How to reduce your hot water bills

Did you know that up to a quarter of energy costs in Australian homes come from heating water? With energy prices constantly on the rise, your hot water system (HWS) could be one of the biggest contributors to your household’s energy bill.

While replacing a hot water system might cost as much as all the major kitchen and laundry appliances combined, its impact on your annual energy expenses can be far more significant.

Once you’ve tackled cooling costs, the next area to focus on is reducing the energy you use for hot water. There are two key strategies to lower these costs:

1. Use less hot water
2. Install a more energy-efficient hot water heater

Better yet, combining both approaches can lead to even greater savings. While upgrading to an energy-efficient hot water system might not always be an immediate option, there are plenty of practical steps you can take today to reduce your hot water consumption.

These simple changes will not only save you money on your energy bill but will also help conserve water, benefiting both your wallet and the environment.

Let’s explore how you can make a difference.

How to lower your water bill

If you're looking to reduce your hot water bills, there are a few easy changes you can make to your existing system. By using less hot water, adjusting your thermostat, and tapping into cheaper energy options, you can start saving money straight away.

Call Compare Energy about cheaper energy tariffs

A great way to lower your energy costs and your hot water bills by default is to speak to the Aussie-based team at Compare Energy. We’re here to ensure that you get the best possible energy plan, and our team is ready to help you to choose one that lowers your monthly bills.

If you're using an electric storage hot water system, it's important to ensure you're on the most cost-effective electricity tariff. Connecting your system to a dedicated circuit can give you access to controlled load (Tariff 31), which offers significantly lower electricity rates.

If that's not possible, consider installing a timer to run your system during off-peak hours. For households with solar panels, installing an electrical diverter can help use excess solar power to heat your water, reducing reliance on grid electricity. Just be sure to calculate whether this is a cost-effective solution based on your energy usage and feed-in tariff.

Install water-efficient showerheads in your bathrooms

Low-flow showerheads are a game changer. They provide the same comfortable shower experience while using less hot water.

A good low-flow showerhead reduces water usage without sacrificing comfort, which is ideal for households with teenagers or high water demand. You'll be surprised at how effective they are at saving both water and energy.

Be smart about washing your clothing

If you have a front-loading washing machine, you're already ahead of the game! These use about half the water of top loaders, meaning less hot water to heat.

To save even more, choose cold or warm wash cycles (around 30°C) to avoid unnecessary hot water usage.

Be mindful of your thermostat settings

Check your hot water system’s thermostat to ensure it's set to 60°C, or no higher than 65°C. Any hotter, and you're heating more water than necessary, which wastes energy.

If your system doesn't have an easily visible thermostat, you can use a thermometer to check the temperature of the water at the tap. If it’s too hot, adjust the setting or call a plumber to help. You can always raise the temperature temporarily for guests and turn it back down when they leave.

Rethink your dishwasher use

Dishwashing is one of the top household uses of hot water, whether you hand wash or use a dishwasher. While dishwashers are generally more water- and energy-efficient than hand washing, efficiency depends on several factors, including the type of dishwasher, how often it’s used, and the age of your water heater.

To save on hot water costs, run your dishwasher only with full loads, avoid pre-rinsing dishes, and use energy-efficient models with eco-settings. If you hand wash, be mindful of water waste, and try to limit the amount of hot water used.

You should also consider running your dishwasher during off-peak hours if you have an electric water heater to take advantage of cheaper rates. By being strategic with your dishwashing routine, you can reduce both water and energy consumption without sacrificing cleanliness or convenience.

Buying a hot water system

When purchasing a hot water system (HWS), selecting the right size for your household's needs is crucial.

Choosing a system that’s too small may result in cold showers or insufficient hot water during peak usage times, while an oversized unit means you’ll be paying extra to heat water you don’t actually use.

It’s important to think about your household size and daily hot water consumption (see the chart below for guidance) to determine the appropriate storage or heating capacity.

Location matters

Your location plays a significant role in choosing the right HWS. In colder climates, hot water usage tends to be higher, meaning you may need a larger storage system or a higher-capacity instantaneous unit.

Instantaneous systems, for example, can struggle in colder areas as they typically only heat water to about 25°C when running at maximum flow. To ensure you get water at a more comfortable temperature, choose a larger unit that can operate at a reduced flow rate, helping heat water to around 40°C or more.

Think about where you’ll install it

Where you place your hot water system also affects its efficiency. Ideally, position the unit as close as possible to key areas like the kitchen, laundry, and bathrooms to minimise heat loss in the pipes.

The less distance the hot water has to travel, the less energy is wasted in heating it up before it reaches your taps. Proper placement and sizing will not only save you money on energy bills but also ensure your system performs at its best.

Hot water systems: What are the options?

When it comes to selecting a hot water system (HWS), there’s a variety of options available, each suited to different needs and energy efficiency goals. Here’s an overview of the most popular technologies, along with considerations for their future viability.

Electric hot water systems

Electric storage systems work similarly to a giant kettle, using an electric element inside a tank to heat and store water.

Around 25% of Australian homes use electric storage systems, but they tend to be less energy-efficient due to the energy required to maintain a large tank of hot water. On the other hand, electric instantaneous systems, which are less common, can be efficient but require high power demands (usually three-phase power).

These systems are ideal in situations where hot water use is intermittent. Electric water heaters range from $300 to $2000.

Solar hot water systems

Solar hot water is one of the most energy-efficient options available, using the sun’s energy to heat water. Solar systems are typically made up of flat plate collectors or evacuated tubes, both of which capture sunlight to warm water.

Flat plate collectors are simpler and more affordable, but they rely entirely on the sun’s availability, meaning performance can drop on cloudy days. Evacuated tube systems are more efficient, particularly in colder conditions, but they come at a higher cost.

With a solar water heater, you can save up to 90% of your hot water energy costs when the sun is shining. However, solar systems typically require a gas or electric booster to ensure you have enough hot water on cloudy or overcast days.

Solar hot water systems generally cost between $3000 and $7000 to install, and they are ideal for homes with ample roof space. However, if you already have solar PV panels or are considering installing them, you might find that switching to a heat pump or a hybrid solar-electric system is more cost-effective in the long run.

Gas hot water systems

Gas has long been the go-to option for many Australian households, especially for instantaneous systems. These systems heat water on demand, meaning you only heat what you need, reducing energy waste.

Gas systems tend to be cheaper to install upfront, especially where natural gas is abundant and affordable. However, gas isn’t a long-term solution for energy efficiency.

With increasing gas prices and the growing push toward renewable energy, gas systems may become less attractive. Gas water heaters typically cost between $800 and $2000 to install.

Electric heat pumps

Heat pumps are a highly efficient alternative to traditional electric water heaters. Using a similar principle to reverse-cycle air conditioners, heat pump systems extract heat from the surrounding air to warm water, consuming less than half the energy of a conventional electric system.

They work well in most climates, especially in warmer regions. Heat pumps can be installed in shaded areas, don’t require roof access, and continue to function even when the sun isn’t shining, unlike solar systems.

The downside is that heat pumps become less efficient in colder climates (such as Tasmania or parts of Victoria), so they’re not always the best choice in these areas. To maximise their efficiency, it’s recommended to run them during the warmest part of the day when energy demand is lower, which aligns well with solar power generation for homes with PV panels.

Heat pump water heaters typically cost between $2400 and $4000 to install.

Hybrid options - solar and heat pump systems

For homes that already have solar panels or are planning to install them, a hybrid system combining solar power and a heat pump can be an excellent choice.

This system allows you to use your solar energy to power the heat pump, which further reduces reliance on the grid and lowers energy costs. If you have access to both solar power and a heat pump, you’ll have a highly efficient, low-cost way to heat your water year-round.

Solar PV vs Solar hot water - A dilemma

While solar hot water remains one of the cheapest running costs, it’s not always the best option for every home.

For households with access to sunny roof space and existing solar PV systems, switching to a heat pump or electric water heater may be a better solution. Solar PV panels generate electricity that can power your entire home - including your hot water system- helping you achieve energy independence while reducing your overall energy costs.

If you're considering adding solar panels, it may be more cost-effective in the long term than installing a solar water heater with a booster.

When deciding which hot water system is right for your home, it’s important to consider factors like your location, energy usage, and long-term goals.

If you’re looking for lower energy bills and are planning to invest in solar or other renewable energy sources, electric heat pumps or solar-electric hybrid systems could be a smart choice. Gas systems might be cheaper upfront but could become more expensive as energy prices rise.

For those with abundant sunlight, solar thermal systems with an appropriate booster provide the most cost-effective long-term solution.

Contact Compare Energy today

Reducing your hot water bills doesn’t have to be complicated. By making small but effective changes - such as using water-efficient fixtures, optimising your hot water system settings, and considering energy-efficient options like heat pumps or solar water heating, you can significantly cut your energy costs over time.

If you're unsure which option is best for your home, or if you want to explore the most cost-effective energy plans available, don’t hesitate to get in touch with the experts. Call Compare Energy today at 1300 790 106 to compare your hot water and energy options and start saving money on your bills now.