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For households, hot water can make up as much as 18% of their energy bill.
In commercial buildings, this can be as high as 36%, and even higher for industrial facilities.
By installing an energy-efficient hot water system you can lower your power bills, reduce carbon emissions and save energy.
Eligibility
All Victorian households and businesses can receive discounts when upgrading gas or electric hot water systems. This can include upgrading some solar water heaters that meet the eligibility criteria outlined below.
You must install an approved product to be eligible for incentives. To find an approved product:
- visit the product register
- select the following from the drop down menu:
- For heat pump water heaters – ‘1D(18) & 3C - Water heater - Heat pump’
- For solar water heaters – ‘1C(18) & 3D - Water heater - Electric boosted solar’
- For commercial heat pump water heater upgrades– ‘44(21) - Commercial and industrial heat pump water heater’
- click search.
The house or building where the upgrade takes place must be at least 2 years old. Residential upgrades are limited to a maximum of 2 and business upgrades are limited to a maximum of 5 domestic products.
Larger commercial upgrades can also claim incentives for new installations and do not have limits.
Living in a rental property?
If you’re living in a private rental property, you are eligible to receive a discount on a hot water system.
We recommend that landlords and tenants work together when doing any upgrades to a rental property.
How much discount to expect
Discounts for hot water upgrades for households and businesses.
Remove this system | Replace with this upgrade | Indicative discount* |
|---|---|---|
Inefficient electric hot water system* | Heat pump hot water heater | $630 |
Inefficient electric hot water system* | Solar-boosted hot water system | $910 |
Inefficient gas hot water heater* | Heat pump hot water heater | $560 |
Inefficient gas hot water heater* | Solar-boosted hot water system | $700 |
* This can include some gas-boosted and electric-boosted solar water heaters that meet the eligibility criteria outlined below.
It is important to consider warranty when installing a new hot water system. Under VEU, heat pump water heaters must be covered by a minimum 5-year warranty. A warranty is only as good as the company that provides it, so remember to read the warranty conditions carefully and look for a company with experience in installing energy efficient hot water systems.
Under Victorian Energy Upgrades, water heating systems have a minimum customer contribution of $200 (incl. GST). This means that after installation costs the minimum that customers must pay is $200. Products cannot be installed free of charge.
Your final installation cost, including your discount, is determined by your accredited provider. This cost depends on your:
- certificate price (which fluctuates)
- accredited provider’s administrative costs
- choice of product and/ or upgrade
- location
- installation costs.
If you have purchased an eligible product after 31 May 2023, and would like to organise a retrospective rebate, an accredited provider may be able to guide you through the process.
For more information on certificate prices under the VEU program, please visit Victorian Energy Efficiency Certificates (VEECs).
Hot water system upgrades available
View our list of hot water upgrades below.
To replace | Why replace it? |
|---|---|
Use your electricity supply to heat water in an insulated storage tank. | Electric hot water systems have the cheapest up-front costs, but are the most expensive to run. Opt for a heat pump hot water heater instead. |
Inefficient gas hot water heaters use liquefied petroleum gas, natural gas or simulated natural gas to store hot water in a tank or heat water on demand. | Gas storage systems are inefficient, particularly in colder climates. They have very high heat loss because they can’t insulate where the gas flame is heating the tank. |
Electric or gas-boosted solar water heaters that only provide hot water from the electric or gas-booster, due to non-functional solar components that are no longer within the relevant warranty period, and at least 5 years has lapsed since the system was installed. | A non-functional solar water heater will continue to operate as a conventional and inefficient gas or electric water heater. These types of units are very expensive to run. Note: electric or gas-boosted solar water heaters that cannot provide adequate hot water due to a non-functional electric or gas-booster are not eligible for incentives. |
Energy-efficient upgrade | Why choose it? |
|---|---|
Heat pump hot water systems extract heat from the surrounding air to heat water in an insulated storage tank. Heat pump units can be integrated on top of their tanks or used as a separate (split system). | They are the most efficient hot water system in the market. These use up to 75% less electricity than a conventional electric hot water system. |
Solar-boosted hot water systems generate heat directly from the sun. Hot water is stored in a hot water tank that is connected to solar collector panels. | Solar-boosted hot water systems are the most energy-efficient and the cheapest hot water systems to run |
How to size your new hot water system (Residential)
It is important to choose a hot water system that is a suitable size for your household. Every household is unique, and this impacts what size is appropriate. You can run out of hot water if your system is too small.
We recommend reviewing our guidance to help you choose the right hot water system for your home.
Factsheets
Download our factsheets for more information on upgrading your home or business.
Installing the right heat pump water heater (commercial and industrial)
To minimise costs when installing hot water heat pumps, it is important to size them to meet your business needs.
DEECA has engaged the Australian Alliance for Energy Productivity (A2EP) to develop a range of guidance materials to support:
- best practice design
- optimisation and installation of commercial and industrial heat pump water heaters.
These guideline resources support the design and installation of heat pumps water heaters in commercial and industrial applications account. They include technical design considerations and case studies to highlight applications of these principles.
Design considerations and guidelines (commercial and industrial)
Accredited providers often work with installers who are not listed on the registry.
Please note that as VEU is a market-based program:
- not all accredited providers listed below may currently offer water heating upgrades
- accredited providers can choose when and where they undertake upgrades.
Find an accredited provider in your area
*Participating accredited providers are published on the Essential Services Commission (ESC) Register of Accredited Persons webpage. For the most up to date list of Accredited Persons working in water heating activities, please visit the ESC Registry and search Water heating under VEEC activity types.
Case studies
Page last updated: 23/04/25