Mozo guides

Hot water is a big energy cost: Here's why

Bathroom tiles and shower

If you’ve ever taken a good look at your energy bill, you may have noticed that in months you’ve used a lot of hot water your cost will increase quite sharply. Water heating accounts for around 30% of the average household bill, but for something only warming up our water why is the cost so high?

Just how much you’re paying for hot water will be based on the size and type of your water tank, and the technology used, along with a range of other factors you may not have even considered. We’ve broken down why hot water is a big cost on your energy bill, and some differences you can make to cut costs. 

The size of your hot water tank can affect your costs

No surprises here, but a bigger hot water tank will generally mean you’ll be paying more for water heating on your energy bill. 

Finding the right sized water tank can be a bit of a struggle: if you’ve got too little storage then you’ll be having cold showers, too large a tank and you’ll be paying to heat water you won’t be using.

Those in colder areas will also usually need a larger tank than those in warmer climates, as hot water usage is generally higher. 

A general rule is to account for 30-40L of water per person per day if you have a gas hot water tank, or 55-60L for an electric water tank.

Electric vs gas water heating

There’s a good chance that you’re using whatever water heater was installed in your home when you moved in, and may not have even given it much thought. If water heating accounts for a big cost for your household, however, you may want to consider a gas heater.

Instantaneous electric water heaters cost on average $780 a year to run, while off-peak electric water storage systems cost $700 on average to run. Gas systems are much cheaper, with a 4-star gas water storage system costing around $415 a year to run with a 5.5-star instantaneous gas water system costing just $340 a year. 

If you’re really looking to cut costs, a solar-powered water heating system with a gas boost costs on average just $85 per year to run, with the added benefit of reducing your household’s carbon emissions. Solar-powered water systems with an electric boost or no boost at all are also available.

Should you heat water instantaneously or off-peak only?

Instantaneous water systems, otherwise known as continuous water heaters, allow for water to be heated at any time of the day. This can benefit those who may run out of hot water on an off-peak system and would otherwise have to wait overnight for more hot water, as a continuous system reheats water as soon as needed. 

Off-peak systems often require a bigger tank, and only heat water during the off-peak periods of the day (generally overnight.) If you’re able to comfortably use the water in your tank or less, never going over, then an off-peak system may be suitable for your household. 

Instantaneous water systems are generally more expensive to run due to the need for an energy supply 24/7, and the fact that water is reheated as it is needed rather than just once per day. Off-peak systems allow for your water tank to be heated just once per day, cutting costs on water heating even if your system is slightly larger than its continuous heating counterpart. 

Maintaining your tank can save you money

As with most other home appliances, newer is often better. As we develop newer, more energy-efficient technologies, they’re more frequently included in our modern devices. A newer water-tank will likely be more cost effective than one from 20 years ago, however buying a new system isn’t the only way to cut costs here.

Proper maintenance of your existing hot water tank can ensure that it is running as it should and not chewing up extra energy. 

One way to keep your system running smoothly is by replacing the sacrificial anode inside a hot water storage system, as the system will begin to rust from the inside should the anode stop working. This requires a qualified technician, but is only necessary to replace once and five years. 

Easier jobs you can do yourself include conducting checks for leaks in the system and draining your water system roughly once every 6 or so months, as well as general cleaning of the unit. 

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Cooper Langby
Cooper Langby
Money writer

Cooper writes across all aspects of personal finance here at Mozo. With a double degree in Journalism and Communications & Media from the University of Wollongong, Cooper has previously written sports content for the Fansided network. He is now turning his focus to finances and is always looking for new ways to educate himself and our readers on the best ways to save money, and budget effectively.