Is a heat pump worth it? Running costs and indicative payback

A heat pump uses electricity to move heat from the surrounding air into water. Its performance depends on the equipment and operating conditions. The Australian Government technology overview explains the principle. HotWaterWise uses a coefficient of performance of 3 as a planning assumption, not a promise for a particular product.

Replacing expensive electric resistance heating can produce a different saving from replacing instantaneous gas. Demand matters too: less hot water means less energy cost available to avoid. Identify the existing system on the Systems page before comparing it.

Simple payback is the full entered installed cost divided by a positive annual running-cost saving. It does not subtract the cost of an alternative replacement. A comparison based only on the extra price above another replacement answers a different question.

The $4,475 installed-cost benchmark is an internal planning assumption: $3,875 for equipment plus a $600 installation allowance. It is not a surveyed market price or a quote for the property. Replace it with the complete current quote, including relevant installation work.

Rebates and Small-scale Technology Certificates (STCs) are outside calculator arithmetic. A quote already discounted for certificates should be entered as that final payable amount. Do not subtract the discount again. Check incentives and quote treatment.

These standalone payback examples use 150 litres/day at 60°C equivalent, a 21°C inlet, electricity at 28.5 cents/kWh, mains gas at 3.4 cents/MJ, and the $4,475 internal installed-cost benchmark. Electric storage efficiency is 0.90, instantaneous gas efficiency is 0.78 and heat-pump COP is 3. No rooftop-PV credit or fixed mains-gas supply charge is included.

• Replacing electric storage: $786.23/year becomes $235.87/year. The calculation gives $550.36 annual savings and 8.1 years simple payback.
• Replacing instantaneous mains gas: $389.61/year becomes $235.87/year. The calculation gives $153.74 annual savings and 29.1 years simple payback.

The cents are shown here to make the calculation traceable; calculator summaries use whole dollars. The calculation retains underlying precision for payback. If an earlier calculator supplies a rounded current annual cost, Payback uses that submitted amount, so the cents can differ from these standalone examples.

A 29.1-year result is an arithmetic outcome, not a prediction that equipment will last that long. The calculator’s 5, 10, 15 and 20-year positions are comparison checkpoints, not warranties or expected service life.

Ask what the installed price includes: removal, plumbing, electrical work, site preparation and any controls. Ask the installer about available space, noise location, household recovery needs, servicing and warranty terms. Lower modelled energy cost cannot resolve those practical questions.

Check a plausible low-demand case as well as the central estimate. Higher installation cost or smaller annual savings lengthens payback. If the modelled annual difference is zero or negative, the calculator has no positive simple payback. Future energy prices, finance costs, maintenance and equipment replacement are not forecast by this simple calculation.

Open Heat Pump Payback with the household demand, current annual hot-water cost if known and installed quote. For bottled gas, first check which charges would actually disappear in the LPG guide. For solar-panel households, the controlled-load guide explains why this model does not calculate solar-switching benefits.