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Signs Your Hot Water System Needs Replacing
Most hot water systems do not fail overnight. They give you warning signs for months, sometimes years, before they give up entirely. If you are noticing any of the following, it is time to start planning a replacement.
- scheduleAge. Your system is over 10 years old. Electric and gas storage tanks rarely last beyond 12 years, and efficiency drops well before that.
- water_dropRusty or discoloured water. Brown or rusty water from the hot tap means the tank lining is deteriorating. Once it starts, it only gets worse.
- plumbingLeaking around the base. A puddle under your system usually means the tank has corroded through. This is not repairable.
- thermostatInconsistent heating. If your water is lukewarm or runs out faster than it used to, the heating element or thermostat is likely failing.
- paymentsRising energy bills. An old system works harder to heat the same amount of water. If your bills have crept up without a change in usage, your hot water system is a likely culprit.
If your system is showing any of these signs, do not wait for it to fail completely. An emergency replacement on a weekend or public holiday costs more and limits your choices.
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Over 3.6 million homes already claiming rebates
Hot Water System Types Compared
There are five main types of hot water system available in Australia. Here is how they compare on cost, running expenses, and lifespan.
| Type | Installed Cost | Annual Running Cost | Lifespan | STC Eligible |
|---|---|---|---|---|
| Electric storage | $1,500–$2,500 | $800–$1,200 | 8–12 years | No |
| Gas storage | $1,800–$3,000 | $500–$800 | 8–12 years | No |
| Gas instantaneous | $2,000–$3,500 | $400–$700 | 15–20 years | No |
| Heat pump | $3,000–$5,500 | $200–$400 | 10–15 years | Yes |
| Solar hot water | $3,500–$7,200 | $100–$300 | 15–20 years | Yes |
Prices are for a standard 300L system in a metro area, including installation. Costs vary by location and installer. Running costs based on average Australian electricity and gas tariffs in 2025/26.
Why Heat Pump and Solar Are the Smart Upgrade
If your old system has died and you are weighing up a straight replacement versus upgrading, the numbers favour heat pump and solar almost every time. The upfront cost is higher, but the total cost of ownership over 10 to 15 years is significantly lower.
Take a typical household replacing a 300L electric storage system. A new electric unit costs around $2,000 installed but runs at $1,000 a year in electricity. Over 10 years, that is $12,000 in total. A heat pump costs $4,500 installed but only $300 a year to run, totalling $7,500 over the same period. That is $4,500 less, and the heat pump will likely outlast the electric unit by several years.
Solar hot water pushes the savings even further. Running costs of $100 to $300 a year and a lifespan of 15 to 20 years mean you could save $8,000 to $12,000 compared to sticking with electric storage over the life of the system.
Both heat pumps and solar hot water systems are eligible for federal STCs, which knock $600 to $1,000 off the purchase price at the point of sale. Your installer handles the paperwork. Electric and gas systems do not qualify for any rebates.
Beyond the dollars, heat pumps and solar produce far fewer greenhouse gas emissions. An electric storage system on grid power generates around 4 tonnes of CO2 over its lifetime. A heat pump cuts that by 65% to 75%, and a solar system by 80% or more.
Rebates for Upgrading Your Hot Water System
If you upgrade to a heat pump or solar hot water system, you can claim rebates that reduce the upfront cost by $600 to $2,000 depending on where you live.
Federal STCs (nationwide)
Small-scale Technology Certificates are available to any household replacing an existing system with a heat pump or solar hot water unit. The value depends on your climate zone and the system you install, but most households receive $600 to $1,000 as a point-of-sale discount.
Check federal rebate details →Victoria: $1,000 hot water rebate
Solar Victoria offers up to $1,000 for owner-occupiers who replace an existing hot water system with a heat pump or solar unit. This is on top of the federal STCs, so Victorian households can save up to $2,000 on the installed price.
Check Victorian rebate eligibility →ACT: interest-free loan
The ACT Sustainable Household Scheme offers interest-free loans of up to $15,000 for energy-efficient upgrades including heat pump and solar hot water systems. This makes the switch essentially cash-flow neutral for many households.
Other states (NSW, QLD, SA, WA, NT, TAS) do not currently offer specific hot water rebates beyond the federal STCs, though some have broader energy efficiency schemes that may apply. Check your state rebates page for the latest details.
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Over 3.6 million homes already claiming rebates
Emergency Replacement vs Planned Upgrade
There is a big difference between choosing your next hot water system and having one chosen for you. When a system fails on a Saturday morning with a house full of people, most homeowners call a plumber and accept whatever they can install that day. That usually means a basic electric or gas storage unit, because that is what fits on the truck.
The problem with emergency replacements is threefold. You pay a premium for urgent callouts. You have no time to compare quotes. And you almost certainly end up with the cheapest, least efficient option rather than the one that saves you the most money over the next decade.
If your system is over 10 years old, start researching now. Get two or three quotes for a heat pump or solar replacement while your current system is still running. That way, when it does fail, you already know what you want, who is installing it, and what it will cost. Some installers will even pre-order your preferred unit so it is ready to go.
A planned upgrade to a heat pump or solar system typically costs $500 to $1,500 less than an emergency replacement with the same unit, because you have time to shop around, avoid after-hours callout fees, and make sure rebates are applied correctly.
How to Choose the Right Replacement
Your best option depends on your household size, climate, roof space, and budget. Here is a quick guide.
Heat pump is ideal if:
- You have limited or shaded roof space
- You want the simplest installation
- You live in a mild to warm climate
- You want the fastest payback period
Solar hot water is ideal if:
- You have a north-facing roof with good sun
- You want the lowest possible running costs
- You plan to stay in the home long term
- You want the longest system lifespan
For a deeper dive into solar hot water specifically, including pricing by tank size and a full state-by-state rebate breakdown, see our solar hot water systems guide.
Frequently Asked Questions
How much does it cost to replace a hot water system in Australia?
Replacement costs range from $1,500 for a basic electric storage system to $7,200 for a large solar hot water system. The most popular options for a family of four fall between $2,500 and $5,500 installed. Heat pumps and solar systems are eligible for STCs worth $600 to $1,000, which reduces the upfront cost.
How long does a hot water system last?
Electric and gas storage systems typically last 8 to 12 years. Gas instantaneous systems last 15 to 20 years. Heat pumps last 10 to 15 years, and solar hot water systems last 15 to 20 years. Regular servicing, particularly flushing the tank and checking the anode rod, can extend the life of any system.
Can I replace a gas hot water system with a heat pump?
Yes, and many households are doing exactly that. A heat pump runs on electricity and is three to four times more efficient than a standard electric system. You will need a plumber to disconnect the gas and an electrician to wire the new unit. The running cost of a heat pump is typically lower than gas.
What rebates are available for replacing a hot water system?
Federal STCs (Small-scale Technology Certificates) provide $600 to $1,000 off heat pump or solar hot water systems. Victoria offers an additional $1,000 hot water rebate through Solar Victoria. The ACT offers interest-free loans of up to $2,500 through the Sustainable Household Scheme. These rebates only apply when upgrading to a heat pump or solar system.
How long does it take to replace a hot water system?
A like-for-like replacement (e.g. swapping an old electric storage for a new one) takes 2 to 4 hours. Switching to a different type, such as going from gas to a heat pump, may take a full day because of additional plumbing and electrical work. Solar hot water installations with roof-mounted collectors typically take one to two days.
Should I replace my hot water system before it fails?
If your system is over 10 years old, planning a replacement before it dies is a smart move. An emergency replacement limits your options because you are at the mercy of whatever your plumber has available. Planning ahead gives you time to compare quotes, choose the most efficient system, and take advantage of rebates.
The next step
If you have any questions about the information in this guide, feel free to get in touch:
Email: andy@whysolar.com.au
Tel: +61 455 221 921
If you're considering solar panels or batteries for your home, Andy and the team can help you get quotes from trusted, pre-vetted local installers:
Written by
Andy McMasterSolar Installer Partner Relations
Connects homeowners with trusted, vetted solar installers across Australia. Andy works directly with installation companies to ensure quality standards and helps homeowners navigate the quoting process.
Learn more about Andy McMaster