Hot Water Heating: Electric vs Gas

What type of water heater is best for your home and budget? We explore the three main types of water heater in NZ and explain what each could cost.

Many of us don’t give too much thought about how our water is heated. But hot water heating makes up about 30% of the average household energy bill, according to the Energy Efficiency and Conservation Authority. So, it’s worth giving more than just a passing thought in the shower to the best system for your home. This is especially true if you’re building, renovating or need to replace your existing system.

If you’re weighing up electricity or gas for your hot water heating, there are three main systems: electric hot water cylinders, gas continuous flow, and heat pump water heaters. The best one for your household will depend on how much hot water you use, space requirements, your existing system, and whether or not you can get a gas supply.

If you’re looking to replace or install a hot water system, first of all think about how you use hot water in your home, such as how many showers and baths your family takes a day. Consider your electricity tariff, and how much existing space you have for a new system.

In most cases, if you are changing your water heating system, you will need a building consent from your local council. The work will need to be done by a registered plumber – and a registered gas fitter if you are using gas, although that could be the same person. In some cases, a registered electrician might also be needed. This means it pays to really research if the installation costs will be covered by any long-term savings made in running a different system.

Electric hot water cylinders

A hot water cylinder run by electricity is the most common type of hot water heating in New Zealand and they are often said to be the most expensive way to heat your water. However, that is not always true – costs depend on efficiency and what power tariffs are available to you.

The system uses an electric element to heat the water stored in an insulated tank or cylinder. To stop legionnaires’ disease, hot water cylinders must be regularly heated to at least 60C to prevent the growth of legionella bacteria.

To help reduce running costs, electric hot water cylinders can be set up to run on lower-cost power supplied at night. However, you will need to ensure that your cylinder is big enough to store all the hot water you will use in a day.

Installing a new electric hot water cylinder costs approximately $2000-$3000. Running costs for an average three-person household are approximately $560-$1000 a year, depending on electricity rates – such as a night tariff being available.

Pros of electric hot water cylinders:

  • Most common form of hot water heating in New Zealand, so you are likely to already have this installed
  • Can be put on a night-rate electricity supply to get a cheaper electricity price
  • Will hold hot water for several hours in the event of a power cut
  • Good for households with low to moderate hot water use

Cons of electric hot water cylinders:

  • Requires water to be regularly heated to 60C to prevent legionnaires’ disease – much hotter than commonly used in the home
  • Hot water amount is limited to the amount stored in the cylinder, meaning you can run out of hot water. This is a particular concern if you heat your water only at night to save electricity costs
  • Cylinders that are more than 15 years old have limited insulation and need wraps around them to prevent heat loss

If you’ve an electric hot water cylinder, the amount you’re paying for your electricity will have a big impact on its running costs. And one of the simplest ways to slash your water heating bill is to switch to a cheaper provider. Canstar Blue’s latest review of NZ power companies compares them on customer satisfaction and value for money. The table below is an abridged version of our full results. Click on the big button at the bottom of the story for more details!

See Our Ratings Methodology

Gas continuous flow

Gas hot-water heaters use a device called a califont, which burns gas to heat water instantly. When you turn on a hot tap, the califont sparks up, heating the water on demand as it flows through the system. The amount of hot water is limitless and the temperature can be set so you don’t need to add a lot of cold water.

Gas continuous flow califonts are usually installed outside the house, so you can save space inside if needed. Most require electricity to start, so will not work during a power cut.

Installing a new gas continuous flow system can cost about $2000-$3000 and can sometimes cost more than a new hot water cylinder, as a registered gas fitter is needed, as well as a plumber.

The cost of using gas continuous flow hot water heating depends greatly on whether you can access gas. If you have piped natural gas or LPG – which are available only in certain areas in New Zealand – it costs approximately $750-$950 a year to run for a three-person household. Running it with LPG 45kg bottles, available in most parts of the country, will cost approximately $850-$1250. The running costs come down if you already have a gas supply for another use, such as for heating.

Pros of gas continuous use:

  • Continuous hot water
  • Not need to heat up to 60C
  • Saves on space inside the home
  • Cost-efficient if you have reticulated gas and/or have gas supply for another use
  • Good for households wanting unlimited hot water

Cons of gas continuous use:

  • Expensive to install if you already have a hot water cylinder that is working effectively
  • Running costs can be high if you use LPG bottles
  • Most systems require an electrical supply to start, so won’t work during a power cut
  • Although the hot water never runs out, using more than you need is a waste of money, water and energy

Compare natural gas suppliers

Gas hot water cylinder

Gas hot water cylinders typically run on natural gas. They burn gas to heat the water in an insulated tank to a temperature set by a thermostat. Gas hot water cylinders are less efficient than gas continuous flow systems, but they will work during power cuts.

Pros of gas hot water cylinders:

  • No electricity required so continue to heat during power cuts
  • Can be located outside the home, which can free up space inside

Cons of gas hot water cylinders:

  • Running costs are relatively expensive
  • Greenhouse gas emissions do contribute to climate change (although burning gas is relatively clean)
  • You’ll have to pay a fixed charge for a gas supply

Compare bottled gas suppliers

Heat pump water heater

Heat pump water heaters use the same technology as room heating and cooling heat pumps. They use electrical energy to move heat, rather than actually generate heat.

In most cases, the system can be retrofitted to an existing hot water cylinder. However, installation costs are still higher than other systems. While the heat pump water heater also uses electricity, it’s much more efficient to run than a standard hot water cylinder. The system can also be put on a night rate to reduce electricity costs.

Like a standard hot water cylinder, the hot water tank needs to be regularly heated to 60C to prevent legionnaires’ disease. As the system uses air from outside the home, it doesn’t work as efficiently at very cold temperatures. This means heat pump water heaters are not suitable for colder parts of New Zealand, such as central North Island and most of the South Island. They also cannot be used if you have hard or aggressive water, which contain a lot of dissolved minerals and metals, and places with bore water.

Installing a new heat pump water heater can cost about $4000-$8000. Running costs for a heat pump water heater cost approximately $150-$650 a year, depending on the electricity rate and the average outdoor temperature.

Pros for heat pump water heaters:

  • Very low running costs
  • Can be put on a night rate electricity supply to get a cheaper rate
  • Can be retrofitted to existing hot water cylinders
  • Will hold hot water for several hours in the event of a power cut
  • Good for households that use moderate to high amounts of hot water

Cons of heat pump water heaters:

  • Relatively expensive up-front costs to install
  • Works best in hotter climates and is not recommended for cooler parts of New Zealand
  • Cannot be used with hard water
  • Requires water to be regularly heated to 60C to prevent legionnaires’ disease – much hotter than commonly used in the home
  • Hot water amount is limited to the amount stored in the cylinder, meaning you can run out of hot water.


Wetbacks are fitted to wood or pellet fires, ranges and burner systems. A wetback is a pipe arrangement that fits in the back of the firebox. Water from your hot water cylinder circulates through these pipes, and is heated using heat from the fire.

Pros of wetbacks:

  • Wetbacks can reduce your hot water heating costs by supplementing your hot water needs

Cons of wetbacks:

  • You get less of a fire’s heat going into a room when you add a wetback. Most existing fires have adequate capacity to do both, but just keep it in mind
  • There’s a limit to how far away a water cylinder can be from the wetback before it won’t work
  • Some councils have clean air requirements in place for urban areas, so check what fires and wetbacks you can install with your local council

Solar water heating

Solar water heating uses the sun’s rays to heat water. It’s then stored in an insulated hot water tank. It may need back-up heating on less sunny days, usually provided by electricity or gas.

Pros of solar water heating:

  • Well designed and installed systems will meet 50-75% of your hot water needs using free energy from the sun, according to the EECA

Cons of solar water heating:

  • The upfront cost is high compared to other hot water systems
  • Not all households will be suitable for it, check with your supplier to find out
  • Your system needs to be set up correctly to ensure the water in the tank is regularly heated to 60C, to prevent the growth of legionella bacteria

For more on solar panel, read our story: How to Get The Most Out of Your Solar Panels

If you’re thinking about changing or updating your water heating system, it pays to double check if you’re on the best electricity plan for your family. And if you’ve received a big electricity bill recently, read up on what to do about it with our story: Have You Received A Shock Electricity Bill? Here’s What to Do!

Compare electricity providers

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