How Much Does a Solar Hot Water System Cost? [2024]

Domestic hot water accounts for a quarter of household energy use, and with energy prices skyrocketing, it's hitting our wallets hard. In the last year alone, electricity prices across Australia jumped by 25%.

Despite the government's new $300 electricity rebate announced in the 2024 federal budget, it's more important than ever to make your hot water system as cost-effective as possible.

Thanks to advancements in solar technology plus new government rebates, a solar hot water system could be the answer. In fact, it's more affordable than ever, with a shorter payback period and long-term savings.

So, how much does a solar hot water system cost? This guide will break down solar hot water prices and explain why it's often worth the investment despite the upfront costs.

• How much does a solar hot water system cost in Australia?
• Why switch to a solar hot water system?
• What solar incentives are available for solar hot water systems?
• Solar hot water vs. average water heating bills 
• What type of solar hot water system should I get?

How much is a solar hot water system?

Like most things, the cost of a solar hot water system depends on several factors, including where you're located, the size of your system, the type of system you choose, and what grants/rebates are available in your area (more on that later).

The costs below factor in the average available grants, and could cost upwards of $1,000 more without. These costs include installation, provided there are no tricky access issues or other challenges.

Flat-plate collectors 

These use a large, solar panel-like collector to capture the sun’s rays and heat water in an insulated tank. They are affordable but less effective in cooler climates. They come in two variants:

• Roof-mounted: These are 100% the best options for houses with lots of roof space available. Roof-mounted systems place both the solar collectors and storage unit on your roof and can cover anything from 50% to 100% of your hot water needs
• Split system: If your roof space is limited or you prefer not to have the system up there, split systems are a great option. It functions like a roof-mounted system, but the storage tank is placed at ground level. This setup frees up roof space and makes maintenance easier while still providing efficient solar heating for your home

Flat-plate systems cost around $3,000-$4,000 for a popular brand like Solahart, with a capacity suitable for a family of four. 

Evacuated tube collectors

These systems use a series of glass tubes with a vacuum seal to capture sunlight more efficiently. They are very effective but also the most expensive option - costing upwards of $6,000. 

Heat pump systems 

Instead of collecting sunlight, these systems draw solar heat from the air to heat water. They use a small amount of electricity to pump in hot air, making them efficient even in cooler climates. While collector systems rely on electric or gas boosters when the sun isn't shining, heat pumps transfer heat from the air into your water, using about 75% less energy than conventional electric water heaters. You can expect heat pump systems to cost around $3,000. 

Why switch to a solar hot water system?

There are two main reasons to switch to a solar hot water system: they're cheaper and better for the environment—a win-win.

Solar hot water is cheaper

A solar hot water system significantly cuts your energy use, saving you money within just a few years.

Let's do the math. According to Sustainability Victoria, hot water usage for the average Aussie is:

• 1 person uses roughly 50L per day
• 2 people use 90L per day
• 3 people use 120L per day
• 4 people use 150L per day.

The exact cost of your hot water system depends on your household size, but a four-person household will pay, on average, the following amount per year to have instant hot water in their home:

• Electric systems: Cost $900 - $1,105 per year, depending on things like peak/off-peak rates and the hot water storage system
• Gas systems: Cost $440 - $1,080 per year, depending on factors such as if you're hooked up to natural gas or LPG
• Heat pumps: are a more cost-effective option at around $215 - $355 per year
• Boosted solar hot water systems: have an average annual cost of $170 - $480 per year, depending on if you're boosting with electric, gas, peak or off-peak

What does 'boosted' mean? If there's not enough sun to power your hot water system, electric boosters or gas boosters will kick in, keeping you in hot water 24/7.

Even small households can see big differences in energy savings and energy efficiency. A single-person household might pay around $475 annually for an electric hot water system but only about $65 for a gas-boosted solar hot water system.

Solar hot water is better for the environment

Beyond the financial benefits, solar water heaters are also much better for the environment, producing significant greenhouse gas emissions reduction. See below for the 10-year greenhouse gas emissions that different types of hot water systems emit for a 4-person home. 

• Heat pump: 4.2 - 5.2 tonnes 
• Electric: 15.8 - 17 tonnes 
• Gas: 7.3 - 12.6 tonnes 
• Solar: 2.7 - 7.1 tonnes 

If environmental benefits are a priority for you, then a solar hot water system is not only a cheaper option but also a green one.

What solar incentives are available for solar hot water systems?

Even better news than the long-term savings of solar hot water systems is that Australia has a fair amount of solar incentives available in every state.

Small-scale Technology Certificates (STCs)

The Australian Government provides incentives called small-scale technology certificates (STCs) to encourage the use of renewable energy. Although the program can seem a bit complex, it basically gives you a big fat discount on your solar hot water system installation.

Although you can claim these credits yourself in some cases, the simplest way is to go through a registered agent. This usually means you'll get the discount up front, too.

There are some limitations to this though. A solar hot water system can only go up to 700 L, and models with a capacity over 700 L need further documentation to be eligible for STCs.

There are also other eligibility criteria to meet, but an experienced solar hot water system installer will be aware of the regulations and will help you through the process.

Feed-in tariffs

This is a benefit after installation, but a benefit all the same. If you have both solar panels for electricity and a solar hot water system, you might qualify for feed-in tariffs, which let you earn money by feeding extra electricity back into the grid. These tariffs vary by state and energy supplier, so check with your solar provider to see if they're available in your area. Combining solar power with solar hot water can maximise your savings.

Solar panel and battery rebates

Different states, territories, and some local governments offer subsidy schemes to help with the upfront cost of installing solar panels and batteries, in addition to STCs. Depending on your location, you might qualify for:

• Rebates: Receive a payment or subsidy towards the cost of a solar system or battery
• Loans: Borrow money for a solar system or battery at favourable rates
• Rebate Swaps: Where you get a solar subsidy instead of bill rebates

These schemes change all the time, so always research your local state when ready to buy, or chat with your solar hot water installation expert—they'll know what grants, rebates, and incentives are available.

For example, in November 2024, NSW is launching a brand new solar battery incentive scheme. This could be a good addition if you choose a heat pump system powered by standard solar panels.

Solar hot water vs. average water heating bills

As mentioned above, the hot water bill of a family of four (at the lower end of the guesstimate) is around $900 per year for an electric system versus around $170 for a solar system. The savings of $730 per year can pay for a $3,000 heat pump system in around four years.

Do you currently use LPG? Well, that could cost around $1,080, which means that even a more expensive $6,000 evacuated tube collector hot water system could pay itself off in seven years.

And, with electricity costs rising, you can expect to save even more over the years.

What type of solar hot water system should I get?

As you now know, there are three main types of solar hot water systems. Your choice will depend on your house, needs, budget, and local climate.

Anything that requires roof installation for the collectors/tank will mean you'll a). need a big enough roof, and b). need a strong enough roof. If you need to reinforce the roof, this could quickly blow your budget.

If you need a booster, will this be natural gas, LPG, or electric? This will also help guide your decision on the best system for you.

Finally, you'll need to consider the climate in your area. Flat plate systems aren't great in cooler climates but are one of the cheapest options. Heat pumps, meanwhile, operate in all climates, and although they need some electricity, they don't rely on direct sunlight—meaning if we're hit with another El Niño, you'll still have plenty of hot water.

Whatever choice you make, switching to solar hot water is a smart investment. Solar systems can pay for themselves in two to seven years and last for 20 years or more, longer than conventional systems. With significant savings over the system lifespan, you’ll enjoy reduced energy bills and a more sustainable home.

*Costs and prices in this article are indicative and should only be used as a guide. They also vary locally and are subject to market forces.

• Solar hot water system cost Victoria: between $3,000 and $7,000

• Solar hot water system price Melbourne: between $3,000 and $7,000

• Solar hot water system price QLD: between $3,000 and $7,000

• Solar hot water system price Brisbane: between $3,000 and $7,000

• Solar hot water system cost NSW: between $3,000 and $7,000