Gas vs Electric vs Solar Hot Water Systems: Which Is Best for Your Home in 2026?

Your hot water system accounts for 25–30% of your home’s total energy use, so picking the right one makes a real difference to running costs across the 10–20 year life of the unit.

Here’s an honest comparison of the four main options available to Australian homeowners in 2026.

Gas hot water systems

Gas is Australia’s most common hot water type, and for good reason: it’s reliable, delivers high-volume hot water consistently, and gas is generally cheaper than electricity for water heating in most states.

• Storage gas — heats and stores a set volume of 125–315L. Reliable, but it burns energy keeping that water hot around the clock.
• Continuous flow gas — heats water on demand as it passes through the unit. No storage and no standby loss, but a higher upfront cost.
• Best for — areas with reticulated gas like Melbourne, Canberra and Brisbane, larger families, and households where reliability comes first.

Electric hot water systems

Electric storage is the cheapest to buy and install and the most expensive to run. If a standard-tariff electric system is your only option, look at switching to off-peak or upgrading to a heat pump.

• Storage electric — simplest and cheapest to install, but running costs are high on peak tariff.
• Off-peak electric — heats overnight on cheaper power. Lower running costs, less flexibility.
• Best for — small households, properties without gas, and units where space is tight.

Solar hot water systems

Solar hot water uses roof-mounted collectors to capture the sun’s energy for water heating directly. It’s not the same as solar PV — those panels generate electricity, while solar hot water collectors transfer heat straight into the water.

• The lowest running costs of any system
• Needs a gas or electric booster for cloudy stretches
• Eligible for Small-scale Technology Certificate (STC) rebates
• Best for — Perth, Brisbane, the Sunshine Coast and Darwin, where the solar resource is high. Less effective in Melbourne and Canberra because of shorter winter sun hours.

Heat pump hot water systems

Heat pumps are the fastest-growing category in 2026. They pull heat out of the surrounding air and use it to heat water, much like a reverse-cycle air conditioner in reverse, and they’re three to four times more efficient than standard electric storage.

• Eligible for STC rebates under the same scheme as solar
• Works best in mild to warm climates
• Some models include a booster element for cold nights
• Best for — Brisbane, Perth, the Sunshine Coast and Sydney. Fine in Melbourne with a booster, less efficient in a Canberra deep winter.

Cost comparison summary

Approximate annual running costs for a four-person household. Varies by location and usage.

FAQs about hot water systems

How do I qualify for STC rebates on solar or heat pump hot water?

STCs are generated automatically when a licensed plumber installs an eligible system. Your installer claims them and applies the value as a discount on your invoice — usually worth $600–$1,000 depending on system size and climate zone.

Can I replace gas with solar hot water?

Yes, and a solar system with a gas booster is one of the most popular upgrades our team installs. Solar does the heavy lifting and gas only kicks in when solar gain isn’t enough.

What size hot water system do I need?

As a rough guide: 125L for one to two people, 160–250L for three to four, and 250–315L for five or more. For continuous flow the key figure is flow rate in litres per minute, which we calculate from how many hot water outlets you run at once.