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  • Last Updated: 27 July 2021

Choosing Between Gas vs Electric Hot Water Heater

Gas vs electric hot water heater:  Which do you choose?
Hot water heat pumps save energy by extracting heat from the ambient outside air to heat the water. Maintenance costs are higher for a hot water heat pump vs gas, prices are much higher and the compressor fan noise can be a problem.
With rising gas prices, apartment dwellers are also looking for more affordable hot water. Hot water heat pumps vs gas have high prices but do save energy. However, multiple hot water heat pumps would be very noisy and maintenance intensive.
We review hot water system types, and compare the pros and cons of the various alternatives, to help you make an informed decision.
The two key decisions involve the type of hot water system and which energy source powers it.
In turn, these decisions will affect the upfront cost of installation and the ongoing running costs.
Given that hot water often consumes around 25% of a home’s energy budget, you really want to get this right.

Gas vs Electric Hot Water Cost

It’s estimated that hot water uses 25% of your home’s power, so gas can save a lot of money. Electric are cheaper to purchase but more expensive to run. Customers also have more choices with electric vs gas hot water heaters. However, gas are more efficient and save you in the long run.

Gas vs electric hot water heater is a case where initial cost and running costs are the major factors to be considered.  Depending on your gas and electric tariffs, remember gas hot water heaters are typically less expensive to run than electric hot water heaters, in choosing between gas vs electric hot water heater.

So, gas hot water initial cost is slightly higher than electric hot water cost but the difference is saved within a year or two. This makes gas hot water cost much more economical over the lifetime of the unit.

Hot Water Heat Pump vs Gas

Hot water heat pumps save energy by extracting heat from the ambient outside air to heat the water. Maintenance costs are higher for a hot water heat pump vs gas, prices are much higher and the compressor fan noise can be a problem.

Heat pump hot water prices are also much higher vs gas hot water system prices. Hot water heat pump system prices range from around $3300 for a ≈160L to $4,000 for a ≈315L. Instant gas hot water system price ranges are only about $735 to $1575, depending on the flow rate and star rating, so much less expensive than hot water heat pump.

Maintenance costs are higher because it can take up to 3 trades for repairs: air conditioning technician, electrician and plumber.

The compressor and fan noise is problematic, particularly at night, if you or your neighbours sleep with open windows.

A Review of Your Electric Hot Water System Choices

Storage Tank Electric Hot Water System

Also known as hot water tanks or cylinders, these have been the most common hot water system in Australia for decades.

Unfortunately, with the rising cost of electricity and the high greenhouse gas emissions associated with generating the required electricity, these units are falling out of favour.

In fact, the government has passed legislation to try and limit their use.

Electric water heaters that heat all day are your most expensive option.

Off peak electric storage units are better, as off peak electricity tariffs are lower.

However, as they only heat water at night, they need to be quite large to make sure you don’t run out of water during the day.

So, some of the electric savings is offset by the fact that you need to heat a larger tank.

The bigger tank would also cost more to purchase.

Still, many people with an old electric unit are tempted to replace like-for-like and continue using an electric storage unit.

It is a quick, one day fix and the upfront costs are not prohibitive. However, the long term disadvantages need to be considered.

Electric Heat Pumps

Heat pumps heat your water by extracting heat from the ambient outside air, in the same way that a reverse cycle air conditioner would heat a room.

The hot water is kept in a tank, similar to storage systems.

Heat pumps can be quite efficient and have low greenhouse gas emissions but, once again, the upfront costs are substantial.

Heat pumps also have a couple of weaknesses that have caused them to lose popularity in the last few years.

Because they essentially incorporate an air conditioning unit, there are many more moving parts and the maintenance costs tend to be higher than for any of the alternatives.

They also have the dubious distinction of requiring as many as 3 trades for repairs: an air conditioning mechanic, a plumber and an electrician.

The other issue is noise.

If you live in close proximity to your neighbours or if you like to leave your windows open, the compressor and fan noise can be problematic.

This is especially true if the unit is set-up to run off-peak.

It can easily need to run all night because of the colder ambient temperatures after dark.

Health & Safety

There are health and safety considerations when comparing gas vs electric hot water heater units.

With storage tank water heaters, there is the potential for bacteria growth within the tank.

The World Health Organisation — WHO — recommends that stored hot water be kept at a minimum of 60°C.

Unless a minimum of 60°C is maintained, hot water tanks can be a breeding ground for Legionnaires’ disease, or Legionellosis, that is caused by a bacterium, Legionella pneumophila.

It is a respiratory disease that can cause severe pneumonia and is sometimes fatal.

However, Canadian studies have shown, even when the thermostat is set at 60°C, a high percentage — approximately 40% — of electric water heaters remain contaminated. 

This is because of the lower temperature, of about 30°C to 40°C, at the bottom of the electric hot water tanks.

With tankless systems, the prevention of bacterial growth is not an issue, as there is no stored water in which bacteria can breed.

Tankless systems can also be set at 50ºC, so the risk of scalding is greatly reduced without the need of a tempering valve.

A Review of Your Gas Hot Water Choices

Gas Storage Hot Water Systems

Appearing similar to an electric tank or cylinder, the primary difference is that the electric heat element is replaced with a gas burner.

Gas storage hot water units are energy efficient, particularly if you choose one of the new 4 or 5-Star models, and they have much lower greenhouse gas emissions.

Also, there are no time-of-day tariff issues with gas.

This means that gas storage units do not need to be as large, as the gas burner can operate whenever required.

The installed cost of a gas storage unit is close to that of the electric units, especially if you already have gas at your home.
You can also choose a gas storage system no matter where you live, as they are available in both natural gas and LPG models.
Installation is normally accomplished within one day.

Solar Hot Water Systems

Solar systems are usually equipped with a booster unit for periods without sufficient sunlight.

These boosters can be electric, natural gas or LPG.
It is important that you purchase a solar system with a sufficient number of panels and tank storage, so that the booster is not overused, or the running costs will be higher.
Your roof configuration also needs to be compatible with a solar system.
Finally, you should not be surprised if the solar option takes a number of days to install.

Solar vs Gas Hot Water Systems

Considering solar vs gas hot water systems, solar units are much more expensive to buy but have lower running costs. Solar installed cost is as much as 4 times that of a gas hot water system. In some cases, it can take more than ten years to recover the purchase price difference, particularly with the 6 or 7 star gas systems.  The solar price depends on the number of solar panels and the size of the booster.

The running cost varies greatly depending on type of booster, climate, gas and electric tariffs and usage rate.

Gas Continuous Flow Hot Water Systems

In the decision between gas vs electric hot water heater, there are units sometimes referred to as ‘instantaneous’ or ‘tankless’ that heat the water as you need it.

Tankless continuous flow systems provide hot water on demand whenever you turn on the tap.

These units only heat the water as it passes through so there is no storage tank.

This also means you never run out of hot water.

With tankless systems, you only need to heat the water to 50°C, as the prevention of bacterial growth is NOT an issue with tankless units, as it is with all of the other alternatives that have tanks.

Greenhouse gas emissions are also much lower than electric storage.
Available in both natural gas and LPG versions, these units are very energy efficient, with 5-Star or better ratings.

Size and Aesthetics of Gas versus Electric Hot Water 

When deciding between gas vs electric hot water heater, one of the important advantages of tankless gas hot water heaters is their compact size.

Storage tank hot water heaters are big, especially the electric off-peak models.

Even when installed outdoors, the size can get in the way, particularly with today’s smaller lot sizes.

Having this large object next to your house also does nothing for the appearance of your home.

At about the size of a small suitcase, tankless water heaters are much smaller than a traditional storage tank heater.

Mounted flush against the wall, the smaller tankless units take up less space and are also more aesthetically pleasing, as they don’t dominate the exterior appearance of your home.

Gas vs Electric Hot Water Heater – Sizing

Once you decide between gas vs electric hot water heater and pick the type of hot water heater you want, you will also need to decide what size unit you need, as each type comes in various capacity or flow rate models.

The use of water efficient tap ware has a huge effect on this decision.

To read an in-depth review of the sizing topic, please see

What Size Hot Water System Do I Need?


Bonus Money Saving Tips!

You can Save Money, Water & Energy

With very little effort or investment you could be saving money on hot water running costs, water usage & the cost of a replacement hot water system.

So, how do you do it?

The use of WELS showerheads and taps is the answer.

WELS is Australia’s Water Efficiency Labelling and Standards scheme.

The scheme helps consumers make informed decisions, when buying water-using products, to help them save water and money.

Saving Water with WELS Water Saving Shower Head

Showers use the most hot water in a home, so the quickest way to save water in your home is to switch to water efficient water saving shower head. A standard showerhead uses about 15 to 25 litres of water per minute, while a WELS 3 Star rated water efficient water saving shower head uses a maximum of 9L/min and as little as 6 or 7L/min.

So, assuming an 8 minute shower, a standard showerhead uses 120 to 200 litres of water whereas a water saving shower head uses between 48 and 72 litres, or 40 to 75% per cent less water.
Your family’s annual water savings can be as much as 44,000 to 63,000 litres*.

Saving Energy and Money with WELS Water Saving Shower Head

People generally shower for 5 to 10 minutes. Assuming you have a 3 Star water saving shower head and you mix in some cold water with the hot, the typical hot water consumption would probably be in the 7L/min range.

If you also assume an 8 minute shower, water saving shower head will consume about 56 litres of hot water per shower or a family of four would consume 224 litres versus.
That same family would use as much as 640 litres of hot water with a standard showerhead, assuming 20L/min consumption.
The use of WELS 3 star rated water saving shower head is an important factor in saving energy, as hot water typically accounts for about 25% of the average home energy costs.
Your actual savings depend on the type, size and energy efficiency rating of the hot water system you currently own.
You can also save money on the purchase price of a new hot water system, as the WELS water saving shower head help reduce the size and cost of the hot water system required.
If you also choose a 5 Star or better hot water systems, you will further minimise your hot water energy costs
Please see Saving Money on Hot Water System Sizing

Saving with WELS Taps

You can also save money, energy and water by using more efficient tap fixtures.

Before purchasing a new tap, check the WELS star rating.

The higher the rating, the more efficient the model.

Your family’s annual water savings could be as much as 25,000 to 35,000 litres.

The range is based on a comparison between 0 Star (16L/min), 3 Star (8.25L/min), 4 Star (6.75L/min) and 5 Star (5.25L/min) kitchen or bathroom taps.

Once again, you can save energy and money, too. Annual energy savings can be up to $297 per year*.

To save even more, make sure you fix all leaks and avoid unnecessarily running taps when washing, shaving or brushing your teeth.

More About WELS

This joint government and industry program is designed to help consumers compare water efficiency when buying water-using products.

Products covered under the scheme include clothes washing machines, dishwashers, showerheads, toilets, urinals and taps, with flow controllers optional.

WELS products are rated and labelled according the requirements of the Australian Standard AS/NZS6400:2005 – Water Efficient Products Rating & Labelling.

For more information on the WELS scheme and to view the full list of water rated products, go to www.waterrating.gov.au

Some state governments, local councils and water utilities offer rebates or other incentives for water efficient products.  To find out more, visit www.smartwatermark.org

*SOURCE: Australian Government WELS Scheme


Compare Gas Hot Water Heater Systems Prices

Now you can compare prices for all the major brands of gas hot water systems including Rinnai, Bosch, Kelvinator, Rheem, Dux and AquaMAX.

Click on your category of interest to compare prices:

Tankless Instantaneous Continuous Flow Gas Hot Water Systems Prices

Gas Storage Tank Hot Water Systems Prices

Gas Boosted Solar Hot Water Systems Prices


Gas Hot Water Special Offers

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The information in this article is derived from various sources and is believed to be correct at the time of publication. However, the information may not be error free and may not be applicable in all circumstances.