Side by side
Solar hot water vs heat pump: which is better in 2026
In short
Both technologies can create STCs and both can suit a home. Solar hot water suits sunny sites with roof space; a heat pump suits a wider range of homes and works without a roof panel. We do not rank them. The better choice depends on climate, roof, existing system, tariff and the eligible product.
People ask which is better, solar hot water or a heat pump, as if there were a general answer. There is not. Each does the same job, heating water for a household, in a different way, and each fits some homes better than others. What they share in 2026 is that both can create STCs, which lowers the price of either.
How they work
A solar hot water system uses roof-mounted collectors to heat water using the sun, usually with a storage tank and a booster for cloudy days. A heat pump water heater works like a refrigerator in reverse, pulling heat from the air to heat water, powered by electricity.
Side by side
| Solar hot water | Heat pump water heater | |
|---|---|---|
| Energy source | Sun, with an electric or gas booster | Electricity, extracting heat from the air |
| Needs roof space | Yes, for collectors | No |
| Climate | Best with good sun | Works in a wide range, though performance varies |
| STCs | Yes, for eligible products | Yes, for eligible products |
| State schemes | Check the scheme | VEECs in Victoria; NSW certificate schemes |
| Running cost | Depends on sun and booster use | Depends on your tariff and the unit |
| Complexity of install | Roof work plus plumbing | Plumbing, electrical and placement for airflow and noise |
Cost and savings depend on the model, the household and the tariff, so we do not quote figures.
How the incentives apply
STCs for hot water are based on the product’s rating and the zone, which are set by the eligible product list. For which products qualify and how to document an install, see our hot water STC checklist and heat pump hot water STCs explained. A Victorian job may also create VEECs, and the interaction is covered in VEECs and STCs on the same job. For the state differences, see NSW vs Victoria heat pump rebates.
What to weigh
- Roof and orientation. Solar hot water needs collector space facing the sun.
- Existing system. Replacing a failed electric storage tank is a different job from a new install.
- Tariff and solar. A household with rooftop solar may be able to run a heat pump on its own generation, which changes the running cost picture. A household without solar faces a different one.
- Noise and placement. A heat pump has a fan and needs air around it.
- Product eligibility. Only listed products create STCs. Check before quoting.
Questions to put to a quote
Ask what the STC figure assumes: the product model, the zone and the installation date. Ask whether the quote is for a replacement or a new installation, since that changes the evidence the claim needs. Ask who the registered person on the STC claim will be, and whether any state certificate is also being claimed on the same job. Finally, ask what the warranty covers on the tank, the collectors or the compressor, and who services it. A quote that answers these in writing is easier to compare than one that leads with a headline saving. If you are choosing for a rental or a strata property, ask who owns the system and who pays the running cost, because the incentive logic changes when the person paying the bill is not the person buying the unit.
A fair verdict
For a sunny home with roof space and an old tank, solar hot water is a reasonable contender. For a home without that roof space, or one that wants electrification, a heat pump is often easier to place. Both are eligible for STCs where the product is on the list. We are a certificate buyer, not a hot water adviser, so get quotes for both and compare the net price after incentives. For installers, our hot water STCs page explains how we handle these claims and /pricing/ has the current rate. The pillar is at /hot-water/.
How we wrote this. Energy Merchants is a certificate trader, so we have a horse in this race. Statements about other providers are taken from their own public websites on the date shown above and are attributed. If something here is out of date, tell the desk and we will fix it.
Sources: Clean Energy Regulator: Small-scale Renewable Energy Scheme · Essential Services Commission: Victorian Energy Upgrades
Questions
Before you decide
Do solar hot water and heat pumps both get STCs?
Is a heat pump or solar hot water better in Melbourne?
Can I also claim a state incentive?
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