Gas vs. Electric: Which Hot Water System
Saves You More Money?
When it comes to choosing a hot water system for your home, one of the biggest decisions is whether to go with gas or electric. Both options have their pros and cons, but which one is more cost-effective in the long run? In this blog, we break down the differences, costs, and efficiency of each system to help you make an informed choice.
1. Understanding Gas and Electric Hot Water Systems
Gas Hot Water Systems
Gas hot water systems heat water using natural gas or LPG (liquefied petroleum gas). They come in two main types:
- Storage tank systems: Store heated water in a tank, ready for use.
- Instantaneous (tankless) systems: Heat water only when needed, reducing energy waste.
Electric Hot Water Systems
Electric hot water systems use electricity to heat water and are also available in:
- Storage tank systems: Heat water and store it in an insulated tank until needed.
- Heat pumps: A more energy-efficient option that extracts heat from the air to warm water.
2. Upfront Costs: Which One is Cheaper?
The initial price of purchasing and installing a gas system is generally higher than that of a standard electric system. However, electric heat pumps can also have a higher upfront cost due to their advanced technology.
- Gas system cost: $900 – $2,000 (plus installation fees)
- Electric system cost: $300 – $1,500 (standard electric), $2,500+ (heat pump)
If you’re looking for a low upfront cost, a standard electric system might be the better choice. However, long-term savings are an important factor to consider.
3. Running Costs: Which One Saves More?
Electric hot water systems are typically cheaper to install but more expensive to run due to higher electricity costs. Gas, on the other hand, tends to be cheaper to operate, especially in households with high hot water usage.
These are the tables for running cost comparison between different hot water systems, facilitating 4 people (150 litres per day). Images and data retrieved from Sustainability Victoria
As shown, heat pumps offer the lowest running costs, while traditional electric systems and gas tend to be the most expensive to operate.
4. Energy Efficiency and Environmental Impact
Gas Efficiency
- Gas water heaters heat water faster than electric storage systems.
- However, they still rely on fossil fuels, contributing to carbon emissions.
- If you have access to natural gas, it may be a more energy-efficient option compared to standard electric systems.
Electric Efficiency
- Standard electric water heaters can be inefficient, especially when using grid electricity.
- Heat pumps, however, use significantly less energy and can run on renewable electricity, reducing emissions.
- When paired with solar panels, an electric hot water system can become nearly cost-free to run.
5. Government Rebates & Incentives
In Victoria, homeowners may be eligible for rebates under the Solar Victoria Hot Water Rebate and the Victorian Energy Upgrades (VEU) Program, which can significantly reduce the cost of installing an electric heat pump or a high-efficiency gas system.
- Solar Victoria Hot Water Rebate: Up to $1,000 off the cost of an eligible system.
- VEU Program: Additional discounts depending on the system type and household eligibility.
These incentives make energy-efficient heat pumps one of the most cost-effective long-term solutions.
The Best Option for Savings
While gas systems can offer lower upfront and running costs than standard electric systems, they are still reliant on fossil fuels. Electric heat pumps are the best long-term investment, with lower running costs and government rebates that make them more affordable upfront.
Want to upgrade to a more energy-efficient hot water system? NRG7 can help? Contact us today to explore your options and find the best solution for your home.