About Red Energy

Red Energy is 100% owned by Snowy Hydro Limited, who own, manage, and maintain the Snowy Mountains Hydro-electric Scheme in New South Wales.
Our Customer Solutions team is 100% based in Australia.

  • Kids Playing

    A Guide to Heat Pump Hot Water Systems

February 2018

Save money on your water heating bill with this energy-efficient system.

When your water heating system stops working, you’ll need to replace it quickly - unless you want a cold shower. This means you won’t have time to consider all the options available, so you may miss out on choosing the best system. When you think of solar hot water, a traditional panel and storage tank come to mind. But, a heat pump hot water system is an energy-efficient system worth looking into.

What is a heat pump hot water system?

A heat pump uses renewable energy to heat your water, without the need for solar panels. They absorb the heat from the surrounding air and use it to heat your water. Therefore, these systems are also referred to as ‘air-source heat pumps’. These systems are more efficient than conventional water heaters despite operating using electricity. They can save money and energy while reducing greenhouse gas emissions.

How do heat pump hot water systems work?

A heat pump system works much like a refrigerator in reverse - by transferring the heat outside the unit to the water inside the heater. It does this using a heat exchange system.

  • Outside air is pulled into the heat pump with a fan into the evaporator which contains a special refrigerant stored in the piping.
  • The warm air turns the refrigerant from liquid to gas.
  • A compressor pumps the refrigerant gas through a value which compresses it. The result of this process is heat generation.
  • A heat exchanger moves the heat from the gas pipes to a water storage tank.

Benefits and disadvantages of heat pump water heaters


  • Saves money in the long term
  • Energy-efficient
  • Environmentally friendly
  • Fewer greenhouse gas emissions than a conventional water heating system
  • Effective in lower temperatures
  • No need for solar panels, inverters, and batteries
  • Easy to install and connect to your hot water plumbing


  • Not suitable in extremely cold climates
  • Can purchase a booster in cold climates, but it is costly
  • May be unreliable if installed or used incorrectly
  • High initial costs

Heat pump hot water vs alternatives

Hot water systems have two designs – storage and continuous flow (also called instantaneous). Storage hot water systems heat and maintain warm water in their tank until it’s used. Hot water is instant, but limited to the tank’s storage capacity. Continuous systems quickly heat unlimited water when you need it. It takes a little while to warm up, but it doesn’t use energy keeping water hot when it is not being used.

Other alternative systems to consider:

Electric Hot Water System

These systems use electric-powered elements at the base of the tank to heat water. Continuous electric systems have an element coiled around the pipes which then heat the water. These systems are typically low-cost and reliable.

Gas Hot Water System

These systems use a gas burner to heat and maintain the temperature of the tank’s water. Continuous gas systems use burners which only ignite when you need hot water. They emit less greenhouse gases, and are cost-effective alternatives.

Solar Hot Water System

These systems generate heat using the sun and solar panels on the roof of your home. The heat generated is used to heat and maintain the temperature of the tank’s water.

Is heat pump the right option for you?

If you live in an area with a low average temperature, a heat pump hot water system is not the most effective solution. Heat pumps work in cold temperatures, but the longer compressor runtime and the need for a booster increase the system’s cost and energy consumption.

If you are located in an area with a warmer temperature year-round, your heat pump will be able to effectively operate and produce heat. You also need to place your heat pump in an area with a decent amount of air space.

The final word

Heat pump hot water systems can save money on your energy bill as well as maintenance, so ensure you maintain your system regularly. You can also try some energy-saving strategies to further lower your water heating costs.

Liked this article? Share it around.

Some of our favourites on Appliances


Appliance Energy Star Ratings Explained

Energy star ratings can be confusing. Follow this simple guide to star ratings and learn how energy-efficient appliances can save you on your power bills.

Keep reading

Hot water system

The Ultimate Hot Water System Buying Guide

Gas, electric, solar, or instant - which is the best hot water system for your home? Read our detailed guide to hot water systems in Australia to find out.

Keep reading

Energy efficient fridge

A Guide to Energy-Efficient Fridges

Fridges are an important household appliance. Is yours eating away at your electricity? Learn how to find the best energy-efficient fridge for your home.

Keep reading