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Electric vs Solar Hot Water Systems: The Complete Breakdown

  • Blog
  • 20 - 01 - 2025
  • By Jude Saad

Hot water systems are important in Australian homes; thus, every homeowner must ensure a steady hot water supply for daily needs. The most popular options are electric and solar hot water systems, each with advantages and disadvantages.

According to a report by the Institute for Energy Economics and Financial Analysis, the efficiency and flexibility of water heating lead to cost savings for homes and ease the strain on the electricity grid.

This article offers a detailed comparison of electric vs. solar hot water systems to help you make better decisions for your home and lifestyle. It focuses on the pros and cons of solar hot water and electric systems, from installation to rebates. Continue reading to learn more.

How Do Electric Hot Water Systems Work?

The first electric water heater was invented in 1889 by Norwegian-American engineer Edwin Ruud. Meanwhile, the storage tank heater is the most common type of water heater and was introduced in newspaper ads in 1945.

How Electric Hot Water Systems Work

Electric hot water systems heat water using an electric element stored in an insulated cylinder. Electric water heaters come in different sizes, with the heating element at the bottom of the cylinder. Some systems also have a boost element along the higher up inside the cylinder.

Pros of Electric Hot Water Systems

Electric hot water systems are great for homes because of their affordability and convenience. Here are some key advantages:

  • Lower water heater installation costs: Electric systems are less expensive than solar systems, making them accessible for most families.
  • Available anywhere: Unlike solar systems, electric hot water systems do not rely on the sun to work. They are best for homes in regions with limited sunlight.
  • Reliable in any climate: Electric systems will provide constant hot water no matter the weather. 

Cons of Electric Hot Water Systems

While electric systems are convenient, these come with some disadvantages:

  • Higher ongoing energy costs: Electric hot water systems increase utility bills, especially in cities with higher electricity rates.
  • Less environmentally friendly: Electric systems produce higher greenhouse gas emissions because they rely on electricity, often from burning fossil fuels.
  • Needs periodic maintenance: These require regular maintenance to ensure longer electric water heater lifespan, optimal performance, and avoiding issues.

Recommended for

Electric hot water heaters are for homes with limited sunlight or regions. It is best for areas where solar energy cannot provide consistent power.

Understanding  Solar Hot Water Systems

The “Climax” is the first patented solar hot water system invented by Clarence Kemp in 1891. Let’s see how solar hot water systems work.

How Solar Hot Water Systems Work

Solar hot water systems have solar collectors installed on rooftops. These collectors absorb sunlight and convert it into heat, which is transferred to water and kept in an insulated chamber.

Most solar hot water systems have backup electric or gas boosters to ensure hot water availability during high-demand hours or overcast days.

Pros of Solar Hot Water Systems

Solar hot water systems are a great solution for eco-conscious homeowners.

  • Solar hot water savings: Solar energy is free energy from the sun. Using a solar hot water system significantly reduces ongoing utility bills.
  • Environmentally friendly: Solar systems use renewable energy, thus minimising greenhouse gas emissions and impacting the environment.
  • Rebates and incentives: You can expect financial incentives and rebates to help with installation costs.

Cons of Solar Hot Water Systems

Solar hot water systems offer great benefits but also come with some disadvantages.

  • Higher installation costs: The cost of the equipment and installation of solar systems are higher than that of electric water systems.
  • Depends on weather and sunlight: Solar water heater performance may vary depending on the weather and the amount of sun in the area.
  • Maintenance: Solar panels need regular cleaning, while components require regular servicing

Recommended for

Solar systems are best for homes with ample sunlight exposure, allowing them to operate all year round. They are great for reducing environmental impact as they use renewable energy.

Comparing Costs: Electric vs. Solar Hot Water Systems

Let us now compare the installation and maintenance costs of electric and solar hot water systems.

Initial Installation Costs

Here are the average installation costs for electric and solar hot water systems in Sydney:

Electric systems

  • Average installation cost: The price is anywhere from $450 to $1,800
  • The cost depends on the system type (with storage tank or continuous flow), size, brand and model, complexity of installation, and labour costs.

Solar systems

  • Average installation cost: The price could be anywhere from $3,000 to $7,000
  • The cost depends on the system type (flat plate or evacuated tube collectors), size and capacity, roof orientation, complexity of installation, and government rebates.

Ongoing Energy Costs

Let us now compare the ongoing operational costs of electric vs solar systems.

Electric Systems

  • There is a significant ongoing utility bill expense, but the cost varies depending on the local rates and the household’s water usage.
  • These systems require regular maintenance, such as tank flushing and inspections, to ensure optimal function.

Solar System

  • The ongoing costs can be limited to occasional inspections and possible system component repairs.
  • Homeowners need a backup heating source such as electricity or gas on cloudy days. 

Average Household Energy Usage and Cost Savings

Homes in Australia use approximately 150 litres of hot water each day. Meanwhile, electricity costs depend on the location and provider. The average cost can be around $0.10 per kilowatt-hour (kWh).

Electric Systems

Electric hot water systems’ estimated daily energy consumption is around 2 to 4 kWh or $0.30 to $0..60.

Solar Systems

Homes with solar hot water systems use significantly less energy. Depending on the location, system size, and weather conditions, these systems can cover 50% to 80% of hot water requirements.

Government Rebates

In New South Wales, the Energy Savings Scheme offers financial incentives for homeowners using solar hot water systems. The ESS operates through a system called Energy Saving Certificates (ESCs). You can claim these certificates when you install solar-powered hot water systems.

You can sell or trade ESCs, which reduces the upfront costs of installing solar hot water systems. The rebate amount depends on the type of solar system installed.

Choosing The Best Hot Water System for Your Needs

The best hot water system in Sydney homes depends on the homeowner’s needs, budget, location, and environmental impact.

Factors to Consider When Choosing

Remember the following factors when selecting the right hot water system for your home:

  • Budget: Electric systems have lower upfront costs, making them more suitable for homeowners with tight budgets. Meanwhile, solar systems significantly reduce long-term utility bills, offsetting the high initial investment.
  • Location and sunlight: Solar heaters are best for places with abundant sunlight. 
  • Environmental impact: Solar water systems use renewable energy, which reduces environmental impact by minimising carbon footprint. Electric heaters may be convenient, but they contribute to greenhouse gas emissions.
  • Size of the home: Solar systems may be more cost-efficient for larger homes with a higher demand for hot water. 

When to Choose Electric

If you live in an area with limited sunlight exposure, choose an electric hot water heater. Electric systems could also be a great option with a limited upfront budget.

When to Choose Solar

Solar hot water heaters are the best option for those living in an area with a lot of sunshine. Those who want to save on electricity costs in the long term may also find solar systems more cost-effective.

Frequently Asked Questions (FAQs)

1. How much can I save on energy bills with a solar hot water system?

A solar hot water heating system can save you anywhere from 50% to 80% on utility bills. Savings depend on location, system size, and household usage.

2. Can I install a solar hot water system in my home?

Yes, you can install a solar hot water system in your home. Still, it is best to have a professional install to ensure safety, efficiency, and compliance with local regulations.

3. What’s the lifespan of a solar hot water system?

The lifespan of a solar-powered hot water system ranges from 15 to 20 years.

4. How long does it take to recoup the cost of installing a solar hot water system?

It may take 4 to 8 years to recoup the cost of installing a solar hot water heater system. The time depends on the installation costs, energy savings, and available incentives in your area.

5. Do electric hot water systems use a lot of electricity?

Yes, electric systems use a lot of electricity, especially when used frequently or during peak hours.

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