If your home has an electric storage hot water system, it is probably one of the biggest users of electricity in the house. A heat pump does the same job with far less electricity. This guide explains how the two systems work, what changes when you switch, and which Victorian programs can help with the cost.
How an electric storage system heats water
An electric storage system works like a big kettle. An element inside the tank heats the water directly, and every bit of heat in the water comes from electricity you pay for. Many of these systems run overnight on an off-peak or controlled-load tariff, then keep the tank hot through the day.
They are simple and reliable, which is why so many Melbourne homes still have one. The downside is efficiency: an element can never put more heat into the water than the electricity it uses.
How a heat pump heats water
A heat pump works like a refrigerator in reverse. It uses a small compressor and a refrigerant to collect heat from the surrounding air and move it into the water in the tank. Because it moves heat instead of making it, it needs much less electricity to heat the same tank of water.
The Victorian Government says a heat pump can use up to 75% less electricity than a standard electric storage system. How much less depends on the model, your household’s hot water use and the weather.
What changes when you switch
Your electricity use for hot water drops. This is the main reason to switch. The saving shows up on every bill, not just in winter.
You can run it on your own solar. An element tank on a controlled-load tariff usually heats overnight from the grid. A heat pump can be set to run in the middle of the day, when solar panels are producing the most. If you have solar, this makes much better use of power you would otherwise export for a small feed-in credit. Without solar, if you sign up to the Victorian Midday Power Saver, you can time the heat pump for the free 11am to 2pm window, as long as it is on general supply rather than a controlled-load circuit. Other rates on that offer can be higher.
There is an outdoor unit. A heat pump needs airflow, so it goes outside or in a well-ventilated space. Some models are a single tank with the heat pump on top; others have a separate outdoor unit connected to the tank. We look at where your current tank sits and where the new system will fit before we quote.
It makes a little noise. The compressor runs while it heats, a bit like an air conditioner’s outdoor unit. We take bedroom windows and neighbours into account when we choose the spot.
The tank size should match your household. The Victorian Government recommends sizing it by the number of bedrooms, and we confirm the size at the site assessment, so you are not heating more water than you need.
Is a heat pump worth it if gas is not involved?
Most of the talk about heat pumps in Victoria is about gas. From 1 March 2027, gas hot water systems in existing homes must be replaced with an efficient electric system, like a heat pump, when they reach the end of their life. In an owner-occupied home that rule is about gas, so it does not apply to an electric storage system. In a rental it does: from 1 March 2027, any hot water system that fails beyond repair must be replaced with a heat pump or an electric-boosted solar water heater.
The case for switching from electric storage is about running costs and solar, not regulation. If your tank is getting old, or you already have solar, it is worth comparing the two before you replace like for like.
Rebates and discounts in Victoria (checked October 2026)
Two Victorian programs can lower the cost of a heat pump. Both have rules, and the amounts change, so check the current figures before you decide.
Victorian Energy Upgrades (VEU). VEU offers discounts to households that upgrade a gas or electric hot water system to an approved heat pump. The house or building must be at least two years old and the new product must be on the approved list. As a VEU Accredited Provider (A003039), Helcro Electrical applies the discount to your invoice on the day and handles the paperwork.
Solar Victoria hot water rebate. Solar Victoria offers a rebate on eligible heat pump systems for owner-occupiers who meet its eligibility rules, including property value and household income caps. The system being replaced must be at least three years old, and the installation must be done by an authorised retailer. Helcro Electrical is an authorised retailer on Solar Victoria’s list.
There is also the federal Small-scale Renewable Energy Scheme, which usually reduces the price of an eligible heat pump through certificates the installer claims.
When we quote, we check which of these apply to your home. Read more on our Victorian Energy Upgrades page.
Which heat pumps we install
We install heat pump hot water systems from iStore, Sanden, Emerald and Haier. Each suits a different budget and household size, and we will talk you through the options for your home. Our heat pump hot water installations come with a 5-year workmanship warranty, on top of the manufacturer’s warranty.
Helcro Electrical is a New Energy Tech Consumer Code (NETCC) Approved Seller for solar and batteries.
Thinking about switching?
If you have an electric storage system in Melbourne’s South East and want to know whether a heat pump makes sense for your home, call us on 1300 201 358 for a written quote. We will look at your current system, your solar (if you have it) and the rebates that apply.
