Electric hot water systems

Last updated: 2 February 2021

There are two types of electric hot water systems:

  1. Storage
    Water is heated and stored in an insulated tank for use when required.
  2. Instantaneous (continuous flow)
    Water is heated only when required. A storage tank isn't needed.

In most houses in Victoria, electric hot water systems are storage systems.

Storage hot water systems

Electric storage hot water systems heat water with an element in the bottom of the unit and store it in an insulated tank, ready for use throughout the day.

Mains pressure systems – the most common type of storage system – provide hot water at a similar pressure and flow rate as cold water. This allows more than one tap to be used at a time without affecting supply pressure.

Unlike gas hot water systems, electric water heaters can be located inside or outside, as there is no flue required.

Energy efficiency and running costs

Electric hot water systems are the cheapest to buy but the most expensive to run.

All storage systems lose some heat through the walls of the tank, so they still consume energy even if you don't use any hot water. For small households, these fixed heat losses can comprise a high proportion of overall hot water energy use.

This is why it's important to buy an efficient, high star-rated water heater that has a well-insulated storage tank.

Electric hot water storage systems also require a larger storage capacity than gas units to provide the same amount of hot water.

Compare running costs

The type of hot water system you have makes a big difference to your energy bills.

Compare running costs of hot water systems.

Tariffs and electric hot water systems

Electric hot water systems are subject to different time-of-use tariffs, depending on the size of the storage tank.

If your storage tank is 160 litres or less, or you have an instantaneous system, you will be charged at the more expensive peak tariff.

If you have a larger storage system, you can move to the cheaper off-peak tariff, where the electricity is supplied to the system overnight at a lower tariff.

Flexible pricing

Flexible pricing options apply to your total electricity usage, not just the electricity used by the water heater.

If you have an electric hot water heater on an off-peak tariff and you are considering changing to a flexible pricing plan, consult your energy retailer to discuss your options.

Learn more about flexible pricing.