How a Heat Pump Hot Water System Works

A heat pump hot water system heats water by moving heat out of the outdoor air and into a storage tank, instead of making heat with an element or a gas flame. The Australian Government's energy.gov.au describes it as using a refrigeration cycle to extract heat from the air to heat the water.

The Australian Refrigeration Council describes hot water heat pumps as vapour compression devices, similar to refrigerators but operating in reverse. A fridge pulls heat out of the food compartment and gets rid of it at the back. A heat pump pulls heat out of the air in your yard and puts it into your water.

That is the whole idea. Electricity runs a fan and a compressor, but most of the heat that ends up in the tank came from the air. It's also why a heat pump can sit at ground level: Your Home, the government's sustainable housing guide, notes that unlike solar hot water, heat pumps don't need roof-mounted collectors.

The cycle runs in four stages, over and over, for as long as the tank needs heat. An energy.gov.au factsheet on heat pump technology sets out the same four stages for every heat pump.

Step one: a fan draws outdoor air across a coil called the evaporator. The evaporator passes heat from the air into the refrigerant inside the coil, and that heat makes the refrigerant evaporate, changing from a liquid to a gas.

Step two: the compressor raises the pressure and the temperature of that refrigerant gas and sends it on to the condenser.

Step three: in the condenser, the hot refrigerant gives its heat to the water. Your Home illustrates integrated units with a condenser coil wrapped around the tank, and the Australian Refrigeration Council describes the condenser as a heat exchanger. As the high-pressure gas gives up its heat, it condenses back to a liquid.

Step four: an expansion valve lowers the pressure of the liquid refrigerant, which also drops its temperature, and the refrigerant flows back into the evaporator to collect more heat from the air. Then the loop repeats.

Heat pump efficiency is measured as a coefficient of performance, or COP: the heat delivered to the water divided by the electricity the unit uses. Your Home puts heat pumps at a COP of around 3 to 5. On the same measure, a new electric storage tank sits at about 0.95 and gas systems at 0.75 to 0.96.

In plain terms, a COP of 3 means three units of heat in the water for every unit of electricity you pay for. energy.gov.au puts a heat pump at about 30 per cent of the energy of a conventional electric system, and the Australian Refrigeration Council says one third on average. Those are national averages, not a promise for any particular house.

The difference matters because water heating is a large slice of the bill. Your Home estimates it at about 25 per cent of average household energy use in Australia, so the system you choose shows up on every quarterly bill for as long as you own it.

Your Home warns that a heat pump's COP can vary a lot with operating conditions, mainly the air temperature and the temperature of the water coming in, and that manufacturers quote COP under different test conditions. Two brochures can both be accurate and still not be comparable.

Two details help. The COP figure leaves out any boost element, so a unit that leans on its element often will use more than its COP suggests. And Your Home suggests the number of certificates a model earns on the Clean Energy Regulator register as a relatively fair way to compare efficiency for your climate zone. Only listed models are eligible for those certificates, so the register is worth checking before you choose.

Heat pump water heaters have not had a Minimum Energy Performance Standard. Energy Rating, the Australian Government's appliance efficiency program, says energy ministers agreed in December 2025 to introduce one, and a draft determination has gone out for public feedback. Until those rules apply, treat a headline COP as one figure measured under the maker's chosen conditions.

An integrated heat pump has everything in one assembly. Your Home describes the heat pump as fixed to the tank, with the compressor typically on top, so it connects much like a standard electric cylinder. That makes replacing an electric storage tank fairly straightforward, though some integrated units are larger than an electric tank of the same capacity because the compressor sits on top.

A split system puts the compressor, evaporator and fan in an outdoor unit and keeps the tank separate. In most split systems the condenser sits in the tank and two hoses carry refrigerant between the two. In some, the condenser is in the outdoor unit and a single hose carries hot water instead.

Separating the parts brings options an integrated unit can't offer. The tank and outdoor unit can be sized independently, the outdoor unit can go in a warmer spot, the tank can even go indoors, and the two are usually limited to 10 to 15 metres apart. The table further down sets the differences out factor by factor.

The refrigerant is the working fluid that carries heat around the loop. Your Home lists the common ones as R290 (propane), R744 (carbon dioxide), R134A and R513A. The last two are HFCs with global warming potentials of 1430 and 629, against 3 for propane and 1 for carbon dioxide. A leak through a fault, a poor installation or illegal disposal can, in Your Home's words, detract from or even negate the environmental benefit of using a heat pump.

Some refrigerants bring their own hazards. The Australian Refrigeration Council notes that hydrocarbons are highly flammable and that CO2 systems run at high pressure.

That is why the refrigerant circuit is never an owner's job. Integrated units are sealed systems holding 2 kg of refrigerant or less, and the ARC says no refrigeration work is needed when they are installed. A split system is different: installing, servicing or decommissioning one involves working with refrigerant, which needs a technician with the skills and training to handle it. Where the split system is designed for a controlled refrigerant, that technician needs a refrigerant handling licence from the ARC, and a refrigerant with a hazardous safety rating calls for training in handling it. If you suspect a refrigerant problem, leave the unit alone and call.

Cold air is the main thing that slows a heat pump, and the Sunshine Coast has little of it. Your Home says air-source heat pumps work best in relatively warm, humid climates, and that efficiency falls in colder climates because the refrigerant is less able to absorb heat. energy.gov.au adds that not all models are designed for cold locations where it regularly drops below 5°C in winter.

Bureau of Meteorology records for Sunshine Coast Airport put the July mean minimum at 9.7°C and the July mean maximum at 21.2°C, the coolest month on both measures. The mean 3pm temperature in July is 19.6°C. Summer nights hardly cool at all: the January mean minimum is 21.3°C.

So a heat pump on the coast spends most of its life in conditions the cold-climate warnings were not written for. Those are readings from a coastal airport, though, and a hinterland property shouldn't assume the same figures. If you live up the range, check the model's tested operating temperature range on its datasheet, as Solar Victoria's buyer's guide suggests.

Because a heat pump can heat at any hour, when it runs is a setting rather than a fixed fact. Your Home says most heat pumps include a built-in timer that can be set to run during the day, when excess solar power or cheap electricity is most likely to be available. If your panels aren't producing enough during that window, the unit draws from the grid instead.

Daytime running suits the heat pump itself as well. Your Home notes that timing water heating for the afternoon, when the air is warmer, can reduce a heat pump's energy use. On the July figures above, the 3pm average is close to ten degrees warmer than the overnight minimum.

Off-peak controlled load is less simple. Your Home says some heat pumps are not compatible with either controlled load tariff and others work only on Controlled Load 2, which is Tariff 33 in Queensland. Solar diverters, sometimes fitted to electric tanks, are not compatible with heat pumps at all.

Many heat pumps include an electric boost element that heats water directly during very cold weather or heavy use, and Your Home warns that running cost rises if that element is used often. When a heat pump bill is higher than expected, the boost element is one of the first things worth asking about.

The other likely causes follow from the sections above: a timer set to heat overnight when the air is coolest, a tariff the model isn't designed for, or an outdoor unit placed in a cold or shaded spot. Your Home's point that a split system's outdoor unit can be placed somewhere warmer to improve efficiency works in reverse too.

A heat pump that runs on its element most of the time is heating the way an ordinary electric tank does. If yours seems to be doing that, a plumber can check the settings and the installation. The controls behind the panels are not an owner job.

A heat pump makes some noise because it has a compressor and a fan; energy.gov.au compares the compressor to an air conditioner's. Where that noise lands depends on the configuration. On an integrated unit, Your Home points out, the noisy component sits high up, so sound can carry over a fence to a neighbour's window. A split system's outdoor unit sits low, which helps.

On a block where the only workable spot is a side passage beside bedrooms, that difference can decide the choice. A split outdoor unit placed low, or a different spot altogether, is worth raising before anything is ordered.

Clearances, airflow and positioning are covered in more detail on the heat pump page.

A heat pump is not the right answer for every house, and the list of drawbacks is short but real.

Upfront cost: energy.gov.au describes heat pumps as expensive to purchase and install but cheap to run, so the saving arrives over years rather than on day one.

Noise and position: there is a compressor and a fan outside, and a block with nowhere suitable for them is a genuine problem.

Complexity: Solar Victoria's buyer's guide notes that heat pumps are more complex internally, so the quality of design and manufacture matters.

Refrigerant: a leak of a high-GWP refrigerant undoes part of the environmental case, and installing, servicing or decommissioning a split system needs a technician trained to handle refrigerant.

Tariff fit: some models won't run on a controlled load tariff at all.

None of these rules a heat pump out on its own. They are the questions to settle before buying, and the comparison guide weighs them against solar, gas and electric.

Installing a heat pump touches up to three separately licensed areas, and none of them is owner work.

The plumbing: Business Queensland states that heat pump hot water systems must be installed by a hot water installer holding a solar and heat pump endorsement from the Queensland Building and Construction Commission (QBCC). A temperature control device must also be fitted to every new and replacement hot water system.

The electrics: Queensland's Electrical Safety Office says anyone doing electrical work must hold an electrical work licence, and that DIY electrical work is illegal. Any circuit or connection work for the unit is a job for a licensed electrician.

The refrigerant: integrated units arrive sealed, while a split system needs a technician trained to handle refrigerant for the refrigerant side of the installation, holding an ARC licence where the system is designed for a controlled refrigerant.

When you get quotes, it's reasonable to ask which of these licences the installer holds and who will do the rest. Ask for the exact model number too, so you can check it on the Clean Energy Regulator register.