In Victoria, consumers have the luxury of applying three different rebates to reduce the upfront cost of installing a heat pump hot water system.
Through the federal government a heat pump hot water system will generate a rebate.
If you’re installing a heat pump in Victoria, there are rebates that can be applied from Solar Victoria and the Victorian Energy Upgrades program which will support the purchase of a hot water heat pump.
After combining all three rebates, an eligible customer could expect to deduct up to $2,600 off the upfront costs of the heat pump hot water system.
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Federal Heat Pump Rebate – STCs
The federal STC scheme was introduced in 2011 as part of the Renewable Energy Target. The scheme includes heat pump hot water systems to generate certificates (called STCs) in relation to their contribution towards the renewable energy target by reducing carbon emissions.
The installing company will generate and claim the STCs on your behalf, so they can offer you a point of sale discount. This will usually appear on your quote as a line item so you can see the value.
All homes in Australia are eligible as long as an ‘approved heat pump’ is installed. Most heat pump hot water systems that are marketed in Australia have received approval from the Clean Energy Regulator but you can see the full list of brands and models on this page.
How much is the STC rebate for heat pumps?
The size of the rebate depends on the heat pump hot water system that is installed and where you are located. As it requires less energy to heat water in warmer climates, less STCs are generated as less energy savings are made. The Clean Energy Regulator has split Australia up into 5 STC zones which correspond to different rebate values.
Customers in Victoria will be eligible for STCs in zone 3,4 or 5 depending on their location as roughly shown in the above image. To give you an idea of the rebate available some popular brands and models are listed below:
Similar to the federal STC scheme, the Victorian Energy Upgrades program will create certificates which are called Victorian Energy Efficiency Certificates (VEECs). VEECs can be created by upgrading an old gas or electric hot water system to a solar hot water or heat pump hot water system.
One VEEC is equivalent to 1 tonne of CO2 abated. An installer will need to get evidence of your existing hot water system that they will decommission as part of the upgrade to determine the VEECs value that can be applied.
The VEECs are available for upgrades from electric storage hot water systems or gas instantaneous or storage systems. If you are upgrading from solar hot water, gas boosted solar, heat pump or electric boosted solar you will not be eligible for this rebate.
You can estimate the rebate value using the Essential Services Commission’s calculator on their website. To give you an idea we have estimated the rebate value below for a number of common heat pump models:
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Solar Victoria’s Heat Pump Hot Water Rebate
The Victorian hot water rebate is managed by Solar Victoria. Eligible Victorians can receive 50% discount up to a maximum of $1,000 when upgrading to a heat pump hot water system. The 50% is calculated after any other rebates (STCs and VEECs) have been deducted.
Similar to the STC rebate, the Victorian heat pump hot water rebate is paid directly to the installer who is then able to pass on a point of sale discount to the end customer.
Eligibility Criteria for Victorian Hot Water Rebate
Available to owner-occupiers of the home of the installation
Combined household taxable income of less than $210,000 per year
Property under $3 million in value
Property address has not already received a Victorian hot water rebate
Hot water system being replaced is at least 3 years old
System is installed by an accredited installer
Treat Free Hot Water Upgrades With Caution!
You only have one chance to apply for the Victorian rebates described above. So it is important to get a good quality system that will provide a good lifetime.
As has been seen in other rebate driven industries, the availability of 3 rebates has attracted many good and bad companies to the market. It is important to do your due diligence on the heat pump product you are considering for installation and the company you are considering to install it.
Our independent heat pump reviews are a source of unbiased information as we do not sell any heat pumps or have any relationships with heat pump manufacturers.
Can I Get A Free Upgrade With a Good Quality Heat Pump?
Based on our market research the lowest cost you could expect to pay for a mid-range heat pump solution is around $2,500. This could extend up to $6,000 for a top of the line product.
Based on our data from pre-vetted heat pump installers across Australia – we can see that installation costs for a heat pump start at around $1,500 to $2,000. This figure includes freight, plumbing & electrical work and some margin for the company completing the job.
So before any rebates are deducted you are looking at a minimum cost of around $4,000 to $4,500. If you’re lucky enough to be eligible for the 3 rebates described in this article then you can expect to deduct $1,500 to $2,600 depending on your circumstances.
As you can see, with a budget heat pump system, we estimate that you could expect to pay at least $1,400 out of pocket after the rebates in the best case, and likely to be $2,000 to $2,500 in most circumstances.
Risks of Heat Pump Hot Water Quotes That Are Too Cheap
Cheap heat pumps are more likely to fail. While at first glance some of the cheaper brands warranty’s look comparable to mid-range options, the problems usually occur when trying to get a claim processed. If you are without hot water, you may not have patience to deal with an unresponsive customer service team.
To minimise installation costs, some companies will cut corners including not installing to manufacturing instructions or to Australian electrical and plumbing codes. The Australian Water Heating Forum who are responsible for over 95% of all water heaters solar in Australia has expressed concerns over unlicenced and improper installations.
A cheaper heat pump will usually lead to higher electricity bills. The cheaper heat pumps are not as efficient and often rely on traditional less-efficient heating elements to achieve the daily heating cycle particular in colder months.
With any hot water system you are likely to need some customer support through the life of the system. Whether that it is to claim a warranty or simply some help to reconfigure the settings when you have solar installed, or additional people move into the house. Cheap installers are notoriously difficult to get on the phone after you have paid your invoice and often close shop once the customer complaints mount up.
To find a good quality heat pump and to find reputable pre-vetted heat pump installers, check out Solar Choice’s free comparison tool.
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What is the heat pump incentive in Victoria?
In Victoria, consumers can apply three different rebates to reduce the upfront cost of installing a heat pump hot water system:
1. Federal Heat Pump Rebate (STCs): The federal government offers Small-scale Technology Certificates (STCs) for heat pump hot water systems as part of the Renewable Energy Target. The value of these STCs varies based on the system installed and location.
2. Victorian Energy Upgrades Program (VEECs): This program generates Victorian Energy Efficiency Certificates (VEECs) when upgrading from an old gas or electric hot water system to a heat pump. The rebate value depends on the system being replaced.
3. Solar Victoria’s Heat Pump Hot Water Rebate: Eligible Victorians can receive a 50% discount (up to $1,000) on the cost of a heat pump hot water system after other rebates have been deducted.
Who is eligible for hot water rebate in Victoria?
Eligibility for the Victorian Hot Water Rebate includes:
1. Owner-occupiers of the home where the system is installed
2. Combined household taxable income of less than $210,000 per year
3. Property value under $3 million
4. Property address has not already received a Victorian hot water rebate
5. Hot water system being replaced is at least three years old
6. System installed by an accredited installer
Is the Vic government providing free hot water upgrades?
No, the Victorian government is not providing free hot water upgrades. While significant rebates are available, a heat pump hot water system will still have an out-of-pocket cost. The minimum cost for a budget heat pump system, after applying all eligible rebates, is estimated to be at least $1,400 out of pocket. In most cases, the cost will likely be between $2,000 and $2,500.
What is the payback for a heat pump?
The payback period for a heat pump hot water system depends on the upfront cost, efficiency of the system, and energy savings achieved. With rebates applied, the reduced upfront cost can make the payback period shorter. Heat pumps generally have lower operating costs compared to traditional electric or gas systems, leading to savings on electricity bills over time. Exact figures will vary based on individual circumstances.
Jeff has consulted on over 20MW of commercial solar projects, ranging from SMEs to ASX top 100 companies. Jeff has also provided independent advice to 100s of residential solar, battery and EV charging customers across every state in Australia. He holds an MBA from the Australian Graduate School of Management and is an expert in business strategy and financial analysis.
