Pump Savings Depending on Hot Water Usage and Family Size

Other than upgrading from electric or gas water heaters, your family size and associated daily hot water usage can further determine the amount you can save. Let’s break it down

• 1 Person – 50 liters Daily 

• 2 People – 90 Liters Daily

• 3 People (120 litres per day)

• 4 people (150 liters per day)

Heat Pumps Savings with Rebates and Incentives 

In NSW, the state government can help you save more when you install heat pumps. This is possible via the various rebate and incentive programs, which include but are not limited to the following: 

• Peak Demand Reduction Scheme

The NSW PDRS aims to encourage energy savings during peak hours. For every 0.1 kilowatt-hours of electricity demand reduction during the peak summer hours, a PDRS certificate is created.

The certificate can be sold to earn you some cash back helping you save on heat pump running costs. Current PDRs certificate price is $1.90.

PRC Market Update

• NSW Energy Saving scheme

The NSW energy saving scheme is aimed at supporting pocket-friendly and environment-friendly choices. Under it, you may qualify for $350 or $1200 when you switch from gas or electric heaters respectively.

How Heat Pumps Save Energy

Heat Transfer, Not Generation

Heat pump water heaters operate like a fridge but in reverse.

They capture and move heat from the outside air to stored water. Electricity is only used for heat transfer instead of heat generation, which means less electricity is needed so you end up saving on electricity bills.

Insulated Hot Water Tanks

Insulated storage tanks keep water hot for longer, preventing heat loss and frequent heating. This saves energy and associated heating costs. 

Leveraging Off-Peak Heating

With their insulated storage tanks, heat pump heaters allow you to warm water during off-peak tariffs when electricity rates are cheaper. The water is then stored for later use, so you won’t incur heating costs during peak hours. 

Combination With Excess PV energy 

Heat Pumps can work with your excess PV electricity helping you reduce reliance on costly electricity from the grid. This combination, according to One Step Off the Grid, saves up to 90% on your annual hot water bills.

Factor Determining the Potential Savings when Using Heat Pump Water Heaters

When you switch to heat pump heaters, you realize that there’s no fixed amount you can save with them.

The savings you achieve depend on several factors, including the following: 

Energy Efficiency/Coefficient of Performance, COP

COP tells you how effectively a heat pump uses energy to warm up the water.

A higher COP indicates greater energy efficiency. It means more hot water is generated using less energy, resulting in lower electricity costs. So always check COP ratings of a heat pump system before buying.

Source of Electricity

The source of electricity can impact the cost and environmental impact of operating a heat pump.

For instance, Solar Shine states that you achieve 90+% more savings and negligible environmental impact if you are powering your heat pump from your excess PV energy rather than when you are relying on the grid.

These potential savings are the reason why the Australian government targets an 82% shift to renewable energy by 2030.

Climate Conditions

Your climatic conditions can influence how much you can save with heat pumps.

Expect more savings if you live in a hotter climate than in a colder climate.

That’s because colder air may have less heat energy compared to hot air.  Consequently, the heat pump will need to work harder to provide hot water in colder regions. 

Maintenance

How you maintain your heat pump can determine whether it will save on operating costs.

Proper maintenance will minimize energy loss, thus helping you lower running costs. Such maintenance includes cleaning or changing air filters, sealing leaks, and ensuring adequate ventilation.

Temperature Settings

Adjusting the temperature settings on the heat pump can impact energy usage. Setting the temperature too high will consume more energy, thereby increasing costs.

Always try setting the temperature slightly lower to reduce energy consumption and save cost without sacrificing comfort. Pump Industry Magazine advises you to set it between 49 and 60 ̊C

Usage Patterns

Both the amount of hot water used and the time of use can impact energy savings. When hot water usage is high during peak hours, the cost will be higher than moderate hot water usage during off-peak hours.

Incentives and Rebates

With government rebates and incentives like those discussed earlier in this post, your heat pump operational costs might be quite low.

That’s because these incentives offer financial aid that can allow you to recoup some of your investment. 

How To Maximize Your Savings with Heat Pump Heaters

If you are looking to achieve more savings benefits with your hot water heat pumps, the following are some important saving habits. 

Insulate Your Heat Pump Water Heater

Although heat pump water heaters come with properly insulated storage tanks, further insulation can help boost their efficiency.

As per Energy Cut, insulating can lower standby heat losses by 25% – 45%. This can lower your domestic water heating bills by 4% – 9%. 

Service Your Heat Pump Regularly

To save more with your heat pump, you must keep it in good working condition. Make sure to frequently inspect the air filters.

They tend to get clogged with dirt that can affect proper airflow.

Also, inspect the evaporator and condenser coils for dirt or debris that may hinder proper functioning. All these should be done annually by qualified professionals as advised by Reece.

Use Efficient Showerheads and Faucets

Installing low-flow showerheads and faucet aerators can reduce hot water use while still providing similar performance to conventional fixtures.

According to the NSW Government Website, such low-flow fixtures can help reduce hot water usage by 50%, thus saving on heating costs. 

Fix Leaky Faucets

Repair any leaky faucets or pipes to eliminate hot water loss.

Even a single dripping faucet can waste several gallons of hot water in a week. In fact the NSW government projects a waste of 200 liters daily from dripping water systems.

Insulate Hot Water Pipes

As water travels from your heat pump to the fixtures, some heat may be lost through the pipes. If you suspect this is happening, please consider insulating the first few feet of the pipes to stop heat loss and save costs. 

Wash Clothes in Cold Water

According to Sydney Water, laundry consumes around 20% of household water.

If you were to keep washing with hot water, this volume is quite huge and the costs on your heat pump would be very high. Try to avoid that by washing with cold water wherever possible, and you will bring your heat pump running costs down.

Take Advantage of Off-Peak Hours

If your utility offers off-peak rates, set your HPWH to heat during off-peak times. This will shift your electricity use to a time when rates are lower and reduce your overall energy costs.

Consider a Timer

If your unit came without a timer, please introduce it as it can help you save significantly.

The timer gives you the power to set when your heat pump works and when it goes off. So, you’ll never have it running when not needed, thereby saving power usage and associated costs. 

Explore Rebates and Incentives

Government incentives and rebates may further maximize your energy savings.

The NSW government has various programs (some already mentioned in this post) you can explore to find out how much they can help you save on heat pump running costs.

Upgrade and Save with Heat Pump Water Heaters!

With all the different ways to save on your hot water with a heat pump water heater, it’s time to act and upgrade to this technology.

It can help you realize these savings, so you don’t have to pay huge utility bills anymore.

Don’t wait – Let an experienced team help you find the best heat pump system and explore the available rebates. You’ll enjoy reduced costs while helping keep our planet green! 

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