Hot Water, Hot Bills: What’s Really Going On With Your System?

[Jimmy] (0:00 - 0:14)
We helped a household, family of four, I think they were using about $1,000 a year on energy just for water heating, swapped a hot water heat pump, fell down to about $300 a year afterwards.

[Sarah] (0:20 - 1:10)
Welcome to The Good Energy Guide. No jargon, no guesswork, just better energy choices. Brought to you by Ausgrid, electricity distributor for Sydney, the Central Coast and Hunter region.

Hello, I'm your host, Sarah Aubrey. Today, we're talking about one of the biggest hidden costs in any home, hot water. It's something we use every day without thinking, but the system behind it can quietly chew through energy and drive up bills.

We're going to look at why some systems cost so much to run, what signs suggest yours may be in need of an upgrade, and how heat pump technology is changing the game. To help us unpack it all, we're joined by Jimmy Lee from ZapCat, who specialises in breaking down clean energy products into plain English. Welcome, Jimmy.

[Jimmy] (1:11 - 1:12)
Thank you. Great to be here.

[Sarah] (1:12 - 1:18)
So, first question, why is hot water such a big chunk of energy use even in smaller households?

[Jimmy] (1:19 - 1:56)
Well, the reason hot water uses energy is because water takes a lot of energy to actually heat up. If you think about how long it takes to boil water or how long an ice cube lasts in your cup of water, it's because the water holds a lot of energy. So, it takes a lot of energy to change the state of it.

And if you think about how often you do that every day, it's all the time. You're washing your hands, that's hot water. You're taking a shower, that's hot water.

You're washing your clothes, that's hot water. So, in all of these normal, everyday, ordinary activities, you're just pumping water full of energy to get it to the temperature you need.

[Sarah] (1:58 - 2:06)
I don't think people realise how much of their bill it actually takes up. I think they'd probably be quite shocked. I think on average around 23%, is that right?

[Jimmy] (2:06 - 2:30)
Yeah, that's about right. It's probably the second largest source of energy usage at home after heating and cooling. And it's an invisible one because you're just using water.

Everyone thinks about, oh, I should turn off my lights when I leave. I need to turn off the power point because I'm losing this trickle of energy. At the same time, they're taking 20 minute showers and just infusing.

[Sarah] (2:31 - 2:35)
Blasting away. And lighting is a tiny part of your bill.

[Jimmy] (2:35 - 2:39)
Exactly. So, I get annoyed with my dad all the time. It doesn't matter, don't worry.

[Sarah] (2:39 - 2:40)
Worry about the lamps, worry about your hot water.

[Jimmy] (2:40 - 2:41)
That's right.

[Sarah] (2:41 - 2:49)
We're heating and cooling more like as well. Why do many people underestimate how much their hot water system costs to run? Why do you think that is?

Is that because you say it's invisible?

[Jimmy] (2:50 - 3:22)
I think so. It's not like an EV or a TV where it's cool and you're researching it and you can't wait to get your new flat screen TV that looks like a picture frame when it's off. It's a utility.

You just expect to work silently and visibly in the background. You had no part in installing the system, probably, unless it broke down and you had to replace it. You expect homes to come with it.

You just take it for granted that it's there. And so, you also take for granted this base cost is always going to be there. You don't actually realise it's changeable.

[Sarah] (3:23 - 3:29)
So, what are the main types of hot water systems in Australian homes and how do they differ in running costs?

[Jimmy] (3:30 - 3:55)
So, you can split it, broadly speaking, into the energy source that fuels a hot water system. So, on one hand, you have gas hot water systems and this could be your instantaneous gas system. So, that's a little rectangular box that's on a wall somewhere and it just heats the water that you need.

So, for a gas system, it's reasonably efficient. Then you have gas storage tanks. So, it's a hot water cylinder is what most people think of it as.

[Sarah] (3:55 - 3:56)
They're a lot bigger, aren't they?

[Jimmy] (3:56 - 5:34)
Big boxy. That's right. That's right.

It might be person height and it's a great big cylinder. And what that does is it uses gas to heat water and store it in this tank. So, your water is just kept there at a particular temperature all day and it heats slowly through the day as opposed to at the moment you need it.

So, on the other hand, you have electric hot water systems. And what many people maybe have not thought about is that just because it's a hot water cylinder doesn't mean they're all the same because you have gas hot water cylinders, but you also have electric hot water cylinders. And electric hot water cylinders are similar to your kettle.

It's just got a heating element in there, which is pumping the water full of energy and you're heating the water up gradually over a long period of time and then using it when you need it. And then you have solar hot water heaters, which are much less common, but if you're an energy enthusiast or a climate enthusiast...

[Sarah]
Or a nerd.

[Jimmy]
I love nerds. So, these are, again, it comes down to how you heat the water.

So, for a solar hot water system, you're not using electricity, you're not using gas, you're just using the sun's thermal energy directly. So, this hot water system will have some sort of panel on the roof, which is absorbing the heat and then injecting that into the water. So, it's important to distinguish this from solar panels in general, because regular solar panels, they convert the sun's energy into electricity, which then can be used for anything, whereas solar hot water systems, it's just literally just capturing the heat for the water.

[Sarah] (5:34 - 5:42)
See, that roof space that you're giving to your hot water system could be powering the whole home, including your hot water, if it was solar.

[Jimmy] (5:42 - 6:07)
That's right. So, that's actually really interesting tension that's evolved over the last 10 years or so, because in the past, when the solar panels were much worse, solar hot water heaters, I felt, made a lot of sense. But now in the same space, you could fit a couple of panels, which could be perhaps more versatile.

So, there's no kind of right or wrong. It is a tension in the sense that they're competing for the same prime roof space.

[Sarah] (6:09 - 6:19)
The mix in terms of what people have on their homes, is it primarily the old school, big electric tanks and instantaneous gas? Is that what the majority of Australians have?

[Jimmy] (6:20 - 6:54)
Pretty much, yeah. Most of the modern, the newer homes, I should say, they tend to move to instantaneous gas because it's the most efficient type of gas, and the old electric hot water cylinders are actually quite inefficient. So, it's very logical and unsurprising why you move from a hot water electric cylinder towards a instantaneous gas, which is a lot cheaper to run, but it's not the most efficient thing you can have today.

[Sarah] (6:55 - 6:59)
Why are older gas and electric resistive systems particularly expensive?

[Jimmy] (7:01 - 7:30)
Well, when these systems were developed, that was just the only known way to heat water. That's just what you did. You pumped it full of electricity or you burned something and heated it up.

And so, it's a very direct, crude way of heating your water. And as we talked about earlier, water takes a lot of energy to heat. So, it's not that they're inherently expensive.

It's just that there are a lot more efficient ways to do it. It's an inefficient technology. 

[Jimmy]
That's right.

[Sarah]
By today's standards. 

[Jimmy]
That's right.

[Sarah] (7:30 - 7:46)
There is another way. Heat pumps. So, I have an old system in my home.

Let's say I've got ancient gas, as I did previously. What are the telltale signs a hot water system is chewing through more energy than it should?

[Jimmy] (7:47 - 8:16)
It's hard to tell for most households because most households don't actually pay that much attention to your bills. You might notice something gradually going up and it's hard to pinpoint it to your hot water system. So, I feel like most households don't really have an awareness of what the real cause of their bills going up is.

And I think most households notice it when their hot water system starts becoming less reliable. And there's probably a big correlation between, oh, I don't really trust my hot water system anymore.

[Sarah] (8:16 - 8:18)
It's a bit tepid at the moment. 

[Jimmy] (8:18 - 8:29)
Exactly.

So, it could be that either it's not functioning correctly, which means that it might be less efficient as well.

[Sarah] (8:29 - 8:32)
Right. It's not really a way of telling, is there?

[Jimmy] (8:33 - 8:38)
Not really. Practically speaking, you wouldn't really care until it breaks.

[Sarah] (8:38 - 8:48)
And I think that's actually something that people don't realise, is that that moment it goes, you're in a mad panic. You call up the plumber and say, I've got no hot water.

[Jimmy] (8:48 - 8:49)
Yes.

[Sarah] (8:49 - 9:20)
It's so common that let's say you've got instantaneous gas. Everyone's like, I need to have a shower. And so, the plumber will go, well, I've got a unit in the van, so I'll just swap it over.

And then you continue with gas all over again for another 15, 20 years. But if you do your research beforehand and know what installer you want to use and what unit you want, what heat pump you want to install, which we'll talk about that. If you've done all that research and you know they keep it in stock, then you know who to call when it goes and you've got a heat pump.

[Jimmy] (9:20 - 9:20)
That's right.

[Sarah] (9:20 - 9:24)
But I think the problem is that people haven't done the research and then it is a bit of a panic.

[Jimmy] (9:24 - 9:53)
That's right. So, we call this your cold shower day, which is, I did not make this up, but I'm sure many people talk about it. But in the moment, on the day that you have a cold shower, you're not exactly the most curious about new technologies.

You want the hot water working ASAP. And so, what is normally done in that situation is the plumber will come and they'll replace something like for like. And it'll just be like a newer model of what you currently have.

In the couple of minutes it took you to make that call, you've actually just locked in your water heating bills for the next 10 to 15 years.

[Sarah] (9:54 - 10:00)
That's scary, isn't it? You're not going to be willing to get on your computer and start doing research when it's cold shower day.

[Jimmy] (10:00 - 10:00)
Exactly.

[Sarah] (10:01 - 10:05)
Yeah. It's something people need to think about before your hot water system dies.

[Jimmy] (10:05 - 10:25)
And on that note, you notice when your hot water is becoming more tepid, you notice when things feel a little bit dodgy. You have these warning signs for often a few years, right, when you start trusting your hot water. So that's a great time to do your research and get comfortable with what a hot water heat pump is, if you think it's right for you, just so you have a plan ready when that day comes.

[Sarah] (10:26 - 10:29)
How can households work out what type of system they currently have if they're not sure?

[Jimmy] (10:30 - 11:52)
Well, the number one clue is where is your hot water system? So, if your hot water system is on the roof, it's a whole solar hot water system. If your hot water system is outside and it's attached to the wall and it's a small rectangular box, that is a gas instantaneous system.

You know it's definitely instantaneous because there's no way you could store a lot of water in that little tank. So, if it looks like it doesn't hold water, it's just a small unit, then it's instantaneous. And alternatively, you could have a hot water tank or cylinder.

It'll be pretty big. We talked about it earlier. It might be person height.

And the cylinder could either be gas or electric. So, if it's inside, indoors, it's almost certainly electric. And you can also look for the label.

It'll say gas or electrical or whatnot. But if it's outside, it could be gas or it could be electric. And the gas hot water systems, they have exhaust vents for exhaust fumes.

But again, look for the label. It'll usually tell you. And finally, of course, you may have a hot water heat pump already.

And then that may be confusing because it might look like a gas system, but then it might not say gas. But what you look for is almost an air conditioning type unit.

[Sarah] (11:52 - 11:55)
Yeah, like a compressor. Just like your outside air conditioner sitting next to it.

[Jimmy] (11:55 - 11:56)
Yeah, yeah, yeah, yeah.

[Sarah] (11:56 - 12:11)
Yeah. Or you can have an all-in-one tank where it's built into the top of the tank as well, right? 

[Jimmy]
That's right.

[Sarah]
So, you go on a fact-finding mission to see what you've got before you call the plumber. What's the biggest misconception about hot water, do you think?

[Jimmy] (12:12 - 12:34)
Misconception. There are a few. Showers is a good one because everyone complains about wasting water for long showers.

So, my so-and-so spends half an hour in the shower, wastes so much water. But no one really thinks about how much energy it's costing to heat that water.

[Sarah] (12:34 - 12:35)
That's very true.

[Jimmy] (12:36 - 12:44)
And actually, so when you do something like add a low-flow shower head to your shower, you're not just saving water, you're saving a ton of energy too.

[Sarah] (12:45 - 12:46)
How are you saving energy?

[Jimmy] (12:47 - 12:59)
So, what a low-flow shower head is, it's just a thing you fit at the end of your shower, which reduces the volume of water that your shower sprays out. So, if you're using less water, you're heating less water.

[Sarah] (13:00 - 13:02)
And they are actually really good now, those shower heads.

[Jimmy] (13:03 - 13:04)
You don't really notice too much.

[Sarah] (13:04 - 13:22)
No, you really don't. I think they're amazing. Okay, so we know why hot water costs creep up.

Now let's talk about solutions and how the fabulous and magical things called heat pumps fit in. I love my heat pump. What is a heat pump hot water system and why is it so much more efficient?

[Jimmy] (13:23 - 14:13)
That is a fantastic question. I'm so glad we're talking about this. So a heat pump hot water system is like a regular hot water system with a tank, except that instead of the water being heated directly by gas or the water being heated directly by electricity, instead what you're doing is you're using a heat pump to push heat into the cylinder itself.

What does that even mean? Well, if you think about your fridge, your fridge is actually a heat pump because what your fridge does is it moves heat from inside the fridge to outside the fridge. That's what a heat pump does.

It just moves heat from one place to another. And so, a hot water heat pump moves heat from the ambient air into the tank. And there's actually a lot of heat in the ambient air.

[Sarah] (14:14 - 14:27)
I love my hot water heat pump. I'm going to say it one more time. It's actually really quiet as well.

It's quieter than my air conditioners, I've noticed. It's pretty amazing. So how much cheaper can a heat pump be to run compared to say gas or resistive electric?

[Jimmy] (14:27 - 15:07)
As a general rule of thumb, a hot water heat pump is about four times more efficient than its comparable equivalent. The reason for that is a hot water heat pump doesn't need to create heat. It doesn't need to burn something or take electrons and use that to create some heat that's not already there.

What it does is it takes heat that's already there. So, it already exists. You're just moving the heat around to where it can be better used.

And that's a lot easier than to heat something up in the first place. There's so much heat just floating around in the air we breathe. And what your hot water heat pump absorbs is so negligible.

[Sarah] (15:08 - 15:11)
What should households consider before deciding to upgrade?

[Jimmy] (15:11 - 17:10)
Well, you have maybe two different situations. One is when you are replacing versus when something's broken and you're swapping it out for a new unit. If your existing hot water system is working fine, then you're more inclined to consider payback periods.

And then you get into, well, how efficient is my current unit? So as a general rule of thumb, instantaneous gas hot water systems, the ones that heat water without a tank, those are the most efficient type of water heating outside of hot water heat pumps or solar water heating. And so, if you're a household of two, you have an instantaneous gas and it's a couple of years old, it's probably not worth swapping it out because you're not going to save that much extra and it's going to be quite expensive.

But on the other hand, let's say you're a family of five, you have an old electric hot water tank, you use a lot of hot water and that type of hot water system is very inefficient. You'll probably get a decent payback just by swapping to a hot water heat pump, maybe four years, maybe five years. So there's actually a good business case from that perspective alone.

So that's one consideration, which is the payback. Another consideration is space. So, a lot of homes with instantaneous gas have a very small footprint for their unit.

It might be at the side of their house and it's very narrow, it might be on a balcony somewhere and you simply might not have enough space to put a hot water heat pump, and in which case it becomes technically quite hard and you might need to explore other options. That's a second consideration. The third consideration is noise.

It is very quiet. Some models are louder, some models are quieter. And I bring this up not because it's actually an issue, but just because I think everyone should just go in there with their eyes open.

You are kind of putting a reasonably quiet air conditioner somewhere.

[Sarah] (17:11 - 17:20)
You live very close to someone or there's a bedroom opposite your home, you don't want to disturb your neighbours, you could have a complaint, or even for you.

[Jimmy] (17:20 - 17:37)
Exactly. And it's normally not an issue at all if you just know about it, because there are units that are quieter, there are units that are louder. And secondly, your hot water heat pump, as you mentioned earlier, doesn't need to run for the entire day.

It might run for a couple of hours.

[Sarah] (17:37 - 18:54)
Two hours, and if you have it coming on in the middle of the day, it shouldn't really disturb anyone. Honestly, it's so quiet, you have to go and stand right up next to it to check that it's on sometimes, because it is so quiet. But I think that's more the expensive ones.

[Jimmy]
Yes, yes. 

[Sarah]
The Rolls Royce, shall we say, of heat pumps. Actually, let's cover that, the noise factors.

So, the split systems, the more expensive ones are quieter. Those cheaper systems, which are the all-in-one, so one big tank with the compressor in the top, they are cheaper to buy, take up less space, but they are noisier. That's one downside of it, isn't it?

And they also have to be, I think every three to five years, they have something inside them called a sacrificial anode, which is the coolest expression, which is a piece of metal that sits inside the tank, and it sacrifices itself and rusts, and it has to be replaced every few years. And if you don't do it, the tank will rust, so it stops the tank rusting. If the tank rusts, then the whole thing's done, right?

But I just love that it's this thing that just sacrifices itself for you. I just think it's the coolest thing ever. So, they have to be serviced, so there is an ongoing cost there compared to a split system, which would need to be serviced less.

Have I got that correct?

[Jimmy] (18:54 - 19:22)
In terms of correlation, yes. It so happens that the split systems kind of have that effect, and the all-in-one systems have the other effect. I'm not deep in the product development side of things, so I don't know how they made these decisions.

Physically speaking, the main advantage of a split system is that you can put the compressor, the aircon unit, outside, and you could theoretically put the tank inside, back to back, right? So, you have a bit more flexibility in terms of placement.

[Sarah] (19:24 - 19:30)
For space. Although you can put that compressor above the tank, can't you, on the wall? Mine's on the wall, it's not on the ground.

[Jimmy] (19:30 - 19:47)
Yeah, so the reason they're quieter, I'm not sure if this is a physical limitation, because the all-in-one units where the compressor is directly on top of the tank. I'm not sure if that's because there's less space in there, but the all-in-one units tend to use a different type of refrigerant.

[Sarah] (19:48 - 19:56)
Yes. What are the most cost-effective short-term improvements people can make if they can't replace their system yet? Low-flow showerheads?

[Jimmy] (19:56 - 20:24)
Yep, low-flow showerheads. Another thing you can do is to reduce your use of hot water in other areas. For example, when you're washing your clothes, you can set your washing machine to a lower temperature.

That will require less energy to heat the water. Just washing cold water. Washing cold water, yeah.

And same with washing your dishes. There's often different settings, you know, you have 70 degrees, your pots and pans, or you have maybe eco mode, which sets it to a lower temperature. That makes a meaningful difference as well.

[Sarah] (20:25 - 20:38)
Oh, I thought that was just how much water it used. I just learnt something else new. Excellent.

I will be using that from here on in. How long does it typically take a heat pump system to pay itself off through lower running costs?

[Jimmy] (20:39 - 20:50)
Well, this really depends on how high your current running costs are. So, I would say that ranges maybe, the numbers I see the most are maybe between four years and 10 years.

[Sarah] (20:50 - 20:50)
Okay.

[Jimmy] (20:51 - 21:16)
And this is if you directly rip out your current system and replace it with a new system, right? So obviously the economics are a little bit different if your system breaks and you need a new one anyway. Well, you've just got to put something there.

So, I would say it's most worth it if you have a hot water tank that is maybe say 10 years old and you have a family. That's probably the situation where it's most worth considering ripping and replacing.

[Sarah] (21:17 - 21:38)
And what was the average again? Around 23% of your energy bill could be even higher if you've got a big family. So, if you have big energy bills, that is a huge chunk of money that you could be reducing.

This is something I do care very much about and I get asked about all the time. What are the options for renters? Are there any?

It's hard, isn't it?

[Jimmy] (21:39 - 22:53)
It's really hard. It's hard because you have what's called a split incentive problem where if you perform an energy upgrade, the renter gets the benefits, but the landlord books the costs. And so, the most promising situations are one where you have a good relationship with your landlord.

How common that is, I won't comment. But if you have a good landlord, you're very collaborative, you might even work out, hey, this will save me 500 bucks a year on energy bills. Maybe I'm willing to pay $5 a week more in rent, for example.

And that's kind of one way to do it. But there are also many landlords who believe in sustainability and it's often just worth asking, hey, did you know about this? Have you considered this?

Because there is a property value benefit as well. And especially if your landlord is planning to move into this home, one that is a personal benefit to them as well. So, I won't pretend that this is very easy for a renter.

[Sarah] (22:53 - 23:32)
But if your hot water system dies and you know about heat pumps, then perhaps you could suggest on cold shower day, rather than replacing it with the gas, you know, instantaneous gas again, you could say it'd be fantastic if you could replace it with a hot water heat pump instead. Are there peak times when hot water demand or system inefficiency is most obvious in that if you've got a resistive old school electric tank, and it's constantly heating all the time, I assume that that's a lot less efficient than having, say, a hot water tank that's on off peak and it only heats up overnight. Is that right?

That's a way of saving money if you can't upgrade?

[Jimmy] (23:34 - 24:30)
Many old electric hot water systems are on a separate circuit already that only activates at certain times of the day when electricity is cheaper. So, I think generally speaking, it is correct that electricity can often be more expensive at certain times of the day and cheaper at other times of the day. So, you'd want to take advantage of the cheaper tariffs.

So, for some households, their hot water system is hooked up to a circuit, you know, that only turns on when it's cheap. Other households, it's on the same circuit as everything else. So, it just draws power whenever it needs to.

And so in the situations where you have a choice as to when to use water, the advantage of having a tank is that you can try to heat it more when electricity is cheap, for example, overnight or in the middle of the day with solar. And you can store it for when you use it later for when you take a shower or whatnot.

[Sarah] (24:31 - 24:48)
Actually, can I play devil's advocate then? So another thing that potentially people could do if they can't replace their system and they do have one of those old school big electric tanks, if they put in solar or if they have solar, the solar could potentially cover that eight kilowatt hours a day, couldn't it?

[Jimmy] (24:49 - 25:13)
One hundred percent. So, a hot water heat pump is a way to make your energy use more efficient. But if you have a really large solar system with plenty of excess output, you don't really need to worry about efficiency as much.

You can just use your excess solar. So, I think it's more important that you get off gas to electric because at least then you are converting your energy to a form that you can generate yourself if you can get solar.

[Sarah] (25:14 - 25:17)
Oh, thank you, Jimmy. That's absolutely brilliant. And I did learn lots.

[Jimmy] (25:18 - 25:19)
I'm surprised because you know many things.

[Sarah] (25:20 - 25:24)
A few things. Get a few things wrong here and there. All right.

Thank you so much.

[Jimmy] (25:24 - 25:24)
Thanks for having me.

[Sarah] (25:25 - 26:18)
So three things to remember. Hot water is one of the biggest hidden drivers of household energy bills. Older gas and electric resistive systems are some of the most expensive to run.

Hot water heating accounts for approximately 15 to 30 percent of total energy usage in an average Australian household. It's typically the second largest source of residential energy consumption after heating and cooling, often averaging around 23 percent. This usage constitutes roughly one fifth of Australian residential greenhouse gas emissions.

That's it for this episode of The Good Energy Guide brought to you by Ausgrid. You can find more episodes on Apple Podcasts, Spotify and YouTube. And head to our website at goodenergy.ausgrid.com.au for practical tools and resources to help you make smarter energy choices.