Should you replace gas hot water with a heat pump?
Heat pumps for hot water move heat from the air rather than generating it directly — typically delivering about 3.5 kWh of heat per kWh of electricity (a 'coefficient of performance' or COP of 3.5). Compared to gas storage hot water (which is typically 60-80% efficient), heat pumps use far less energy. The economic case has strengthened materially as gas prices have risen and electricity prices have stabilised: in most parts of Australia, switching from gas to heat pump now saves $400-1,200 per year on running costs.
Add the gas supply charge ($400-600/year just for being connected) and the case strengthens further — disconnecting gas entirely (assuming you don't have other gas appliances) saves the supply charge regardless of usage savings. State rebates (VIC, NSW, ACT, SA all have programs) typically cover $1,000-3,500 of the install cost, bringing payback periods to 4-8 years for most households.
The pairing with rooftop solar PV is especially compelling: program the heat pump to recover during 11am-3pm when your solar is producing maximum power, and the heat pump runs effectively for free during those hours. Most modern heat pumps have a built-in timer or can be controlled by a smart switch for this. The combination of (a) heat pump efficiency, (b) gas supply-charge elimination, (c) state rebates, and (d) solar pairing typically takes the lifetime cost of hot water from ~$15,000 over 15 years (gas) to ~$3,000-6,000 over the same period (heat pump). For solar payback see our Solar Payback Calculator.