Electrifying Australia’s domestic hot water

New research by the UTS Institute for Sustainable Futures (ISF) for the Australian Renewable Energy Agency (ARENA) shows how electric water heating systems can help Australia meet decarbonisation targets and support the transition to renewable energy, while providing significant cost savings to consumers. 

Domestic hot water use is responsible for around one fifth of Australian residential greenhouse gas emissions and a quarter of current household energy use. Decarbonising domestic hot water is, therefore, an important part of Australia’s pathway to net zero. Phasing out gas hot water systems in favour of electric technologies is integral to this process. Electric water heating technologies enable greater efficiency and can provide a substantial amount of flexible demand to better match renewable generation. 

This research aims to clarify domestic hot water’s role in accelerating the energy transition, considering the benefits and challenges of the two leading electric water heating technologies: heat pumps and resistance. Heat pump water heaters offer high levels of efficiency, significantly reducing energy use and emissions, but they are not suitable for all homes. Resistance electric water heaters with storage are less efficient, but when coupled with smart technology and time-of-use metering can provide high levels of flexibility to soak up excess solar generation and lower bills for consumers.

ISF researchers looked at various scenarios for decarbonising hot water by phasing out gas water heaters in favour of a mix of flexible and efficient electric units. The research found that following a business-as-usual approach represents a major missed opportunity to use domestic water heaters as a significant source of flexible demand. A rapid electrification approach that combines both flexible resistance and efficient heat pumps with rapid phase out of gas would provide 31 GWh/day of flexible demand while reducing annual greenhouse gas emissions from domestic water heating by 80 percent compared to the current trajectory. The success of this approach, however, relies on supporting policy and consumer incentives.

ISF Research Director David Roche says, “It’s well known that current electric water heating technologies can both save energy and provide significant demand flexibility. Our work shows that, with the right policy mix, domestic hot water alone can add over 30 GWh of energy storage to the National Electricity Market – the equivalent of over 2 million home batteries like the second-generation Tesla Power Wall. That would reduce consumers’ energy bills by over $6 billion per year while accelerating the path to net zero carbon emissions.”

ARENA CEO Darren Miller says, “Through deployment of innovative technology solutions, we can help to unlock the potential of domestic hot water systems across Australia to help reduce energy bills and lower emissions. As households continue to purchase electric hot water systems, we can look to options to dynamically manage load, ensuring the benefits of renewables are realised at least cost to consumers. The report prepared by ISF offers the market valuable insights and provides a pathway forward in understanding how flexible demand can play a larger role.”

Key points

• The phasing out of gas water heaters in homes would reduce the combined annual energy bills of consumers by $4.7–6.7 billion by 2040.
• Domestic water heaters could provide flexible electricity demand equal to 15–31 GWh/day.
• Rapid electrification of water heating could reduce emissions by 80% compared to remaining on the current trajectory, from 3.5 to 0.71 million tonnes per year of CO₂ in 2040.
• To provide maximum benefit through electrification of water heating does not require a choice between either efficiency or flexibility – both can be achieved at scale with the right policy mix
• Governments and industry must work together to address several barriers that are hindering uptake of electric water heating in homes and activation of their flexible demand potential.