Quick Answer
Continuous flow (instantaneous) hot water systems suit smaller households or those with irregular hot water use — they heat water on demand with no tank to keep warm, costing $800–$2,500 installed. Storage systems suit larger families or homes with high simultaneous demand, costing $900–$3,500 installed depending on fuel type and capacity. For most Melbourne homes transitioning away from gas, a heat pump hot water system (a type of storage unit) is the most energy-efficient long-term choice.
The Core Difference: How Each System Works
Continuous Flow (Instantaneous) Hot Water
A continuous flow — also called instantaneous or tankless — system heats water only when you open a hot tap. Cold water passes through a heat exchanger powered by gas or electricity, reaching temperature almost instantly. There is no stored water to maintain and no standby heat loss. Units mount on an external wall or in a cupboard and are compact compared to storage tanks.
The trade-off is flow rate. Each unit has a maximum litres-per-minute output. Run a shower and dishwasher simultaneously and a smaller unit may struggle. Gas-powered continuous flow units are the most common in Melbourne, though electric models exist for homes without reticulated gas.
Storage Hot Water Systems
Storage systems heat water and hold it in an insulated tank ready for use. They can be gas, electric, solar, or heat pump powered. The tank size (typically 125–400 litres for residential use) determines how much hot water is available before recovery is needed. Recovery time varies: electric off-peak units may take several hours, while continuous gas storage heats quickly.
The main disadvantage is standby heat loss — the tank continuously loses heat to its surroundings, especially in cold Melbourne winters. Good insulation reduces this, but it is never zero. Modern heat pump hot water systems address this by using ambient air to heat the water rather than a direct element.
Cost Comparison: Continuous Flow vs Storage
Supply and Installation Costs
| System Type | Unit Cost | Installation | Total Installed |
|---|---|---|---|
| Gas continuous flow (16–26 L/min) | $600–$1,500 | $300–$600 | $900–$2,100 |
| Electric continuous flow | $500–$900 | $350–$600 | $850–$1,500 |
| Gas storage (135–250 L) | $600–$1,400 | $350–$600 | $950–$2,000 |
| Electric storage (125–315 L) | $500–$1,200 | $300–$500 | $800–$1,700 |
| Heat pump hot water (200–315 L) | $1,800–$3,200 | $400–$700 | $2,200–$3,900 |
| Solar hot water (with electric boost) | $2,500–$5,000 | $500–$1,000 | $3,000–$6,000 |
Annual Running Costs (Melbourne, 2026)
| System Type | Annual Running Cost | Notes |
|---|---|---|
| Gas continuous flow | $350–$600 | Varies with gas tariff and usage |
| Electric continuous flow | $700–$1,200 | High per-unit energy cost |
| Gas storage | $400–$700 | Includes standby loss |
| Electric storage (off-peak) | $300–$500 | Uses cheaper overnight rates |
| Heat pump hot water | $180–$350 | 3–4x more efficient than direct electric |
| Solar hot water | $80–$200 | Electric or gas boost adds cost in winter |
Performance: Who Wins on Hot Water Delivery?
Flow Rate and Simultaneous Use
A 20 L/min continuous flow unit comfortably handles one shower (9 L/min) with room to spare. Two showers running simultaneously pushes a smaller unit (16 L/min) hard. A household with 4+ people showering in quick succession, plus a dishwasher running, is better served by a 250 L or larger storage system that holds enough pre-heated water to cover peak demand.
Check your current peak usage before choosing. Homes with a single bathroom and 1–3 occupants: continuous flow handles it well. Homes with 2+ bathrooms and 4+ occupants: storage is usually the safer choice.
Temperature Consistency
Modern gas continuous flow units include modulating burners that maintain consistent temperature even as flow rates change. Early models (pre-2010) sometimes produced temperature spikes, but this is largely solved. Storage systems deliver consistent temperature until the tank runs cool, then recovery time applies.
Energy Efficiency: Which Is Greener?
Gas continuous flow systems have no standby loss, which makes them more efficient than gas storage in households with low or irregular hot water use. For high-use households, the gap narrows. Electric continuous flow is generally the least efficient option due to electricity tariff rates and resistance heating.
Heat pump hot water systems are far and away the most efficient electric option — they move heat from the air rather than generating it directly, achieving an effective efficiency of 300–400% (coefficient of performance 3–4). In Melbourne’s climate, heat pumps perform well year-round, even in winter, though efficiency drops slightly below 5°C.
Victoria’s Renewable Energy Action Plan incentivises transitioning away from gas, and VEU rebates heavily favour heat pump hot water. If you are replacing a gas system, a heat pump is worth seriously considering, especially with solar panels already on the roof.
Which System Is Right for Your Melbourne Home?
| Situation | Recommended System | Reason |
|---|---|---|
| 1–2 person household, mains gas connected | Gas continuous flow (20 L/min) | Low standby loss, compact, adequate flow |
| 3–5 person household, high morning demand | Gas storage (250 L) or heat pump (250–315 L) | Buffer for simultaneous use |
| Existing solar panels, no gas | Heat pump hot water (off-peak controlled) | Lowest running cost, uses cheap solar/off-peak power |
| Gas not connected, tight budget | Electric storage off-peak (250 L) | Moderate cost, simple, reliable |
| Rental property, easy replacement | Gas continuous flow or electric storage | Low upfront cost, standard install |
| Long-term owner, wants lowest bills | Heat pump hot water | Rebates + low running cost recover premium in 4–6 years |
Lifespan and Maintenance
| System Type | Expected Lifespan | Key Maintenance |
|---|---|---|
| Gas continuous flow | 15–20 years | Annual service, clean inlet filter, check burner |
| Electric continuous flow | 10–15 years | Scale flushing in hard-water areas, element check |
| Gas storage | 10–12 years | Anode rod replacement every 3–5 years, pressure valve test |
| Electric storage | 8–12 years | Anode rod, element replacement, pressure valve test |
| Heat pump hot water | 10–15 years | Filter clean every 6 months, refrigerant check |
| Solar hot water | 15–20 years (collector) | Collector cleaning, glycol check, boost element service |
Top Tips and Gotchas
- Check the star rating before buying. A 6-star gas continuous flow unit uses significantly less gas than a 5-star model — the ongoing savings matter more than the upfront difference.
- Anode rods in storage tanks must be replaced. Most homeowners never do this. A depleted anode rod means the tank shell corrodes instead. Replace every 5 years or your warranty may be void.
- Gas continuous flow needs minimum pressure. Most require 200–350 kPa inlet pressure. Check your mains pressure first — low pressure in some older Frankston and Mornington streets can cause ignition problems.
- Temperature tempering valves are mandatory. Australian standards (AS 3500) require water to be delivered to bathrooms at 50°C maximum for homes, to prevent scalding. A licensed plumber must install these — do not bypass them.
- Heat pumps make noise. They sound like a quiet air conditioner. Check local council rules on placement — in some estates, noise-sensitive boundaries apply. Do not install directly outside a bedroom wall.
- Electric continuous flow is expensive to run. Unless it is the only option (no gas, no space for storage), electric tankless units rarely make financial sense on peak tariffs.
- Off-peak tariffs change. Controlled load 1 and 2 tariffs from Energy Australia, Origin and AGL continue to exist, but check your retailer’s current rates — they are not always cheaper than peak in all time bands.
- Gas is being phased out in Victoria. New homes in many SE Melbourne estates are gas-free by developer covenant. Check before speccing a gas-only system in Clyde, Pakenham East or Officer growth areas.
- Pressure relief valves must drip slightly. If your T&P valve drips, that can be normal expansion — but if it runs continuously, call a licensed plumber. Never cap or replace it yourself.
- Cold-climate heat pump performance. Most quality heat pump units (Reclaim, Sanden, Rheem) operate down to -5°C ambient. Melbourne winters rarely go below 2–3°C, so heat pump performance holds up well even in July.
FAQ
Can a continuous flow system ever run out of hot water?
No — a continuous flow system heats water on demand indefinitely. It cannot run out the way a tank does. The limitation is flow rate: if demand exceeds the unit’s litres-per-minute rating (e.g. two showers running simultaneously on a 16 L/min unit), the water temperature drops. Upgrading to a higher-rated unit solves this.
How long does it take for hot water to arrive at the tap with a continuous flow system?
Typically 10–30 seconds, depending on the distance from the unit to the tap and the pipe diameter. In older Melbourne homes with long pipe runs, a small recirculation pump or point-of-use electric booster can reduce wait time. This is a common complaint on Whirlpool forums, particularly in larger homes.
Is a heat pump hot water system worth it if I already have gas connected?
Usually yes, if you plan to stay in the home for 5+ years. The lower running cost (often $200–$350/year vs $450–$700 for gas) and available VEU rebates typically recover the cost premium within 4–7 years. Victoria is also incentivising gas-to-electric transitions, so future rebates may improve this payback further.
What size continuous flow unit do I need?
The standard recommendation: a 20 L/min unit for 1–3 person households with one bathroom. A 26 L/min unit for 2–4 person households with 2+ bathrooms. Calculate your peak demand: a shower uses roughly 9 L/min, a bath fill 12–15 L/min, dishwasher 3–4 L/min. Add up simultaneous uses to find your minimum flow rate requirement.
Do I need a plumber or a gasfitter to install a hot water system?
Yes — in Victoria, hot water system installation must be done by a licensed plumber (and licensed gasfitter for gas units). The Victorian Building Authority (VBA) licences these trades. Unlicensed installation voids manufacturer warranties and your home insurance, and may fail safety inspection at sale. Always ask for their licence number.
Are there rebates for replacing my old electric storage system?
Yes. The Victorian Energy Upgrades (VEU) program offers significant point-of-sale rebates for upgrading from electric resistance storage to a heat pump hot water system. Additional federal small-scale technology certificates (STCs) apply to solar and heat pump systems. Ask your installer to quote with all applicable rebates applied — a reputable installer will do this automatically.
Local Melbourne Resources
- Reece Plumbing — Hot Water Systems — full range of continuous flow and storage systems, with knowledgeable trade counter staff
- Victorian Energy Upgrades — Hot Water Rebates — check current rebate amounts for heat pump upgrades
- Victorian Building Authority — Find a Licensed Plumber — verify your installer’s licence before any hot water work
- Bunnings — Hot Water Systems — for electric storage units and accessories
- Rheem Heat Pump Hot Water — one of the most common brands in SE Melbourne, good local service network