Gas vs Electric vs Solar: What's the Best Hot Water System?
- Lewis New
- 7 days ago
- 11 min read
Choosing a new hot water system is one of the most important long-term decisions you'll make for your home. It impacts your daily comfort, your energy bills for the next decade, and your property's environmental footprint. With gas, electric, and solar options all on the table, making the right choice can feel overwhelming.
This comprehensive 2026 guide is designed to give you a clear, doubt-free answer. We break down the complete difference between each system, comparing the upfront costs, long-term running costs, performance in the Cairns climate, and all available government rebates to help you make a smart, informed investment.
In This Guide:
A Quick Look at Your Hot Water Options
Gas Hot Water Systems
Electric Hot Water Systems
Solar Hot Water Systems
Government Rebates & Running Costs Explained
The Verdict: A Side-by-Side Comparison
Our goal is to empower you with all the information you need. When you're ready for a personalised solution, our Cairns Hot Water specialists are here to provide an expert recommendation and quote.
A Quick Look at Your Hot Water Options
Before we dive into a detailed comparison, it's important to understand the fundamental differences between the main types of hot water systems available in Cairns. Each technology uses a different method to heat your water, which directly impacts its cost, performance, and efficiency. Your choice will primarily come down to one of these three categories.
Gas Hot Water Systems
Gas systems use a burner to rapidly heat water on demand (known as continuous flow or instantaneous) or to keep a supply ready in a storage tank. They are renowned for their powerful performance and are a popular choice for families with high hot water demand.
Electric Hot Water Systems
Traditional electric systems use an electric element submerged in a storage tank, similar to a large kettle. While simple and cheap to install, a far more energy-efficient electric option is the modern heat pump hot water system, which extracts warmth from the ambient Cairns air to heat the water instead of creating its own heat.
Solar Hot Water Systems
Harnessing the Queensland sun, solar hot water systems use roof-mounted collectors to absorb solar energy and heat water, which is then stored in an insulated tank. They have the lowest running costs but almost always require an electric or gas booster for cloudy days or periods of high use during the wet season.
Gas Hot Water Systems
Gas hot water systems are a popular choice in Cairns, offering powerful performance and faster heating than most electric models. They are available as instantaneous (tankless) units that heat water on demand or as traditional storage tanks. While they can have a longer lifespan, they typically involve a higher upfront cost and more complex installation requiring a licensed gas fitter.
Pros
Lower Running Costs: Natural gas is often cheaper than peak-rate electricity, leading to lower ongoing energy bills compared to standard electric storage systems.
Faster Heating & Continuous Flow: Instantaneous models provide an endless supply of hot water and only use energy when you turn on the tap. Storage models also reheat significantly faster than their electric counterparts.
Reliable Performance: Unlike solar, the performance of a gas system is not affected by cloudy days or the wet season, guaranteeing consistent hot water 24/7.
Longer Lifespan: With regular maintenance, continuous flow gas systems can last up to 20 years or more, often outlasting other types of water heaters.
Cons
Higher Upfront Cost: Gas systems, particularly instantaneous models, generally have a higher purchase and installation cost than traditional electric units.
Installation Complexity: Installation must be performed by a licensed gas fitter and may require running new gas lines and ensuring adequate ventilation, which can add to the cost.
Environmental Impact: As a fossil fuel, natural gas produces greenhouse gas emissions, making it a less environmentally friendly option than solar or heat pump systems.
Gas Supply Dependent: Your property must either be connected to the natural gas network or have adequate space for storing LPG bottles.
Is Gas Hot Water Being Phased Out in Queensland?
While some Australian states are phasing out gas connections in new home builds to meet emissions targets, there is currently no plan to phase out existing gas hot water systems in Queensland. However, government regulations do require that all new gas installations meet strict safety and compliance standards. This is why a gas compliance certificate is mandatory for any new installation or modification, ensuring your system is safe and efficient from day one.
Choose a Gas System If...
You have a large family or consistently high hot water demand.
You want the convenience of "endless" hot water from a continuous flow unit.
You already have a natural gas connection to your property.
Reliability during any weather (including the wet season) is your top priority.
Electric Hot Water Systems
Electric hot water systems are a common and straightforward option, known for their lower upfront cost and simpler installation compared to gas or solar. However, traditional electric storage units are the least energy-efficient, leading to higher long-term running costs. This has paved the way for modern, highly efficient heat pump technology to become the leading electric choice.
The fundamental difference lies in how they generate heat. A traditional electric storage system works like a giant kettle, using a power-hungry electric element submerged in the water to create heat directly. A heat pump system works like a reverse-cycle air conditioner; it doesn't create heat but instead uses a small amount of electricity to pull warmth from the ambient Cairns air and transfer it into the water. This makes it vastly more energy-efficient.
Feature | Traditional Electric System | Heat Pump System |
Upfront Cost | Pro: The lowest initial purchase and installation cost of any system. | Con: A significantly higher initial purchase price. |
Running Costs | Con: The highest ongoing running costs due to poor energy efficiency. | Pro: Exceptionally low running costs, saving up to 80% on electricity use. |
Energy Efficiency | Con: The least efficient hot water technology available. | Pro: Highly efficient, especially in the warm Cairns climate. |
Rebates | Con: Not eligible for any government energy-saving rebates. | Pro: Eligible for generous State and Federal government rebates. |
Installation | Pro: Simple installation, can be placed almost anywhere, including indoors. | Con: Requires a specific location with good airflow and produces some noise. |
Environmental Impact | Con: A large carbon footprint due to high electricity consumption. | Pro: A much smaller, more environmentally friendly carbon footprint. |
The Heat Pump Advantage: A Smarter Electric Option
A heat pump is a super-efficient type of electric hot water system that is perfectly suited to the Cairns climate. Instead of using a power-hungry element to create heat, it works like a reverse-cycle air conditioner, capturing warmth from the ambient air and transferring it into the water. This process uses up to 80% less electricity than a traditional system, though like any system, faults can still occur and leave you asking why there is no hot water. Heat pumps are eligible for significant government rebates, which can drastically reduce their higher initial purchase price.
Choose an Electric System If...
Your upfront budget is the absolute top priority (for a traditional system).
You are looking for extremely low running costs and high efficiency (for a heat pump).
You do not have access to a natural gas connection at your property.
You want to take advantage of generous government rebates to install an energy-efficient system (for a heat pump).
Solar Hot Water Systems
Solar hot water systems harness the abundant sunshine in Cairns to provide the lowest possible running costs of any system type. By using roof-mounted collectors to absorb the sun's thermal energy and transfer it to water in a storage tank, they can significantly reduce your reliance on grid electricity or gas. While they have a higher upfront cost and are weather-dependent, they offer exceptional long-term savings and environmental benefits.
Pros
Lowest Running Costs: Once installed, the energy from the sun is free. This can reduce your water heating energy consumption by 50-90%, leading to a dramatic reduction in your quarterly bills.
Most Environmentally Friendly: As a renewable energy source, solar hot water produces virtually no greenhouse gas emissions, making it the greenest and most sustainable choice available.
Generous Government Rebates: Solar hot water systems are eligible for generous federal rebates (in the form of STCs), which are applied as a point-of-sale discount to help reduce the high initial cost.
Increases Property Value: A high-quality solar hot water system is a significant selling feature for modern buyers, adding tangible value to your property.
Cons
Highest Upfront Cost: Even after rebates, solar systems typically have the highest initial purchase and installation cost of the three main options.
Weather Dependent: Performance is significantly reduced on overcast or rainy days. A reliable gas or electric booster is essential for consistent hot water in Cairns.
Roof Requirements: Installation requires a suitable, structurally sound roof area that is relatively free from shading, preferably facing north.
More Complex System: With collectors, tanks, pumps, and boosters, the system has more components that may require maintenance or repair over its lifespan.
How Does Solar Perform in the Cairns Wet Season?
This is a critical consideration for any Cairns resident. During periods of heavy cloud cover common in the wet season, the solar collectors will produce significantly less heat. This is why virtually every solar hot water system installed in our region is a "solar-boosted" model. An integrated electric or gas booster automatically activates when the sun isn't strong enough to heat the water to the required temperature, guaranteeing you still have reliable hot water year-round. This reliability is a key factor in investment property plumbing for landlords.
Choose a Solar System If...
Your number one priority is the lowest possible long-term running costs.
You are environmentally conscious and want to maximise your use of renewable energy.
You have a suitable, unshaded, north-facing roof space on your property.
You plan to stay in your home long-term, allowing the upfront investment to pay for itself through energy savings.
Government Rebates & Running Costs Explained
Understanding the true cost of a hot water system goes beyond the purchase price. Government rebates can significantly reduce your upfront investment, while long-term running costs determine the overall value you receive over the next decade. This section breaks down the financial incentives available to Cairns residents and compares the estimated running costs of each system type, which is a vital part of choosing the right hot water system for your Cairns home.
Does solar hot water have a rebate in QLD?
Yes. The Queensland Government offers a significant rebate through the Climate Smart Energy Savers Program. This state-based incentive is designed to help households upgrade from older, inefficient hot water systems to modern, energy-saving models like heat pumps and solar hot water systems. This rebate provides a direct, upfront reduction in your purchase cost.
Who is eligible in Cairns?
To be eligible for the Queensland rebate, you must be a Queensland resident upgrading from an older system to a new, high-efficiency model with a 4-star rating or higher. As of late 2025, the rebate is up to $1,000 for eligible low-income households and up to $800 for all other households. It is essential to apply for this rebate before your new system is installed and to use a licensed installer.
Federal Rebates: The SRES Scheme Explained
In addition to the state rebate, the Federal Government's Small-scale Renewable Energy Scheme (SRES) provides a major discount for eligible solar and heat pump systems. This scheme generates a number of Small-scale Technology Certificates (STCs) based on your system's efficiency and location. These STCs are then sold on your behalf (usually handled by the installer) and applied as a point-of-sale discount, often saving you hundreds or even thousands of dollars off the final price.
Estimated Annual Running Costs:
While rebates reduce the initial price, running costs are what you pay for the next 10-15 years. Based on typical usage for a family of four in Cairns and projected 2026 energy prices, here are the estimated annual costs:
Traditional Electric System: $900 - $1,200 per year
Gas System (Natural/LPG): $500 - $800 per year
Heat Pump System: $250 - $400 per year
Solar System (with booster): $150 - $300 per year
*These are estimates only. Actual costs will vary based on your household's usage, energy tariffs, and final system efficiency.
The Verdict: A Side-by-Side Comparison
With all the details covered, making a final decision is easier when you see the options side-by-side. Your 'best' choice ultimately depends on your top priority: are you focused on the lowest initial price, the cheapest long-term bills, or maximum reliability? This table summarises the key differences to help you decide.
Feature | Gas Hot Water | Electric (Heat Pump) | Solar Hot Water |
Upfront Cost | Medium | High (Reduced by rebates) | Highest (Reduced by rebates) |
Annual Running Cost | ~$500 - $800 | ~$250 - $400 | ~$150 - $300 (Lowest) |
Key Pro | Heats water instantly; reliable in all weather. | Highly energy-efficient; very low running costs. | Lowest possible running costs; most eco-friendly. |
Key Con | Produces emissions; running costs tied to gas prices. | Higher upfront cost; requires good airflow for installation. | Highest upfront cost; weather-dependent (needs a booster). |
Best For... | Households with high water demand wanting on-demand heating. | Homeowners seeking the best balance of low running costs and all-weather reliability. | Environmentally-focused households with a suitable roof, aiming for the lowest bills. |
So, Which System Should You Choose?
If your top priority is the lowest possible upfront cost:
A traditional electric storage system (not detailed in the table) remains the cheapest to purchase and install, but always comes with the highest long-term running costs.
If your top priority is a balance of very low running costs and all-weather reliability:
An Electric Heat Pump is often the best all-around choice for Cairns, offering huge energy savings and eligibility for multiple rebates.
If your top priority is the absolute lowest long-term bills and environmental impact:
A Solar Hot Water system is the ultimate choice, provided you have a suitable roof and the budget for the initial investment.
Ultimately, the best system is one that is correctly sized for your family and professionally installed. Regular check-ups are also key to maximising the lifespan of your investment, which is why we provide a complimentary plumbing maintenance check with our plumbing services, ask about this when we are onsite.
Frequently Asked Questions
Here are a few more common questions Cairns homeowners ask when choosing a new hot water system.
Q1. What size hot water system do I need?
The right size depends on your household's peak water usage, not just the number of people. As a general guide, a 1-3 person home may need a 125L-160L tank, while a 4-5 person home often requires 250L+. We can provide a precise recommendation during a consultation when you contact us.
Q2. How long should a new hot water system last?
Most modern storage tank systems last 10-15 years. For a detailed breakdown of the warning signs an older system gives, please read our guide on the 5 Signs Your Hot Water System Needs Replacing. The key to maximizing any system's lifespan is regular servicing, which is especially critical for gas system maintenance to ensure ongoing safety and efficiency.
Q3. Do I need a compliance certificate for a new hot water system?
Yes. In Queensland, any new hot water installation must be certified by a licensed professional to ensure it is safe and meets all regulations. For gas units, this involves issuing a gas compliance certificate to confirm the work complies with all legal standards.
Q4. How long does it take to install a new hot water system?
A straightforward, like-for-like replacement of an existing hot water system can typically be completed by our licensed plumbers in 2 to 4 hours. More complex installations, such as converting to a different type (e.g., electric to solar) or relocating the unit, may take a full day.
Q5. Are the more expensive systems (solar, heat pump) really worth it?
For most Cairns households, yes. While the initial purchase price is higher, the significant savings on your quarterly energy bills mean that highly efficient systems like solar and heat pumps pay for themselves over their lifespan. The available government rebates also make the upfront investment much more manageable.
Conclusion
Choosing the right hot water system for your Cairns home is a balance between your upfront budget, long-term running costs, and performance needs. Whether it’s the reliability of gas, the efficiency of a heat pump, or the sustainability of solar, the best decision is an informed one. This guide has provided the data to help you invest with confidence.
The final step is a personalised recommendation based on your property and household usage. For expert advice and a detailed, upfront quote on the perfect system for your home, contact our Cairns Hot Water specialists today.
