Guide · last reviewed 8 July 2026
Heat pump vs solar hot water
Both slash your hot water bills and both earn federal STCs. The honest answer for most Australian homes in 2026: a heat pump is cheaper to buy after rebates and simpler to install, while solar thermal wins on running cost if you have great north roof and lots of sun. Here's how to choose.
Upfront cost, after rebates
A heat pump hot water system is typically $3,000–$5,000 before incentives, but federal STCs plus state rebates often bring it down to $0–$1,500 installed in Victoria and NSW. Solar (thermal) hot water is usually $3,000–$7,000 installed and earns STCs too, but state rebates for it are less generous than for heat pumps in most states.
Running costs
Solar thermal is close to free on sunny days but relies on an electric or gas booster when it's cloudy or in winter. A heat pump sips electricity all year and, run on a timer with rooftop solar PV or off-peak power, is extremely cheap to run — and predictable, because it doesn't depend on the weather that day.
Practical fit
- Roof: heat pumps need no roof space; solar thermal needs good, unshaded north-facing roof (competing with your solar PV).
- Climate: heat pumps heat day and night, summer and winter; solar thermal leans on its booster in cool, cloudy regions.
- Existing solar PV: if you already have panels, a timed heat pump effectively runs on your own cheap daytime power.
- Noise/space: a heat pump has a small fan (like a slim AC unit) and sits at ground level — check placement with your installer.
The verdict
For most homes — especially with rooftop solar PV or in states with strong heat pump rebates — a heat pump is the cheaper, simpler, weather-proof choice in 2026. Solar thermal remains excellent for sunny homes with spare north roof and no PV plans. Either way, get a couple of quotes so you can compare the rebate-adjusted price for your home.
Frequently asked
Is a heat pump or solar hot water cheaper in Australia?
After federal STCs and state rebates, heat pump hot water is usually the cheapest to buy — often $0–$1,500 installed in states with generous rebates like Victoria and NSW. Solar (thermal) hot water tends to cost more upfront but uses free rooftop sun. Both are far cheaper to run than electric-element or gas storage.
Which has lower running costs, heat pump or solar hot water?
Both are low. Solar thermal is close to free when the sun's out but needs an electric or gas boost on cloudy days. A heat pump uses a small amount of electricity year-round — very cheap if you run it on a timer with rooftop solar PV or off-peak power.
Do heat pumps work at night and in winter?
Yes. A heat pump extracts warmth from the air day or night, so it heats water in winter and after dark — unlike solar thermal, which relies on direct sun and leans on its booster in poor weather.
Do I need roof space for a heat pump?
No. A heat pump hot water unit sits on the ground next to your home and needs no roof space — handy if your roof is shaded, full of solar PV, or north-facing area is limited. Solar thermal needs good, unshaded north-facing roof.
Get the rebate-adjusted price for your home
Check your rebates, then get free quotes from local installers.
General information reflecting Australian pricing and rebate rules as at July 2026 — not a quote or advice. Rebates vary by state and change; always confirm current eligibility.