The great news for NSW customers is that there are 2 governments rebates that are available for customers looking to upgrade their hot water system to an energy-efficient heat pump hot water system. There is the federal government’s Small-Scall Technology Certificates (STCs) and the NSW Government’s Energy Savings Scheme.
The state and federal governments have recognised heat pump hot water systems as the most efficient way to heat water and the rebates are designed to provide extra encouragement to improve your house’s carbon footprint.
You can combine both rebates together to collectively reduce the overall cost of the solution by around $700 to $1,100 depending on your circumstances which we will explain below. For a mid-range quality system, you could still expect to pay at least $2,500 after these rebates are applied.
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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 enables eligible renewable energy projects like solar panel installations and heat pump hot water systems to generate certificates (called STCs) in relation to their contribution towards the renewable energy target.
Put simply, more energy savings will create more certificates. The certificates can be sold on an open market which is usually completed by the installing company on your behalf. This means they can offer you a lower price which should match the value of the certificates.
The main eligibility is that you install a brand and model of heat pump that the Clean Energy Regulator has tested and accredited. Most heat pump hot water systems that are marketed in Australia have been through this process but you can see the full list 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.
To give you an idea we’ve broken down the rebate values for some of the most popular heat pump hot water systems in New South Wales:
The STC scheme was designed to reduce over time until 2030 when the scheme ends altogether. That means the value of the rebate you can deduct off the install cost will be lower the longer you wait.
In practice the number of certificates reduces on the 1st of January each year, so installers can usually hold their prices while a customer makes their decision. It is normal that quotes would have a validity of around 30 days.
NSW Government Heat Pump Rebate – Energy Savings Scheme
The NSW Energy Savings Scheme was first established in 2009 and is documented in the NSW Electricity Supply Act 1995. The scheme was designed to incentivise Australians households and businesses to reduce greenhouse gas emissions through upgrading their appliances like lighting, air conditioning, pool pumps and hot water systems.
The hot water system upgrades is specifically covered under the Home Energy Efficiency Retrofits (HEER)
The upgrades will need to be completed by an Accredited Certificate Provider (ACP). This same provider will be able to assess your existing hot water system and determine the value of the rebate that will apply. Similar to the STC scheme, the upgrade will generate Energy Saving Certificates (ESCs) which correspond to the amount of energy savings the upgrade will achieve.
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How much is the NSW ESC rebate for heat pumps?
The calculation for the ESC rebate is very complicated and is defined by Equation 16 of the Energy Savings Scheme rule which relates to Home Energy Efficiency Retrofits (HEER). All buyers really need to know is that the value of the rebate is determined by the calculated electricity and/or gas savings that the new solution will deliver.
As a rough guide we’ve calculated the typical savings you could expect for upgrading from an electric storage hot water system and a gas storage hot water system to a heat pump hot water system:
Upgrade Type
Approx. number of ESCs created
Estimated Rebate Value
Replacing an electric hot water system with a 200L heat pump
40
$450
Replacing a gas hot water system with a high efficiency heat pump
20
$230
Please note that the actual NSW ESC rebate value will vary depending on your own circumstances. You can use Solar Choice’s comparison service to compare accurate quotes including the relevant rebates from accredited hot water heat pump installers.
NSW heat pump rebate has a minimum contribution
Currently the NSW rebate scheme has a mandatory minimum contribution of $220 from the end customer. This minimum payment has increased from $33 as the NSW Government is attempting to combat some of the less reputable operators who were marketing ‘free upgrades’ or ‘$33 upgrades’.
Beware of too cheap or ‘free’ hot water heat pump upgrades
Like most rebate-driven industries, it attracts all types of businesses to the market, including those who are not focused on delivering long-term value to their customers. Generally a reasonable quality heat pump would cost around $2,000 to $4,000 including installation and disposal of your old system, after both rebates have been deducted.
Is it possible to get a good quality heat pump upgrade for free?
Lets review the inputs:
Most reputable brands of heat pump hot water systems start with a minimum cost of $2,500 but can range up to $6,000 for top end systems.
The proper installation of a hot water system usually costs at minimum $1,000. Works need to be completed by a qualified plumber and a qualified electrician. This figure can increase for anything non-standard like switchboard upgrades and concrete slabs. This means the absolute minimum cost should be around $3,500 before any rebates are applied.
In NSW the value of the two rebates will enable you to deduct somewhere between $700 and $1,100 off the total cost of the project depending on your individual circumstances.
As you can see, to get a reasonable quality heat pump upgrade for a best case installation you could expect a starting cost of around $2,500 to $4,000 after the rebates are applied. In reality, this could extend up to $4,000 to $6,000 for a premium quality heat pump with more complex install requirements.
Key Risks of Cheap Hot Water Heat Pump Quotes
Poor quality heat pump hot waters systems will often fail. Even though these systems come with warranties, the lower cost system have unclear warranty terms and unresponsive customer service teams which make life difficult for customers to find a resolution. If you have to pay for another system to be installed you will not be eligible for the rebates a second time.
In order to keep prices to a minimum, heat pump installers are often trying to complete 3 or 4 installations in a day. To achieve this some corners can be cut which will lead to problems with the systems performance. The majority of these installations are not inspected by regulators. Improper installations will always void your warranty with the manufacturer.
A cheaper heat pump will usually lead to higher electricity bills. The cheaper heat pumps are not as efficient and often rely on traditional heating elements (booster elements) which are less efficient.
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 hot water system, you can check out our heat pump reviews which have been written independently by Solar Choice.
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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.
