Which new hot water system could save you money on your energy bills?

What’s the worst thing that can happen in the middle of a hot shower? OK, there are a lot of answers to that (we’ve seen Psycho), but something guaranteed to cause an equally chilling scream is suddenly losing hot water, especially in the colder months.

When it comes to replacing hot water systems, people have traditionally replaced like with like, partly because it’s something you need fixed as quickly as possible.

However, whether you’re replacing your current system, working on a home renovation or developing a new build, it’s worth taking a few minutes to consider your options, because today’s hot water systems are likely to be more energy efficient than your old one and help you save money on your energy bills.

Your current hot water system will be powered by electricity, natural gas (piped), LPG gas (cylinders) or solar.

If you’re unsure what type of hot water system you have, it should be easy enough to find out. Firstly, locate the heater, which will most likely be in a laundry or utility room, against an outdoor wall, or possibly in a basement or garage.

Gas hot water systems will have metal piping leading into them, as well as an electricity cable and two water pipes, whereas electric ones will have just electricity cabling and water pipes. The unit might also have a sticker or writing on it identifying whether it’s gas or electric.

A solar hot water system will typically have a storage tank roof-mounted alongside solar panels, though some have the water tank component positioned on the ground or against a wall.

Whether it’s powered by electricity, gas or solar, your home’s hot water is delivered by either a storage tank or a continuous flow system. You should be able to tell at a glance which yours is. Continuous flow systems are rectangular boxes fixed to a wall, whereas storage tanks are cylinders of varying sizes, ranging from around 50L to over 400L. Heat pump storage tanks look similar to regular ones, but have a number of grilles or vents at the top, and tend to be taller than regular storage tanks of a similar capacity.

Once you’ve confirmed the appearance and the energy supply of the unit, you should know whether your existing hot water system is an:

Storage tank hot water systems are cylindrical tanks that use an element to heat, and keep heated, large amounts of water, so that it’s there ready to be used at any time.

Traditional style gas and electric water storage tanks originated in the 1920’s, but didn’t start to gain wider popularity in Australia until the 1950’s as electricity and piped gas became more widely available and affordable. By the 1970’s they were commonplace in Aussie homes.

The main advantage of tank systems is their ability to provide a large supply of hot water on demand, making them useful for larger families and busy households.

The flipside of this convenience is the high amount of energy needed to keep a large volume of water hot, even when it’s not being used. A bit like boiling a very big kettle and keeping it simmering away. Although new hot water storage tanks have better insulation and heating efficiency than older models, they are still less energy efficient than other hot water systems.

The storage is also finite, however, so high usage homes can run out of hot water, resulting in a wait for the system to heat up more water.

Due to its traditionally lower cost, hot water storage tanks that are fuelled by gas, both natural and LPG, are often cheaper to run than electric ones - though this can vary according to power prices in your region.

In contrast to storage tanks, continuous flow systems heat water only as you use it - making them significantly more energy efficient than traditional storage tanks. When you turn the hot tap on, water is fed through a heat exchanger, which heats the water being sent through the pipe. The heat is generated by either electricity, natural gas or LPG.

Continuous flow systems (aka tankless, on-demand or instantaneous water heaters) were invented in the 1920’s, but weren’t used in Australia until the 1970’s. It took until the 1990’s, though, for them to gain widespread popularity, because this period saw government initiatives to increase the uptake of energy efficient appliances.

Gas continuous flow systems cost more to install than electric ones, because you need the services of a gas fitter and an electrician, but they are more energy efficient and cheaper to run, potentially saving hundreds of dollars a year for bigger households.

Rather than generating heat directly, like traditional hot water tanks, heat pump water heaters extract heat from the surrounding air and transfer it - at a higher temperature - to your home’s water supply.

Powered by electricity, they are up to three times more energy efficient than conventional electric water tank heaters - which means electricity bills up to two-thirds cheaper than with traditional hot water tank systems.

Heat pump hot water systems have become the new standard for new build homes across much of Australia. In VIC, heat pump hot water systems are mandated for new builds, and in other States and Territories their use is incentivised via rebates. So, although they cost more to buy than traditional tank-style systems, the rebate in conjunction with lower running costs (which could save larger households several hundred dollars each year) could see it pay for itself within a few years.

A Sustainability Victoria comparison of solar, heat pump, gas storage tank, gas continuous flow, electric storage tank and electric continuous flow hot water systems found significant differences between them in terms of energy use and annual running costs.

Of the various systems, solar and heat pump were found to be far and away the most energy and cost efficient to run. The cost of running a solar hot water storage tank was around a quarter that of an electric storage tank, while an electric heat pump storage tank was around one-third the cost. The greenhouse gas emissions of both systems follow a similar pattern.

Though they are much cheaper to run, the initial cost of these systems is considerably higher, as is often the case with modern, sustainable appliances. A more expensive heat pump dryer, for example, can more than recoup its additional purchase price by significantly reducing your energy bills. As an incentive to increase the uptake of heat pump and solar hot water systems, the Australian government offers rebates ('benefits') for new purchases under its Small-scale Renewable Energy Scheme (SRES).

There are a couple of ways of getting this benefit: you can either trade the Small-scale Technology Certificates (STCs) that the hot water system is accredited for with the person installing it (as long as they are an accredited agent), or you can sell your STCs through the open STCs market (variable price) or the STCs Clearing House (fixed price).

The number of STCs that the heat pump or solar hot water system is accredited for varies according to its size, capability and energy efficiency. Some heat pump models are eligible for up to 20 STCs, which can be sold for up to $1,000, and some solar models up to 90 STCs, which can be sold for over $3,000. It’s definitely worth taking this into account when comparing costs for your new hot water system.

Whether you’re getting a continuous flow hot water system, or any type of storage water heater, you need to choose a size, or flow rate, that suits your household's water use. This is dictated not only by the number of people in your home, but also when they use hot water and whether or not you use water saving low-flow shower heads. For most households, this boils down to the question of how many people are having hot showers every morning. Water Research Australia reports that the length of shower taken in the average household in Australia is eight minutes per person. Not everyone manages to be in and out in that time though (if only), so you’ll want a heating system that can handle your family’s hot water usage.

Because they don’t have storage tanks, continuous flow systems are not limited by a set amount of stored hot water, and are instead only potentially restricted by flow rate. Sizes typically range between 10L and 32L, and this indicates the rate of hot water flow per minute.

One person only needs to use one hot tap at a time, so a lower flow rate will usually suffice. A busy household in which a couple of showers - as well as a kitchen sink or washing machine hot wash - may be in use simultaneously, needs a higher flow rate, as the system feeds the hot water to multiple outlets.

Whatever hot water system you choose, you’ll need a licensed plumber, and probably also an electrician. If you’re getting any type of gas hot water heater, the plumber should also be a qualified gas fitter - as many are. Gas heaters also require electricity for ignition and, in some cases, to power the electronic control panel. This may simply involve plugging it into an existing power point, which won’t require an electrician, but some units do need to be hardwired to mains power by a professional.

Electric hot water systems, including heat pumps, need a licensed electrician to hardwire them to a dedicated electrical circuit that can handle their power needs.

If you plan to replace the old system with a new version of the same type, installation costs should be relatively low, as you may not require any new wiring or plumbing work.

Similarly, if you currently have an electric hot water storage tank and want to upgrade to a heat pump system, the installation should be relatively straightforward, as the electrical and plumbing infrastructure should be in place.

Switching from gas to electricity, or vice versa, will incur more costs as you may need additional wiring, circuitry or gas piping to be installed.

Any hot water storage tank system will require more space than a continuous flow system, so you should consider if you have the space for it and you’ll be happy with how it will look when it’s in position, most likely in your garden or against an external wall. If you currently use an old water tank system, you should already have an allocated space for it to sit in.

Appliances Online has a large range of hot water systems at great prices and, just as it does with thousands of other home appliances, delivers them to 95% of Australia’s population with FREE delivery.

Plus, if it’s in stock and you live in a metropolitan area, you can receive it the next day (Mon-Fri) - and our legendary delivery team can even take your old disconnected appliance away to be recycled.

Check out our full range of hot water systems and if you need a few more tips on choosing the right one for your home, call our friendly team 24/7 on 1300 000 500.