Replacing Gas Hot Water with Heat Pump: Complete Guide Australia

Replacing Gas Hot Water with Heat Pump: Complete Guide Australia

Gas hot water is on the way out in Australia. Rising gas prices, state government electrification incentives, and a growing awareness that heat pump technology delivers cheaper hot water than gas — these forces are converging to make the switch from gas to electric heat pump one of the most common home upgrade decisions in 2026.

For solar and electrical businesses, this is a significant opportunity. Homeowners with solar are prime candidates for heat pump hot water — and they’re asking the question more than ever. For installers who can confidently explain the switch, handle the electrical work, and navigate the rebate programs, gas-to-heat-pump replacements are a strong, repeatable revenue line.

This guide covers the full picture: why gas hot water is being replaced, how heat pump hot water systems work, the switchover process, rebates, and what installers need to know to do the job properly.

Why Australians Are Switching Away from Gas Hot Water

Gas prices have made the economics clear

Residential gas prices in Australia have increased dramatically over the past five years. The east coast gas market, tied to export LNG pricing, has seen household gas bills rise 30–60% in some markets. For households where hot water represents 20–30% of their energy bill, this is a material cost increase.

A heat pump hot water system uses 60–75% less electricity than a resistance electric system to produce the same amount of hot water. When combined with solar PV — where the daytime electricity cost can approach zero — the running cost advantage over gas is compelling.

State governments are restricting gas

Victoria has banned gas connections in new homes from 2024. NSW has similar policies in development. The ACT has been gas-free in new builds for several years. While existing gas connections remain permitted in most jurisdictions, the policy direction is clear: gas in homes is being phased out, and the infrastructure to support it is not being extended into new areas.

For homeowners who have an ageing gas hot water system, the replacement decision is no longer simply “replace with the same thing.” The sensible long-term choice — particularly for those with solar — is to make the switch to electric now rather than extend their dependency on gas.

Solar makes heat pump hot water essentially free to run

A homeowner with a 6.6kW solar system generating 25–30kWh per day in summer has significant excess solar generation that currently goes to the grid at a low feed-in tariff. A heat pump hot water system, set to heat during the middle of the day, consumes 1–2kWh to heat a full tank. That energy comes from solar — effectively free.

The “drive on sunshine” pitch works for EV chargers; the “shower on sunshine” pitch works equally well for heat pump hot water. It resonates with customers who feel like their solar investment isn’t working as hard as it should.

How a Gas-to-Heat-Pump Replacement Works

What stays, what goes

In a typical gas-to-heat-pump switchover:

Removed: The existing gas hot water unit, the gas supply pipe to the unit (capped off), and any gas-specific controls.

Installed: The heat pump unit (outdoor unit + tank, or integrated unit), a new dedicated electrical circuit from the switchboard to the unit, and any solar integration controls.

Left in place: Existing hot and cold water supply lines (usually reused), the existing pressure relief valve connection point (adjusted to suit new unit), and the existing mounting slab or base (sometimes reused, sometimes requires new base).

Who does what

Gas-to-heat-pump replacement involves both plumbing and electrical work:

  • Licensed plumber: Decommissions the gas unit, caps the gas line, connects water supply and pressure relief valve to the new unit
  • Licensed electrician: Installs the dedicated circuit from the switchboard, connects the heat pump unit electrically, handles any solar integration wiring

In most states, gas decommissioning also requires notification to the gas network operator (e.g., APA Group, Jemena) to arrange disconnection — coordinate this early to avoid project delays.

Sizing a Replacement Heat Pump System

Getting the sizing right is critical. A heat pump hot water system that’s too small creates an unhappy customer; one that’s too large wastes capital.

Sizing guide:

Household sizeRecommended tank capacity
1–2 people160–200L
2–4 people250–315L
4–6 people315–400L
6+ people400L+ or multiple units

Consider:

  • Shower habits — High-volume morning showers (10+ minutes) increase demand
  • Simultaneous demand — Multiple showers running at once requires adequate tank size
  • Climate — In colder climates, heat pump performance is reduced; sizing up or selecting a cold-climate unit compensates

For solar-optimised installations, where the system is set to heat during midday solar generation rather than overnight, a larger tank provides more flexibility — it can store a full day’s solar heat for evening use.

Electrical Circuit Requirements

A heat pump hot water system requires a dedicated electrical circuit — the existing switchboard circuit for the old gas system (if there was an ignition or clock circuit) is not adequate.

Typical requirements:

SpecificationTypical Value
Supply voltage240V single-phase
Circuit breaker10A–20A dedicated (check manufacturer specifications)
Cable size2.5mm² TPS minimum; check cable run length for voltage drop
RCD protectionRequired on the dedicated circuit
IsolationIsolating switch at the unit

Switchboard considerations

If the existing switchboard doesn’t have a spare circuit breaker slot, a switchboard upgrade may be required. This is a common scenario in older homes that are also candidates for gas replacement — their switchboards were installed before the current standard of circuit protection density.

Quote the switchboard assessment separately from the heat pump installation, and be clear about costs upfront. Discovering that a switchboard upgrade is required mid-job creates budget disputes.

Rebates and Incentives for Gas-to-Heat-Pump Replacement

The rebate landscape for heat pump hot water replacements is substantial in 2026 — and this is one of the strongest selling points in the gas replacement conversation.

Federal: Small-scale Technology Certificates (STCs)

Heat pump hot water systems are eligible for federal STCs. The number of STCs and their value depends on:

  • System capacity and energy factor (efficiency rating)
  • Installation climate zone
  • Current STC market price

STCs are typically deducted from the purchase price by the retailer or installer who claims them. As an accredited STC agent, you can claim these yourself. As a sub-agent, you work through a registered agent who handles the paperwork. Either way, the benefit flows to the customer as a point-of-sale discount.

See the STC claim process guide for how STCs work in practice.

Victoria: Victorian Energy Upgrades (VEU)

The VEU program provides point-of-sale discounts for eligible appliance upgrades in Victoria, including heat pump hot water. VEU-accredited installers can offer customers discounts that are then claimed back through the scheme. For a qualifying gas-to-heat-pump replacement in Victoria, the combined STC + VEU discount can reach $1,500–$2,500 — making the switch genuinely affordable for most customers.

To offer VEU discounts, your business must be registered as a VEU accredited provider with the Essential Services Commission (ESC).

NSW: Energy Savings Scheme (ESS)

The NSW ESS provides similar point-of-sale incentives for eligible heat pump hot water replacements. ESS accreditation is required. The incentive amount varies based on system specifications and the current certificate price.

QLD, SA, WA, ACT

Additional state-specific incentives exist in most jurisdictions. Check the current program status in your state — these programs change more frequently than federal schemes.

Solar Integration: Making the Most of the Switch

For customers with existing solar, the gas-to-heat-pump replacement is most valuable when the heat pump is integrated to use solar generation during the day.

Integration options:

Timer control: The simplest option — program the heat pump to heat between 10am and 3pm when solar generation is typically at its peak. Works without any hardware integration; just set the built-in timer.

Solar diverter: A solar diverter (Catch Power, iBoost, Solaray, etc.) monitors actual solar export and diverts excess energy to the heat pump rather than exporting it to the grid. This is more efficient than a timer — it responds to real solar generation rather than a fixed schedule.

Energy management system: Full home energy management integration (if the customer has compatible solar/battery hardware) allows the heat pump to be controlled dynamically alongside battery charging and other loads.

For most installations, the timer approach delivers 80%+ of the benefit of full integration at near-zero additional cost. Recommend the timer setup as standard; offer solar diverter as an upgrade for customers with larger systems or specific optimisation goals.

Managing Gas Decommissioning: The Process

The gas decommissioning step is the one that catches many installers out — specifically, coordinating the gas line disconnection or cap-off with the gas network.

Typical process:

  1. Customer requests gas disconnection (or just cap-off at the meter) from their gas retailer or network operator
  2. Network operator schedules disconnection — allow 5–15 business days in most markets
  3. Licensed plumber caps the gas line at the unit location and removes the gas appliance
  4. Electrician installs the new heat pump circuit
  5. Plumber connects the water supply to the new unit
  6. Electrician energises and commissions

The risk: scheduling the installation before gas disconnection is confirmed. If the gas is still live when the plumber arrives to remove the old unit, the job is delayed. Build gas decommissioning coordination into your job scheduling process — confirm the disconnection date before booking the installation day.

Compliance and Documentation

Post-installation:

  • Electrical compliance certificate (state-specific)
  • Any rebate program documentation (VEU activity statement, ESS certificate, STC paperwork)
  • Warranty registration (most heat pump brands require warranty registration)
  • Operating instructions left with customer

Build these into your job completion checklist. The customer documentation step is important: a customer who doesn’t understand how to set the timer or check the system status will call you more often than necessary.

Start your free ServiceM8 trial → — manage gas-to-heat-pump jobs, coordinate plumbing subcontractors, track rebate paperwork, and generate compliance certificates.

Questions on heat pump hot water rebates, VEU accreditation, or solar integration? Ask Tradie Brain AI free → Instant answers, no login required.

FAQ

How much does it cost to replace gas hot water with a heat pump in Australia?

A complete gas-to-heat-pump replacement in Australia typically costs $2,500–$5,000 installed (hardware + labour + compliance), before rebates. The installed cost varies based on: the brand and capacity of heat pump selected ($1,200–$2,500 for the unit), whether a new electrical circuit is required (add $600–$1,200), whether a switchboard upgrade is needed (add $1,000–$2,500), and the cost of plumbing labour to remove the gas unit and connect the new system. After Victorian VEU or NSW ESS rebates plus federal STCs, the customer’s out-of-pocket cost can be $800–$2,500 less than the gross cost.

Why are homeowners switching from gas hot water to heat pumps in Australia?

Three main drivers: rising gas prices (east coast residential gas has increased 30–60% in some markets over five years), state government incentives that make the upfront cost of heat pump hot water competitive with gas replacement, and the solar synergy opportunity — a heat pump set to run during the day can use rooftop solar generation to heat water essentially for free. For solar-owning households, a gas-to-heat-pump switch is one of the highest-impact home electrification upgrades available.

Does a gas hot water replacement require a plumber or an electrician?

Both. Removing the old gas hot water unit and capping the gas line requires a licensed plumber (and gas decommissioning notification to the gas network). Installing the new dedicated electrical circuit for the heat pump requires a licensed electrician. In most installations, an electrician manages the job and subcontracts the plumbing component, or the business holds both licences.

What is the gas decommissioning process when replacing a gas hot water system?

The homeowner typically requests gas disconnection (or just cap-off at the appliance) from their gas retailer or network operator. The gas network schedules the disconnection — allow 5–15 business days in most markets. A licensed plumber then removes the gas hot water unit and caps the gas line. Importantly: coordinate the gas decommissioning date before scheduling installation day. Arriving to install before gas is disconnected will delay the job.

Can a heat pump hot water system be integrated with solar to use free solar electricity?

Yes — and this is one of the strongest selling points for solar-owning customers. The simplest approach: programme the heat pump timer to operate between 10am and 3pm, using midday solar generation to heat the water. A solar diverter (Catch Power, iBoost, etc.) provides smarter integration by monitoring actual solar export and diverting excess energy to the heat pump automatically. Either way, the result is water heated primarily or entirely from solar — dramatically reducing running cost.

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