New minimum efficiency rules are coming for heat pump hot water

Heat pump hot water systems are about to get their first legal efficiency floor. According to Energy Matters, the federal government released an exposure draft on 7 September 2026 proposing minimum energy performance standards (MEPS) for heat pump water heaters under the Greenhouse and Energy Minimum Standards (GEMS) Act 2012. Until now, these systems have carried no mandatory efficiency threshold at all, even as they've grown into one of the most common ways Australian households heat water.

What the draft rules actually do

Energy Matters reports three changes. First, heat pumps sold here would need to clear a minimum efficiency level, set to match the threshold already used to qualify for small-scale technology certificates (STCs): at least 60% energy savings against a standard electric tank in climate Zone 3. Second, efficiency would be measured with a new local test — a full 24-hour cycle at a cool 9°C — rather than the computer simulations used today, which Energy Matters says tend to produce headline coefficient-of-performance (COP) figures well above what the new, colder test would show. Third, every model would need to be registered with the GEMS Regulator before sale, with results published on the government's Energy Rating Product Database so buyers can compare like for like.

None of this is locked in yet. Energy Matters notes the start date depends on when the final determination is registered, with earlier industry submissions pushing for at least a 12-month lead time, and that star-rating labels are a separate, later stage not expected before 2028.

Why this matters for your bill, not just the paperwork

The timing lines up with a bigger shift already under way. As our fact sheet notes, heat pump hot water and solar prices are usually quoted after STCs are deducted, and that federal discount steps down every year until the scheme winds up in 2030. Energy Matters reports the government expects most heat pump suppliers to stop bothering with STCs after 2028, once the paperwork costs outweigh the rebate, and warns that could tempt some brands to sell cheaper, less efficient units once the rebate stops acting as an informal quality filter. A permanent efficiency floor is partly designed to stop that race to the bottom once the STC "safety net" disappears.

For homeowners, that means two things are moving in opposite directions over the next few years: the upfront rebate on a heat pump hot water system will keep shrinking, while the minimum quality bar on what's sold is set to firm up. Waiting for the new rules won't obviously save you money — the proposed minimum simply matches what decent STC-eligible heat pumps already meet, so a well-chosen system bought today should already clear the new bar.

What it costs today

Our live cost model puts a typical heat pump hot water installation, GST included, at $4,500, with a realistic mid-tier range of $3,500 – $5,850. Budget installs start around $3,600, and premium systems with larger tanks or higher-output compressors run up to $6,000. Those figures already assume the STC discount is applied at quote stage, which is standard practice — if a quote doesn't mention certificates, ask why. See our full Heat pump hot water guide for a size-by-size breakdown.

If you're weighing a heat pump against rooftop solar to offset the running cost, our Solar panels guide covers typical system pricing, also quoted after STCs.

What to check before you buy, regardless of the new rules

Energy Matters makes the point that efficiency isn't usually what disappoints heat pump owners — reliability, noise and installation quality are. The new rules don't touch any of that. Before signing a quote:

• Ask what conditions any COP figure was tested under, and be wary of comparing a brochure COP of 4 or 5 against a system tested the new way, which the government expects to show closer to 2 at the minimum standard.
• Check the compressor warranty specifically, as it's the component most likely to fail, and cover periods vary more than tank warranties do.
• Confirm installation is quoted by a licensed tradesperson, as electrical and plumbing work on these systems requires it in every state.
• If you already have solar, ask your installer about running the heat pump's timer in the middle of the day, when Energy Matters notes both your own solar output and warmer daytime air help it run more efficiently.

If you've already got a quote in hand and want a second opinion on whether it stacks up, our "is my quote fair" tool checks it against local labour rates and current material costs rather than brochure claims.

The bottom line

The new MEPS won't change what a heat pump hot water system costs you tomorrow, but they're a sign the market is tightening just as the rebate that's propped up quality is being phased down. If you're in the market now, buy on the same fundamentals as always — registered testing, a solid compressor warranty, and a licensed install — rather than waiting on rules that are, by the government's own estimate, still a year or more away.