Heat pump hot water system

Written and checked by the Energy Merchants desk · Reviewed 2 October 2026

A heat pump hot water system works like a refrigerator in reverse. A fan draws in outside air, a refrigerant absorbs its heat, a compressor concentrates it, and that heat warms the water in the tank. Because it moves heat instead of making it, it typically uses far less electricity than a standard electric storage heater.

Heat pumps work best where air is mild, but modern units operate in cold weather too, with a drop in efficiency.

In practice

For installers, a heat pump is a two-way certificate job. Eligible models can create STCs under the federal scheme, and in Victoria they can also create VEECs under Victorian Energy Upgrades. The certificate counts depend on the model, its listing and the property’s circumstances. Our heat pump hot water STCs explained walks through the federal side.

What the desk sees on a heat pump claim comes down to a short list: the model must be on the approved list, the serial number plate must be legible in the photos, the installation type must be correct, and the old system’s removal must be shown where it applies. The hot water and heat pump STC checklist lays out the evidence.

Victorian jobs add their own steps, and the VEEC and STC can sit on the same job. See VEECs and STCs on the same job. Pricing for each certificate type is separate, and you can check it on pricing.

Common confusion

A heat pump is not the same as a solar water heater. A solar water heater collects heat from the sun with rooftop panels. A heat pump takes heat from air and uses electricity to do it. They are both small-scale technologies, but listings and certificate calculations differ. See solar water heater.

A heat pump is also not the same as a reverse-cycle air conditioner, which heats and cools rooms rather than water. Reverse-cycle systems are a different activity under the state schemes.

For the full process, see hot water STCs. More terms are in the certificate trading glossary.