Urgent action needed to stop Australia being flooded by cheap, inefficient ‘faux’ hot water heat pumps

Australia is currently seeing a massive increase in hot water heat pump (HWHP) installations. The Clean Energy Regulator documented 159,848 HWHP systems were installed in 2023, up from 80,895 the previous year.

The rise has been fuelled by government incentives and rebates to install hot water heat pumps. Federal and State governments have recognised heat pumps are good for the environment, good for mitigating climate change, and can reduce the cost of living for householders.

Installations have also been fuelled by the decision of the Victorian and ACT governments to ban new gas connections.

But the increase has also seen a rise in consumer complaints about heat pumps.

Anecdotal stories include hot water heat pumps being installed in lounge rooms and toilets when they should be outside; units that stop working after just a few months and have to be pulled out; and manufacturers refusing to replace broken units or provide refunds, etc.

The Independent Pricing and Regulatory Tribunal in NSW has documented cases of heat pumps being incorrectly installed that have led to safety issues; certificates of compliance signed by someone other than the installer; oversized and undersized HWHPs being installed, or ones not appropriate for a site; installers refusing to install equipment as agreed; low pressure, low heat and inefficient flow of hot water; along with high pressure sales tactics and misleading marketing.

“We’re seeing what we call ‘rebate chasers’, Chris Taylor, Managing Director of Reclaim Energy told the SwitchedOn podcast. “What they're interested in doing is driving as much volume as quickly as possible while the rebate schemes are in place, and not really taking responsibility for the installation quality.”

Taylor says Australia is now at risk of being flooded by cheap, unreliable products, installed by inexperienced companies, and we could become a dumping ground for ineffective products that will do little to reduce climate change, or the cost of living.

He estimates that 90% of the heat pumps now being sold and installed in Australia are what he calls “faux heat pumps.”

These are units that have an electric element in them as a backup or a boost system. The electric immersive element makes them much less efficient than premium hot water heat pump models that don’t have an electric element at all, which results in a much higher energy draw and will cost more to run over the life of the product.

In its submission to the Residential Inquiry into Electrification, the Australian hot water heat pump manufacturer, Dux, said that these heat pumps can be permanently boosted, or if they’re switched to boost mode, “won’t change back to heat pump mode unless there is subsequent human intervention. These water heaters are attracting rebates yet operating as electric (or combined electric + heat pump) water heaters.”

In September last year, the NSW Office of Energy and Climate Change (OECC) found “the energy savings calculations for hot water system upgrades do not align with real-world savings.” In other words, the energy savings of several models are being overstated and real-world savings are much less.

“Anyone can go to China and bring in a cheap heat pump system,” says Taylor, who is concerned that the rebate schemes have encouraged inexperienced operators. “You've got people who did lighting … who have now jumped into hot water.”

“I don't know what they know about hot water, because they were giving away light globes for free,” says Taylor. “That's a miraculous shift in terms of business model and expertise that they must have developed.”

Traditionally, hot water system sales in Australia were run through a plumbing merchant, such as Reece or Tradelink, which plumbers would access. Taylor argues that the checks and balances, and quality control mechanisms that the plumbing merchants provided, have now disintegrated.

A major problem for Australian consumers wanting to install a hot water heat pump is we currently don’t have a government-regulated energy star-rating system for hot-water heat pumps like we have for other electrical appliances, and there are no controls around how different heat pump products report their efficiency.

At present, the only way to compare the energy efficiency of different brands is by looking at the number of small-scale technology renewable energy credits, STCs, that they've been allocated by the Clean Energy Regulator.

But Taylor believes the hot water heat pump industry could be cleaned up overnight, and consumers protected. He's calling on governments to revamp the rebate system for hot water heat pumps.

“They should exclude any system that relies on an electrical immersion element in any way shape, or form …  from the [rebate] program.”

Taylor argues this will weed out ‘rebate chasers’ from the industry, and ensure only quality, efficient systems are installed in Australian homes.

“If they do that at a federal level with the Clean Energy Regulator, that then flows on to the states … and that’ll allow the industry to catch its breath, the government to catch its breath, and for heat pump sales to continue, and standards to be implemented in a consultative manner to protect consumers.”

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You can hear the full interview with Chris Taylor on the SwitchedOn podcast here.

You can also read some tips on how to buy a hot water heat pump while we don’t have minimum energy standards for hot water heat pumps, and we do have rebates.

‍You can also read our article on how Victoria is ramping up its installations and audits of hot water heat pump installations here.