What Is the Best Heat Pump Hot Water System?

Are your energy bills creeping higher each quarter? Are you looking for a smarter, more sustainable way to heat your water? If so, you're not alone. Thousands of Australian households are switching to heat pump hot water systems—a technology that offers impressive energy savings and a smaller carbon footprint.

In this guide, we’ll explain how heat pump hot water systems work, highlight their pros and cons, compare different types, and help you decide if this is the right option for your home. We’ll also answer a question many people are asking: What is the best heat pump hot water system for Australian conditions?

How Do Heat Pump Hot Water Systems Work?

The Basics

A heat pump hot water system works like a reverse fridge. Instead of creating heat from electricity (like traditional systems), it extracts warmth from the surrounding air and uses that energy to heat water.

A refrigerant absorbs heat from the air and becomes a gas. This gas is compressed, increasing its temperature. The heat is then transferred to your water tank via a heat exchanger, and the gas cools back down to start the cycle again.

The result? These systems use 60–75% less energy than standard electric heaters—making them 300–400% more efficient.

Key Components

· Evaporator – Draws in ambient air.

· Compressor – Increases the refrigerant temperature.

· Heat Exchanger – Transfers heat to the water.

· Expansion Valve – Prepares refrigerant to absorb more heat.

· Electric Backup Element – Ensures hot water during peak demand or cold weather.

Benefits of Heat Pump Hot Water Systems

Energy Efficiency

One of the biggest advantages of a heat pump is its energy efficiency. With a Coefficient of Performance (COP) of 3 to 5, you get 3–5 times more energy out than you put in. That means significant savings on electricity bills—typically $500–$1,000 per year for most families.

Environmental Impact

Switching to a heat pump can reduce your hot water system’s carbon emissions by 60–80%. Combine it with solar panels, and your water heating becomes almost carbon-free. This makes heat pumps a key part of a low-emissions home.

Government Rebates

Thanks to their environmental benefits, heat pumps qualify for rebates under Australia’s Small-scale Renewable Energy Scheme (SRES). Depending on your location and the model you choose, you could receive $800–$1,600 off the purchase price.

Some states, like Victoria and NSW, offer additional rebates or interest-free loans. These incentives can reduce the upfront cost by thousands.

Are Heat Pump Hot Water Systems Right for You?

Climate Suitability

While heat pumps work best in warm to temperate climates, modern systems can operate efficiently in cold conditions (as low as -10°C). If you live in colder parts of Australia, look for units with a high COP and frost protection features.

Installation Requirements

Most systems are installed outdoors and need good airflow—around 500mm of clearance. Integrated units combine the tank and heat pump in one unit, while split systems allow for more flexible placement.

Ensure your property has the right plumbing and electrical setup. If switching from gas or a tankless system, some modifications may be needed.

Household Size

· 1–2 people: 150–200L tank

· 3–4 people: 250–315L tank

· 5–6 people: 400L tank

Always size your system based on peak demand, not average use. It’s better to slightly oversize than to run out of hot water.

Comparing Types of Heat Pump Hot Water Systems

Integrated vs Split Systems

· Integrated Systems: All-in-one design. Easier to install but bulkier.

· Split Systems: Separate compressor and tank. More flexible, quieter indoors, and easier to place on smaller properties.

Indoor vs Outdoor Installation

Most systems are designed for outdoor use, but some can be installed indoors in well-ventilated areas. Indoor installation protects the unit from weather, but the unit will cool the room as it extracts heat.

Smart Features

Many modern systems come with programmable timers, remote monitoring, and smartphone connectivity. These features allow you to optimise performance, especially when paired with solar power.