Worked Estimates and Checklists
Heat pump hot water worked example: net cost after STCs and rebates, and the payback in years
A full illustrative calculation for replacing electric or gas hot water with a heat pump in Australia, from quote to incentives, running-cost saving and payback.
This worked example follows one household from quote to payback. A family of four replaces a 12-year-old electric storage tank with a 270 litre integrated heat pump. On illustrative figures, the $4,200 installed price falls to $2,600 after an STC discount and a state discount, the household saves about $450 a year in electricity, and with prices rising 3% a year the upgrade pays for itself during year 6. A second scenario shows the same arithmetic for a gas-to-heat-pump switch in Victoria, where the Solar Victoria rebate changes the answer. Run your own numbers in the payback calculator. This guide is part of the heating and cooling quote checklist.
All figures are illustrative, not quotes or official rebate amounts.
Scenario 1: electric storage to heat pump
The quote
| Line item | Amount (illustrative, incl. GST) |
|---|---|
| 270 L integrated heat pump | $3,300 |
| Removal and disposal of old tank | $200 |
| Plumbing, tempering valve, relief and drain lines | $450 |
| Electrical connection and isolator | $250 |
| Price before incentives | $4,200 |
| STC discount (illustrative) | −$800 |
| State discount (illustrative) | −$800 |
| Payable | $2,600 |
The STC number comes from the CER calculation for the model, postcode and 2026 deeming period; the dollar value depends on what the agent pays per STC. The state discount depends on where you live and whether the product and installer qualify, for example the NSW Energy Savings Scheme published "up to $640" for electric to heat pump in 2026, so a NSW household would see less than the $800 shown here. See the STC guide and the NSW guide.
The running-cost saving
Using the method in the running-cost guide:
- Useful hot water energy: 3,000 kWh a year (illustrative for this household's use).
- Old electric tank at 90% efficiency: 3,000 ÷ 0.9 ≈ 3,333 kWh.
- Heat pump at COP 3.5: 3,000 ÷ 3.5 ≈ 857 kWh.
- Electricity saved: 3,333 − 857 ≈ 2,476 kWh.
- Controlled-load tariff 18 c/kWh: 2,476 × $0.18 ≈ $446 a year, rounded to $450.
The payback
| Year | Saving that year (3% rise) | Cumulative |
|---|---|---|
| 1 | $450 | $450 |
| 2 | $464 | $914 |
| 3 | $477 | $1,391 |
| 4 | $492 | $1,883 |
| 5 | $506 | $2,389 |
| 6 | $522 | $2,911 |
Cumulative savings pass the $2,600 net cost during year 6. Over 12 years, total savings would be about $6,386, so the net benefit after the $2,600 is about $3,786 in this illustration.
Scenario 2: gas storage to heat pump in Victoria
The quote
| Line item | Amount (illustrative) |
|---|---|
| 270 L heat pump (eligible locally made product) | $3,500 |
| Gas line capped by licensed gasfitter, old tank removed | $400 |
| Plumbing and tempering valve | $500 |
| New circuit from the switchboard | $800 |
| Price before incentives | $5,200 |
| STC discount (illustrative) | −$720 |
| VEU discount (illustrative) | −$800 |
| Price after these discounts | $3,680 |
| Solar Victoria rebate: 50% of $3,680 = $1,840, capped at $1,400 for an eligible locally made product | −$1,400 |
| Payable | $2,280 |
The Solar Victoria rebate (as published in October 2026) is 50% of the price after other discounts, up to $1,000, or up to $1,400 for eligible locally made products, subject to eligibility rules on property value, income, ownership and system age. See the Victorian rebates guide.
The running-cost saving
- Useful hot water energy: 3,000 kWh = 10,800 MJ.
- Gas storage at 70%: 10,800 ÷ 0.7 ≈ 15,429 MJ × $0.04 ≈ $617.
- Heat pump at COP 3.5 on solar-timed or off-peak power at 20 c/kWh: 857 kWh × $0.20 ≈ $171.
- Usage saving ≈ $446 a year.
If hot water is the last gas appliance, closing the gas account adds the supply charge saving (illustrative $365 a year), but there may be a disconnection or abolishment fee. See the gas-to-electric worked example.
The payback
With $446 a year rising 3%, cumulative savings pass $2,280 during year 5. If the supply charge is also saved, the yearly saving is about $811 and payback falls to about three years, before any abolishment fee.
What changes the answer most
| Variable | Effect |
|---|---|
| Incentives | Can halve the net cost; amounts change and depend on eligibility |
| Tariff | A cheap controlled-load rate reduces the saving against an electric tank |
| Solar | Running on surplus solar can make the heat pump's running cost very low |
| Household size | More hot water use means a bigger saving |
| Old system | Replacing an efficient gas instantaneous unit saves less than replacing an old storage tank |
| Electrical work | A switchboard upgrade can add significantly to the cost |
Checks before you rely on the numbers
- The STC and state amounts are written on the quote, with the model number.
- Eligibility forms (Solar Victoria, NSW nomination form) are signed before installation where required.
- The tariff in your calculation matches how the heat pump will run.
- The installer has confirmed the location, noise and electrical requirements.
Frequently asked questions
Why use useful hot water energy rather than the old system's bill?
Because it lets you compare systems with different efficiencies on the same basis. If you know your old system's kWh or MJ use, multiply by its efficiency to estimate useful energy.
What if my STC discount is lower than in this example?
The STC count falls each year as the deeming period shrinks, and the price per STC varies. Use the amount on your quote.
Does the payback include maintenance?
No. Add any expected servicing costs, and compare warranty lengths.
Is this example valid for my state?
The method is. The incentives and tariffs differ by state and change over time.
Official sources
- Clean Energy Regulator — STC calculation and heat pump register
- Solar Victoria — hot water rebate rules
- Essential Services Commission — VEU accredited providers
- NSW Climate and Energy Action — hot water upgrade incentive
