I fit both. Last week it was a gas storage tank in Wattle Grove at ten at night because the family wanted showers in the morning; the week before it was a heat pump in Oran Park because the owner had solar on the roof and no gas in the street. Neither choice is wrong, and the adverts that say one of them is always better are selling you the one they stock. Heat pump vs gas comes down to five things about your house, and you can work most of them out before you ring anyone. If the shower is cold right now, the hot water systems page covers same-day replacement with no call-out fee.
A heat pump is the cheapest hot water to run in South West Sydney, especially with solar on the roof, and the 2026 incentives cut the up-front gap to gas. Gas continuous flow wins when the household runs several showers at once in winter, has a good gas line already and does not have solar. Gas storage with a pilot light is the only one of the three that keeps working in a blackout. On LPG bottles, a heat pump wins outright.
Heat pump vs gas: what each one actually does
A heat pump hot water system is an electric storage tank with a small refrigeration circuit on top: a fan draws in outside air, the refrigerant pulls the heat out of it and a compressor pumps that heat into the water. It moves heat rather than making it, so it uses about a quarter to a third of the electricity of an old element tank. A gas storage tank burns natural gas or LPG under the tank and holds 135 to 170 litres hot. A gas continuous flow unit has no tank at all and heats the water as it passes, so it never runs out but is limited to a set number of litres a minute. The continuous flow vs storage guide covers that last split; this one is about the energy source.
Running costs: the heat pump wins, and solar widens the gap
Per litre of hot water, a heat pump on a normal tariff costs roughly a third of an electric element tank and a bit less than gas, and the gap grows every time gas prices move. Put solar on the roof and run the heat pump on a timer through the middle of the day, and the hot water is close to free for most of the year. Gas cannot use your solar at all. Gas also carries a daily supply charge whether you use it or not, so a house that only keeps the gas connection for hot water is paying for the pipe as well as the gas; switching to a heat pump and disconnecting the gas removes that line from the bill. On LPG bottles, which is most of the acreage around Austral, Rossmore and Bringelly, gas hot water is the dearest option of all and the heat pump wins without a contest.
Recovery and winter mornings: where gas still wins
A heat pump heats slowly. A 270 litre unit might take four or five hours to reheat from cold, and on a cold July morning the air it is pulling heat from is near ten degrees, so it works harder and slower. That is fine if the tank is sized for the household and heats overnight or through the day on solar; it is a problem if four people shower back to back and the tank is too small. Gas continuous flow does not care how many showers there were yesterday, it just needs the gas line to be big enough, and gas storage reheats in about an hour. So a big household with a 26 or 32 litre continuous flow unit and a properly sized gas line will not notice winter, and a heat pump household needs the tank sized up to match, which is why I always ask how many people and how many bathrooms before I recommend a size.
Noise, space and where the unit lives
A heat pump has a fan and a compressor, and runs at about the level of a quiet air conditioner outdoor unit. It needs air moving around it, so it cannot go in a cupboard without ventilation, and it should not sit under a bedroom window if it is going to run at dawn. On the compact lots in Edmondson Park, Gregory Hills and Oran Park the heat pump often ends up on the side path a metre from the neighbour's bedroom, and the fix is to run it on a timer in the middle of the day rather than at night, which also suits solar. A gas unit is silent apart from the burner and a continuous flow unit is small enough to hang on any outside wall, which is why gas is still the easy answer on a tight block with no solar.
Blackouts, gas lines and other practical things
Gas storage with a standing pilot keeps making hot water in a blackout. A continuous flow unit does not, because it needs power for the ignition, the fan and the flow sensor, and neither does a heat pump. If your street loses power often, that is a point for gas storage. Continuous flow units also need more gas than the tank they replace, and an undersized line starves them at full demand, so budget for the gas line check. A heat pump needs a power point or a circuit near it, a drain for the condensate it makes, and a tempering valve like any storage tank. Both get the same valves, the same pipework and the same compliance paperwork from a licensed plumber and gas fitter.
The 2026 incentives
Replacing an electric element tank, or a gas water heater, with a heat pump attracts federal small-scale technology certificates and NSW Energy Savings Scheme incentives in 2026, and the amount depends on the unit, the postcode and what it replaces (a gas swap attracts less than an electric one). We claim them for you and the discount comes off the invoice, which is what closes most of the up-front gap between a heat pump and a gas replacement. There is no incentive for a new gas unit. The heat pump hot water page explains how the claim works, and the hot water installation cost guide has the Sydney price ranges for each type.
Which one for which house
Solar on the roof, or planning it: heat pump. LPG bottles: heat pump. One or two people, or a household that showers at different times: heat pump, sized normally. A family of five with two bathrooms, natural gas in the street, no solar and a decent gas line: gas continuous flow. A street that loses power a few times a year and a household that cannot be without hot water: gas storage, or a heat pump with a bigger tank and the knowledge that it holds what is already hot. A rental where the landlord wants the lowest up-front price and nobody is thinking about bills: honestly, gas storage like for like is still what gets fitted, and it is a fair choice. If you are not sure, ring and describe the house; the answer takes about two minutes.
Frequently asked
Is a heat pump cheaper to run than gas hot water?
Yes for almost every house in South West Sydney. A heat pump uses about a quarter to a third of the electricity of an old element tank, which works out cheaper per litre than natural gas on 2026 prices and far cheaper than LPG. With solar and a daytime timer the running cost is close to nothing for much of the year.
Does a heat pump work in winter in Sydney?
Yes. Sydney winters are mild by heat pump standards; the units are rated to work well below zero. They do run longer and slower on a cold morning, so the tank is sized to the household and set to heat when the air is warmest, usually the middle of the day.
Are heat pump hot water systems noisy?
About as loud as a quiet air conditioner outdoor unit while running. Placed away from bedroom windows and run on a daytime timer, most owners never hear it. On a tight block we talk about where it goes before it is ordered.
Can I replace a gas hot water system with a heat pump?
Yes, and in 2026 the NSW and federal incentives apply to a gas-to-heat-pump swap as well as electric. The gas is capped off and certified, the heat pump needs a circuit and a condensate drain, and the old tank is taken away. If the house keeps no other gas appliance, you can also have the gas supply disconnected and stop paying the daily charge.
Licensed plumber and drainer based in Austral, 13+ years in the trade, working across Liverpool, Fairfield and the Macarthur region. About Paul