6 February 2026

Commercial and Industrial Heat Pump Water Heaters Response to Consultation

On 6 February, the Department of Energy, Environment, and Climate Action (the department) released its response to the consultation on revisions to product eligibility for the Commercial and Industrial (C&I) Heat Pump Water Heater (HPWH) activity (Part 44) available under the Victorian Energy Upgrades (VEU) program.

The department would like to sincerely thank everyone who took the time to make a submission or meet with the department. Your feedback is appreciated.

The Response to Consultation, now available on Engage Victoria, details the key decisions proposed in response to stakeholder feedback. A summary of the proposed decisions include:

  • The average heating capacity eligibility threshold (previously 20 kW) is proposed to be removed.
  • The load factor threshold is proposed to be increased to 12 kW from 10 kW, with scaled incentives to apply to products failing to meet an average heating capacity of 12 kW.
  • For products below the 12 kW minimum heating threshold, the scaled incentive is proposed to be increased slightly based on the total number of heat pumps in the registered product.
  • The eligible minimum average tank volume is proposed to be reduced from 700L to 425L.
  • The minimum co-payment amount is proposed to increase from $1,000 to $10,000 (incl. GST).

Stakeholders are advised not to make any decisions related to the activity under the VEU program until final Specifications have been approved and published.

These proposed changes are focused primarily on adjusting the product eligibility thresholds brought in for Part 44 in July 2025, which were introduced to define ‘commercial and industrial-sized’ HPWH systems and to prevent domestic-sized HPWH units receiving higher incentives than appropriate for the facilities they were installed in.

The department received valuable input on more significant changes to Part 44 via the consultation process, beyond changes to product eligibility. Consideration of these changes is expected to be included in the comprehensive review of all water heating activities in the VEU program, to be conducted over 2026. The department will provide further updates on the water heating activity review, including public consultation, in due course.

Page last updated: 06/02/26