Key Takeaways
- The rebates and incentives you receive to discount the price you pay for a heat pump hot water unit varies depending on which state you live in
- Analysing how an installer passes on rebates can be informative
- But, it’s the final price you pay that matters - not the value of the rebates
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There are generous federal and state government incentives and rebates available that help reduce the upfront cost of heat pump hot water units. There are Federal incentives available to everyone as well as state based rebates. Some rebates are means tested and some depend on the type of hot water service you are replacing.
Federal - Small-scale Technology Certificates (STCs)
The Australian Federal Government offers incentives on nearly all heat pump hot water units through small-scale technology certificates. The program is operated by the Clean Energy Regulator.
From the Clean Energy Regulator website
Readers that already have solar installed would have noticed a discount on their solar installation due to STCs.
Heat pump hot water unit manufacturers apply to have their products eligible for STCs. The STCs are claimed when a unit is installed, most commonly by the installer. The homeowner transfers the rights to the STCs to the installer, who claims them on the homeowner’s behalf and passes on the discounts.
The installer will likely then be paid by a third party aggregator who claims the STCs from the Clean Energy Regulator and sells them on market.
Energy retailers are a significant source of demand for STCs - they are required to buy them. The funding for the purchase of STCs is from us - we all pay a little more in our power bills. It’s not actually the federal government that is funding the STCs, rather they operate the program which redistributes the funding to help reduce emissions.
The discount from STCs depends on:
In practice, people can expect roughly the following:
Zone 1 & 2 - NT, Mid/North Qld, North WA - around$600
Zone 3 - NSW, SE Qld, SA, Act, Perth - around $750
Zone 4 & 5 - Vic, South SA, South WA, Tas - around $800
Pro tip: STCs decrease every calendar year! The number of STCs eligible for each unit drops a little on the 1st of January each year. This won’t affect many customers, but, if you’re looking into heat pump hot water in December, you're better off installing in December than January.
State Rebates
Victoria
There are two rebates available for people living in Victoria.
1.$1,000 Solar Victoria Rebate
Solar Victoria offers a maximum of $1,000 discount on the value of an installed heat pump hot water unit. The rebate is 50% of the installation value, up to $1,000. The rebate is means tested.
Solar Victoria continues to release more rebates available to eligible customers. Their website states a number of “rebates remaining this release.” As someone who has visited the website many times, that number doesn’t appear to make much sense. It seems to fluctuate randomly. The current Victorian government has a clear mandate on reducing emissions so I think it’s unlikely the rebates will disappear anytime soon.
Customers can apply for the rebate and either be rejected or approved before they commit to an installation. The rebate application is started by the installer, who loads the details in the back end, which is then sent to the customer to finalise. Once finalised and approved, the installer can then carry out works. ‘Emergency’ rebate applications can be made by those with a hot water service that has failed.
The Solar Victoria hot water rebate is still available to those that have claimed a solar installation rebate (but not a battery rebate).
2. Victorian Energy Upgrades Program (VEECs)
The Victorian Government also offers incentives for heat pump hot water units through the VEU Program. I won’t go into all the detail, but it’s easiest to think of the VEU as the Victorian equivalent of STCs.
Homeowners can save anywhere from $300 to over $1,000 through claiming Victorian Energy Efficiency Certificates (VEECs) for eligible activities.
Crucially, VEEC discounts only apply for heat pumps that are replacing inefficient electric, gas storage or gas instantaneous hot water services. VEECs are not eligible for solar hot water replacements.
VEECs and the Solar Victoria rebate are independent - customers can claim both.
NSW
The NSW government offers a heat pump hot water rebate through the NSW Energy Savings Scheme (ESS).
Heat pump hot water units are eligible for Energy Savings Certificates (ESCs) when replacing existing electric water heaters (Activity D17) or replacing an existing gas water heater (Activity D19). Solar hot water replacements are not covered.
Customers must use an approved supplier and the product must be on the Approved Product List (most, if not all, of the main units on the market are on the list).
The amount of rebates is determined by a complex calculation of how much energy the activity is likely to save. In practice, you can expect a rebate of around $500 for a gas hot water replacement or $950 for an electric hot water replacement.
From 19 June 2024, customer must pay a minimum of $200. The minimum payment previously was $30, which created a nasty situation of ultra cheap heat pumps flooding the market for how much? You guessed it - $30.
Queensland
There are currently no rebates for Queensland residents. The Queensland government previously ran the Climate Smart Energy Savers rebate but this is now closed. The rebate was between $300 and $1,000 and included heat pump hot water.
South Australia
The City of Adelaide has a 50% up to $1,000 rebate for heat pump hot water installations through its "Incentives for Sustainability" program. Residents must reside within the City of Adelaide municipal area (postcodes 5000 and 5006).
Tasmania
There are no Tasmanian government rebates but there is financial assistance. The Tasmanian government operates the Energy Saver Loan Scheme which provides 0% interest loans of between $500-$10,000 to eligible applicants. Repayments are fortnightly over 1 to 3 years. The government website recommends talking with suppliers about which hot water systems are eligible under the ESLS.
There are currently no state or territory rebates for residents in Northern Territory or Western Australia.
Different installers pass on different rebates?
There's every chance that when you receive 3 quotes, you'll see different amounts of rebates on each of the quotes.
I think it can be informative to analyse how installers allow for rebates and incentives. For example, if you now know that STCs trade at around $40, but an installer is passing on $35 per STC, what does this say about the installer? Perhaps they are taking a hefty clip, or perhaps they’re not being as savvy as they should with the aggregators they use (i.e. they should be asking for a better deal).
While this information is interesting, we need to remember that it’s the final price that is crucial, not the amount of the rebates. If Installer A quotes $2,000 net price and $1,500 rebates, all else being equal, it’s a better deal than Installer B who quotes $2,200 and $1,700 worth of rebates. We don’t want to go for Installer B just because the value of the rebates appear higher - they might have just increased the installation cost.
The ideal quote will be a sharp price due to both:
- a competitive installation price, and
- maximised rebates - the installer has found ways to maximise the value of rebates for their customers, and passed on the discounts!
Summary
I hope this helps you understand the rebates you may be eligible for to reduce the cost of your next heat pump hot water unit. Please use this knowledge when talking with installers - ask them which rebates they will pass on and whether they pass on the full rebate.
