For most homes that have rooftop solar, or are planning it, a heat pump is usually the strongest all-round choice: it uses roughly a quarter to a third of the electricity of a conventional electric tank and can be timed to run on your own solar in the middle of the day. Solar hot water with roof collectors also has very low running costs, but it usually costs more upfront and competes with panels for roof space. A plain electric storage tank is the cheapest to buy and the most expensive to run, although a solar diverter can narrow that gap. The right choice depends on your roof, household size, where the tank can go and how much quiet operation matters to you.

How each system heats water

• Electric storage: a heating element inside an insulated tank, much like a very large kettle. Each unit of electricity becomes one unit of heat.
• Heat pump: works like a refrigerator in reverse, drawing heat from the surrounding air and moving it into the water. It typically delivers three to four units of heat for every unit of electricity it uses.
• Solar hot water: roof-mounted collectors heat water or a transfer fluid directly from the sun, with an electric or gas booster for cloudy spells and winter.

Side-by-side comparison

Running costs: a simple worked example

Hot water use varies widely with household size and habits, so treat this as a way to do the maths rather than a prediction. Assume your household needs the equivalent of 8 kWh of heat a day and you pay 35 c/kWh for grid power.

• Electric storage on grid power: about 8 kWh of electricity a day, or roughly $2.80 a day and about $1,020 a year. Many tanks run on a cheaper controlled-load tariff overnight, which lowers this, so check your bill.
• Heat pump on grid power: about 2-2.7 kWh a day, or roughly $0.70-$0.95 a day.
• Heat pump running on your own solar: the real cost is the feed-in credit you give up by not exporting that power. With NSW feed-in tariffs commonly just a few cents per kWh, that is a small fraction of the grid cost.
• Solar hot water: most of the heat comes from the collectors, and the booster adds cost mainly in winter and after cloudy days.

The pattern is clear even if your numbers differ: a heat pump cuts the electricity needed sharply, and shifting it into solar hours cuts the cost again. Have your last four bills handy when comparing quotes so you know which tariff your current tank uses.

Pairing hot water with rooftop solar

A hot water tank is effectively a battery for heat, which makes it one of the easiest ways to use more of your own solar. How you pair it depends on the system:

• Heat pump: set its timer or smart controls to run from late morning to mid-afternoon. Because it draws relatively little power, even a modest solar system can usually cover it on a sunny day.
• Electric storage: a smart solar diverter sends surplus solar, which would otherwise be exported, into the element. It works best with a generous array and a household that rarely needs a night-time top-up.
• Solar hot water: it heats independently of your panels, so it does not increase your PV self-consumption, and the collectors occupy roof space that could hold more panels.

If you are buying panels and a new hot water system together, include the heat pump's daily consumption in the sizing. Our guides on how many panels you need and system sizing show how to add a planned load to the calculation.

Upfront costs, noise and space

The upfront price depends on tank size, model, access and whether you are replacing gas, which needs a licensed gasfitter to disconnect the supply and usually a new electrical circuit. Eligible heat pump and solar water heaters can also create certificates under the federal Small-scale Renewable Energy Scheme, which reduces the price at the point of sale. Values change, so confirm them on the official page before signing. Our STC rebate guide explains how certificate discounts appear on a quote.

Noise is the heat pump's main drawback, so placement matters:

• keep it away from bedroom windows, including your neighbours';
• compare the sound rating in dB(A) on each model's datasheet;
• run it during the day on solar, which also keeps it quiet at night;
• ask the installer about NSW noise rules and council requirements for your chosen spot.

A heat pump also needs open air around it, so a cramped cupboard or narrow side passage may not suit. Solar hot water needs an unshaded, north-facing roof section, ideally close to the tank. An electric storage tank fits almost anywhere a tank can go.

Which one suits you?

• A heat pump suits most households with rooftop solar that can place the unit away from bedrooms and want low running costs.
• Solar hot water suits homes with plenty of unshaded north-facing roof that won't be needed for panels.
• Electric storage suits a tight budget, or a site where noise or space rules out a heat pump, ideally paired with a timer or diverter.

Whatever you choose, installation involves plumbing and electrical work that must be carried out by licensed tradespeople.

Next steps

Ask for at least two quotes that state tank size, expected daily electricity use, sound rating, location and any certificate discount. To compare the options for your home, request a free assessment from Blue Energy Solar. The energy market lists Heat-Pump Hot Water from $3,490, Solar Hot Water from $4,490, Gas to Electric Hot-Water Conversion from $2,990 and a Smart Solar Diverter from $890, all supplied and installed. These prices are indicative and are confirmed after a site assessment.

Frequently asked questions

How long do hot water systems usually last?

Service life depends on water quality, tank material and maintenance, but many storage tanks last somewhere around 10 to 15 years. Replacing the sacrificial anode when the manufacturer recommends it can extend tank life, and valves should be checked periodically. If your current tank is getting old, plan the replacement now rather than waiting for a failure that forces a same-day decision.

Can a heat pump work in cold areas like the Blue Mountains?

Yes, but check the model's minimum operating temperature and how quickly it recovers on cold mornings. Some units have a backup element that switches on in very low temperatures, which raises running costs on those days. Scheduling the heat pump for the warmest part of the day helps, and it also lines up with solar production. Ask the installer to confirm the unit suits your local winters.

Should I replace a working gas hot water system now?

It depends on its age and your plans. If it is near the end of its life, switching to a heat pump avoids an emergency replacement with another gas unit. If you also plan to remove other gas appliances, closing the gas account entirely can remove a daily supply charge. A licensed gasfitter must disconnect the gas, and a licensed electrician must install the new circuit.