Australia's rapid rollout of home and grid-scale batteries has helped stabilize power prices despite fears of the Iran conflict triggering a surge. Now, policymakers and households are being urged to look beyond batteries to hot water systems, which account for 25% of the average home's greenhouse gas emissions. Research shows efficient electric hot water systems could provide energy storage equivalent to 2 million home batteries while saving billions in energy bills.
Battery Boom Stabilizes Power Prices
In the 18 months to June 2026, Australia installed more than 450,000 home batteries and several grid-scale batteries, removing the need for two large gas-fired power stations during evening peak periods. This reduced reliance on expensive gas, keeping power prices steady or even falling. Between early 2025 and early 2026, batteries in the National Energy Market displaced 853 GW of gas generation during peak times.
Hot Water: A Hidden Energy Storage Asset
Hot water systems use about 25% of home energy, but this usage is flexible. Each Australian uses about 50 litres of hot water daily; a family of four with a conventional electric storage system uses about 13 kilowatt-hours per day—similar to the energy stored in some home batteries. Costs vary widely: a family with electric hot water and rooftop solar could pay nothing, but 40% of homes still rely on gas, costing A$1,000 or more annually. New heat pump technologies cut running costs by up to 72% by drawing heat from the air.
Smart Hot Water Systems
When connected to timers, smart meters, or controls, heat pumps and other electric systems can run during the day, storing large amounts of solar energy cheaply. Pairing smart hot water with the Solar Sharer scheme, which began July 1, 2026, in some states, allows renters and apartment dwellers without solar to heat water during free power hours, cutting bills substantially.
Australia's Advantage
Australia is well placed for this transition, being the second cheapest globally for rooftop solar installation. The home battery subsidy program demonstrated the industry's ability to pivot quickly. A national hot water push could build on this momentum.
Policy Recommendations
To accelerate the shift from gas, policymakers could introduce four changes: extend existing heat pump subsidies in New South Wales and Victoria to other states and smart electric water heaters, coupled with a public information campaign; create a scheme to retrofit existing electric water heaters with timers or smart meter connections; improve standards to require timers or smart controls on all new systems; and focus on renters and apartment residents by supporting owners' corporations, social housing providers, and local governments to replace shared gas infrastructure. Councils and community organizations could help engage hard-to-reach households, and targeted industry support could accelerate compact, lower-cost heat pump designs.
Conclusion
Australia's rapid uptake of home batteries shows how quickly households can move when economics and supply chains align. Hot water systems could be the next wave—cheaper than batteries or solar, more inclusive, and hiding in plain sight.
