Energy savings schemes are supporting upgrades to efficient hot water systems using heat pump technology, writes Hamish McGovern.

Energy efficiency schemes might look like free money to some, but they have a clear purpose. The idea is to encourage customers to upgrade to technology where although the costs are generally higher, long-term savings and payback periods are very attractive. Without such schemes rapid transformation would not occur, as customers tend not to make purchasing decisions based on efficiency.

It’s good to see high-efficiency residential hot water heat pumps are getting traction in jurisdictions with energy efficiency schemes that reward these technologies. Our industry is participating in heat pump consultations and workshops with various governments to achieve government energy market transformation goals and efficiency targets. There is a lot of opportunity, especially in commercial and industrial applications.

Hot water heat pumps concentrate ambient heat from the surrounding air and then send, or “pump”, that heat into the water in a storage tank. As the process concentrates existing heat instead of having to create more, a heat pump can reduce annual hot water requirements by 50-80% compared with electric-resistive home systems. For this reason, they are considered renewable and are eligible for small-scale technology certificates under the Renewable Energy Target. They are also eligible for energy efficiency certificates under the various state-based energy efficiency schemes.

Source: Hot Water Heat Pump Guide, Australian Energy Foundation, aef.com.au

Innovation paying off

The Victorian Energy Upgrades program established a proven working model that has been embraced by South Australia’s Retailer Energy Efficiency Scheme and savings calculations under these programs could be adopted in other states. Eco Alliance Plumbing and Hot Water managing director Remi Infanti has diversified his high-efficiency stable of products to include heat pumps and says they provide a compelling option when replacing less efficient electric hot water systems. Hot water heat pump technology ticks all the energy transformation boxes, he says, because it is one of the lowest cost technologies to implement and one of most technologically and commercial readily available solutions, according to the Federal Government’s Technology Investment Roadmap Discussion Paper 2023-2030.

Infanti says there is a significant pool of opportunity. For example, the NSW government’s Energy Efficiency Opportunity List estimates indicate market penetration rates of 25%, which is reasonable when considering residential and small commercial sites, he says. This aligns with the assumption that at least one in every three hot water systems in NSW is still operating using electric element heating (1.2 million units across 3 million dwellings.

The technology can bring significant energy savings, he says, with an average family of four saving about $825 a year by upgrading an electric element hot water system. This estimate is based on comparing hot water running costs for four people (150 litres a day) for electric, peak tariff, no energy rating, with an annual energy cost about $1,115 (using Sustainability Victoria data) with the same four-person household fitted with a heat pump, on peak tariff, high-efficiency rating and an annual energy cost of $290.

Because the technology must be installed by a licensed plumber or electrician, an upgrade to a heat pump is seen as a low-risk activity with good compliance, he says. The solution is also strongly aligned with solar PV generation initiatives, where modern appliances are equipped with timer functionality to operate during daylight hours only (within the self-generation curve), essentially operating on free, 100% renewable, off-grid electricity.


Hamish McGovern is vice president of the Energy Savings Industry Association.