Australia Is Facing Issues With Cheap And Inefficient "Faux" Hot Water Heat Pumps
- geetika_tandon
- Oct 28
- 3 min read
The market for heat pump water heaters (HPWH) in Australia, once a clean energy success, has declined sharply since 2024. This downturn is likely to continue into 2025. After two years of strong growth fueled by generous rebates, the industry now struggles with reduced subsidies, poor-quality imports, and decreasing consumer trust.
From Boom to Bust
Between 2022 and 2023, the HPWH sector grew quickly, thanks to federal Small-scale Technology Certificates (STCs) and state rebates that made installing efficient systems very affordable.
However, from the beginning of 2024, state governments started cutting back on these incentives. In New South Wales, rebates under the Energy Savings Scheme dropped from around AUD 1,200 to AUD 300. The popular "AUD 33 upgrade" program ended on 1 January 2024. The value of Energy Savings Certificates (ESCs) fell by about 40%, and federal STC support decreased by AUD 120-160 per unit.
Other states followed this trend. In Victoria, changes to the Victorian Energy Upgrades (VEU) program imposed stricter installation rules and minimum contributions from customers. In Queensland, the advantages for rebate stacking were reduced. These cuts made new systems much less affordable for low- and middle-income households, leading to a sharp decline in installations.
The Flood of ‘Faux’ Heat Pumps
The earlier boom resulted in proliferation of many low-cost imported systems, many of which were "faux" heat pumps that barely met minimum standards. Rather than using actual compressor-based technology, they relied heavily on electric resistance boosters, which offered minimal efficiency gains.
Installers rushed to meet demand, sometimes compromising quality. Audits later revealed widespread faults, safety concerns, and violations of Australian standards. Many of these systems failed within just a few years, leading to complaints and loss of consumer trust.
By early 2025, demand had decreased further as households grew cautious about the technology. Reputable installers and manufacturers now face the task of restoring the industry's image after numerous unreliable operators took advantage of rebate schemes.
Structural and Market Challenges
Even with rebates, installing HPWHs can be complex and expensive. Many homes need plumbing or electrical upgrades, and areas with hard water may require additional treatment equipment. A shortage of qualified installers has also resulted in inconsistent performance and limited support after installation.
At the same time, solar photovoltaic (PV) systems, often paired with home energy management tools and batteries, have become more popular. For many households, solar offers a simpler and more flexible way to reduce energy bills, shifting attention away from hot water heat pumps.
Regulatory Action and Reforms
Recognizing the need for action, the Clean Energy Council (CEC) and the Australian Competition and Consumer Commission (ACCC) have enhanced the oversight through the New Energy Tech Consumer Code (NETCC), updated in August 2025.
The revised Code aims to:
- Enforce accurate performance claims and clear pricing.
- Ban misleading "free upgrade" advertising.
- Strengthen warranty and service obligations.
- Empower the Code Administrator to penalize or suspend non-compliant businesses.
The Australian federal government is also reviewing STC eligibility so that only truly efficient systems qualify for certificates. This step helps prevent another influx of substandard imports. These reforms indicate a shift toward quality rather than quantity in Australia’s electrification efforts.
2025 Outlook: A Difficult Year Ahead
Despite these changes, HPWH installations are expected to decline further in 2025, as per BRG analysis. Lower rebates, higher equipment costs, and damaged consumer trust continue to hinder installations. Many businesses are now focusing on training, quality assurance, and rebuilding trust.
Find out more in our latest edition Australia Heating and Cooling reports
Source: Geetika Tandon, BRG Research
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