There have been growing calls in the state of Victoria and elsewhere in Australia to ban gas hot water systems in new homes. This is not just due to their prices, but also their environmental impact. On average, a household hot water system can make up around a third of a household’s total energy bill. What is more, since the price of gas has been rising in recent years, the bill can be crippling for some homeowners.

So, if home gas connections will be phased out, what could take their place, and what is the price of these alternatives?

Gas hot water systems: Prices

A large portion of hot water systems in Australian homes are powered by natural gas. Each gas bill comprises three parts: the wholesale cost of gas, the cost of transporting it (network charges) and company retail charges. The wholesale price of gas on the east coast has been fairly volatile in recent years. It shot up four-fold between 2014 and 2017, from AUD $4 per gigajoule to AUD $20 per gigajoule. Since then, prices fell until 2019 before fluctuating again. That has made gas bills volatile too. 

On average, a household in Victoria uses 42 gigajoules of gas per year, bringing average annual costs to around AUD $1,280. An average home in Melbourne with a gas cooker and a gas hot water system uses around 17 gigajoules per year and costs AUD $681 per year.

The price of installing a gas hot water system depends on whether you have a gas connection at home. Without it, it may be quite expensive. Even with such a connection, it may be cheaper to get your hot water another way. 

Are gas hot water systems worth it?

Gas prices across Australia have risen so much in recent years that they have even sparked a parliamentary inquiry. Australian gas companies say that it is still better to have a gas-powered hot water system than one based on alternatives. But this is no longer necessarily true. 

A record number of Australian homes now derive their electricity from solar panels on rooftops, making electricity far cheaper and environmentally friendly. An electricity-based hot water system makes far more economic sense for these homes, rather than one based on gas.

Home alternatives

There are several alternatives to gas-powered hot water systems for the home. Australians can install an electric system, a solar-powered hot water system or a heat pump. Each option has its advantages. A large portion of Australian households already have electricity-powered hot water systems. But such systems can take time to heat up water and contribute to greenhouse gas emissions

A solar hot water system usually costs more to buy and install relative to others. But it has the lowest running costs and is usually more cost-effective over an extended period of time. Moreover, Australia’s abundant sunlight makes it the most energy-efficient option. They can cut the energy required to heat up water by up to 90 per cent compared to other systems.

Electric heat pumps are also an increasingly attractive option. A heat pump can be reversible by sucking in heat from the outside to warm up your house during winter and also sucking in cool air during the summer, like an AC. They are roughly three times more efficient than electric hot water systems but cost more to install initially. Over time, they can be the far cheaper option for your home as they last longer – typically 20 years. They are also far better for the environment. There are also some subsidies available to install heat pumps.