A heat pump hot water system doesn't generate heat directly the way a gas burner or electric element does. Instead, it uses a refrigeration cycle, the same underlying principle as a reverse-cycle air conditioner or a domestic fridge running in reverse, to extract heat from the surrounding air and transfer it into the water stored in the tank. Because the unit is moving existing heat energy rather than converting electrical or chemical energy directly into heat, it typically requires meaningfully less input energy to heat the same volume of water compared with a standard electric resistive system.
What changes electrically
A gas hot water system typically runs on a small electrical connection for controls and ignition, with the bulk of the energy input coming from the gas line. A heat pump system, by contrast, draws its full energy input from the electrical circuit, which means the swap usually requires a dedicated circuit sized appropriately for the unit's compressor and any backup electric element it includes. An electrician needs to assess the existing switchboard capacity as part of the changeover, particularly in older residential properties where the switchboard may already be near its limit before other electrification steps like an EV charger or induction cooktop are considered.
Siting and noise considerations
Heat pump hot water units include a compressor and fan, similar in principle to an outdoor air conditioning unit, and they produce audible operating noise while running, generally comparable to a standard air conditioner's outdoor unit, though this varies by model. Siting needs to account for airflow (the unit needs adequate air volume to draw heat from), noise impact on the household and neighbouring properties, particularly for units that run overnight to take advantage of off-peak electricity pricing, and proximity to the existing plumbing to manage installation cost and complexity.
Tank sizing for the household
Tank sizing for a heat pump system follows similar principles to any storage hot water system, it needs to be sized to the household's typical daily hot water draw, accounting for the number of occupants, bathing habits, and any appliances like dishwashers that draw hot water directly. Because heat pump units generally take longer to heat a full tank than a gas system, getting the sizing and the operating schedule right, for example, running the heating cycle during the day to use solar generation, or overnight on an off-peak tariff, matters more for a heat pump than it typically did for the gas system it's replacing.
VEU and REPS support for the switch
Victoria's Victorian Energy Upgrades (VEU) program and South Australia's Retailer Energy Productivity Scheme (REPS) both include eligible activities relating to efficient hot water upgrades, delivered through accredited providers under program-specific eligibility rules. These schemes are not gas-to-electric conversion subsidies in a blanket sense, eligibility typically depends on the specific equipment being replaced and installed, and settings are reviewed periodically. Households considering the switch should confirm current eligibility with an accredited provider rather than assuming a fixed level of support.
Why it's usually the first step
Hot water is typically one of the largest single energy loads in an Australian household, and replacing a gas system with a heat pump removes a gas appliance without requiring changes to cooking or space heating in the same project. This makes it a comparatively contained, well-understood upgrade, the electrical, plumbing and siting work is well established, and the equipment has a long track record in the Australian market, which is why it's commonly recommended as the first practical step in a broader household electrification plan, ahead of larger changes like cooktop replacement or space heating conversion.
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This article is general information, not financial or electrical advice. Program rules and eligibility change, confirm current settings with the relevant scheme or your Esena engineer before making decisions. Last reviewed: August 2026.