Gas vs Electric Hot Water Review & Prices
Gas or electric water heater? How do you choose a hot water system?
We review gas hot water vs electric hot water system types, and compare the pros and cons of the various alternatives, to help you make an informed decision.
Heat pump hot water saves energy by extracting heat from the ambient outside air to heat the water.
Maintenance costs are higher for heat pump electric hot water vs gas hot water, prices are also much higher and the compressor fan noise can be a problem.
But heat pump hot water saves energy.
With rising gas prices, apartment dwellers are also looking for more affordable hot water.
However, multiple heat pump hot water units would be very noisy and maintenance intensive.
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 Hot Water vs Electric Hot Water Cost
It’s estimated that hot water system uses 25% of your home’s power, so gas can save a lot of money.
An electric hot water system is cheaper to purchase but more expensive to run.
Customers also have more choices with electric hot water systems vs a gas hot water system.
However, a gas water heater is more efficient and saves you in the long run.
This is a case where initial cost and running costs are the major factors to be considered.
Depending on your gas and electricity tariffs, remember gas hot water heaters are typically less expensive to run than electric hot water heaters, when you choose.
So, whilst gas hot water initial cost is slightly higher than the electric hot water cost, the difference is saved within a year or two.
This makes gas hot water cost much more economical over the lifetime of the unit.
Heat Pump Electric Hot Water vs Gas Hot Water
Heat pump electric hot water saves energy by extracting heat from the ambient outside air to heat the water.
Maintenance costs are higher for a heat pump electric hot water as are prices and the compressor fan noise can be a problem.
Heat pump electric 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 electric 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.
An electric water heater that heats all day is your most expensive option.
Off peak electric hot water 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 hot water 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 Hot Water Heat Pumps
Electric hot water 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.
Electric hot water 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.
Storage gas 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 hot water storage units do not need to be as large, as the gas burner can operate whenever required.
The installed cost of a gas hot water 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 hot water 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.
Continuous Flow Gas Hot Water Systems
In the decision between gas or electric 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?
Eric Hahn has over a decade of experience in the LPG industry and has become a key figure in shaping how LPG is marketed and communicated. As the creator of one of the world’s first LPG blogs, Eric has authored over 200 technical posts, helping educate and inform the industry and consumers.
Eric has served on multiple committees for Gas Energy Australia and the World LPG Association (WLPGA), contributing to important discussions and advancements within the global LPG sector. He has presented at WLPGA Annual Conferences, sharing his expertise as a speaker, panellist, and panel chair.
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Steve Reynolds
Technical Consultant
Steve Reynolds is a leading expert in the LPG industry with over 22 years of experience. As part of the national management team at ELGAS, Steve ensures the safe and efficient storage, handling, and transportation of LPG. He serves as the lead investigator for incidents and collaborates with authorities on industry developments.
Steve is a technical advisor to Standards Australia and Gas Energy Australia (GEA), and an active member of the World LPG Association (WLPGA), contributing to global standards and technical reviews. He holds a BSc. (Hons) in Industrial Chemistry from UNSW and has held senior safety and technical roles at ELGAS, making him a trusted authority in LPG safety and standards.