Heat Pump Costs in Australia: Purchase, Installation and Running
Heat pumps are the most efficient heating and cooling technology available to Australian homes. Here is a full breakdown of purchase, installation and running costs — including rebates.
A heat pump moves heat rather than generating it, making it 3–5 times more energy efficient than a resistive electric heater or gas furnace. In Australia, heat pumps cover two distinct applications: hot water systems and space heating/cooling (reverse cycle air conditioners). Both offer significant efficiency gains and both have rebate pathways that reduce upfront cost.
Heat Pump Water Heaters
Heat pump hot water systems (also called air-source hot water heat pumps) use 60–75% less electricity than traditional resistive storage elements. They are eligible for STCs (Small-scale Technology Certificates) under the federal SRES scheme, which reduces purchase price at point of sale. Several states offer additional rebates.
| State | Rebate program | Approximate rebate amount |
|---|---|---|
| VIC | Victorian Energy Upgrades (VEU) | Up to $1,000 (varies by installer) |
| NSW | Energy Savings Scheme (ESS) | Varies — check with retailer |
| SA | Home Energy Efficiency Scheme | Varies by technology |
| QLD | Climate Smart Home Service | Limited availability — check current status |
| All states | Federal STC rebate | $400–$900 depending on zone and tank size |
After rebates, a heat pump hot water system typically costs $1,500–$2,500 installed. Running costs are approximately $150–$250/year versus $600–$900/year for a standard electric storage system — a saving of $350–$650 annually.
Reverse Cycle Air Conditioners (Space Heat Pumps)
Reverse cycle split systems are heat pumps for space conditioning — they heat in winter and cool in summer. They have a Coefficient of Performance (COP) of 3–5, meaning they deliver 3–5 kWh of heating for every 1 kWh of electricity consumed. No gas heater or electric resistance heater can exceed a COP of 1.0.
| System type | COP (heating) | Relative running cost |
|---|---|---|
| Reverse cycle split system (heat pump) | 3.0–5.0 | Lowest |
| Ducted reverse cycle (heat pump) | 2.5–4.0 | Low |
| Gas ducted heating | 0.7–0.9 (effective) | Moderate (rising gas prices) |
| Electric resistive heater | 1.0 (max) | High |
| Gas log fire | 0.5–0.7 (effective) | High per unit of warmth |
Installation Cost Ranges
- Single split system (heating/cooling): $1,500–$3,500 installed (2.5–7.1 kW capacity)
- Multi-head system (multiple rooms, one outdoor unit): $4,000–$10,000 installed
- Ducted reverse cycle system: $8,000–$20,000 installed depending on home size
- Heat pump hot water system: $2,000–$4,500 before rebates; $1,500–$2,500 after typical rebates
Pairing a heat pump with rooftop solar is particularly effective — the heat pump runs on free daytime solar electricity rather than grid power, cutting running costs to near zero during solar hours.