Gas prices across Victoria (VIC) have been climbing, and for many, the biggest contribution isn’t heating or cooking. It’s HOT WATER.
What most homeowners don’t realise is that under VIC’s Gas Substitution Roadmap, from March 1, 2027, when a gas hot water system in an existing home reaches the end of its life and can’t be repaired, it must be replaced with an electric alternative, typically a heat pump. Replacing it with another gas unit will no longer be allowed.
That means thousands of homes currently running ageing gas systems are heading toward a forced decision in the next few years. And for many, that decision will arrive suddenly, on the day the system fails.
The good news is that 2026 gives homeowners a rare window to act on their own terms. With Victorian Energy Upgrades (VEU) rebates available and rising gas bills already biting, this is the year to plan the switch calmly, rather than waiting for an emergency replacement in 2027.
What the 2027 rule actually means for your home
This isn’t limited to new builds or renovations. It applies to ordinary homes with ageing storage tanks and instantaneous gas heaters that have been running for years without much thought.
For many, this will be the first real point at which the state’s move away from gas becomes unavoidable, with the hot water unit sitting quietly outside or in the garage.
The key detail is timing. The rule only matters when the system fails, and gas hot water systems rarely fail at a convenient moment.
Why this is colliding with gas bill shock right now
While this rule sits in the background, gas prices are already rising in the foreground.
Hot water is one of the largest and most constant gas loads in a home. It runs every single day. Showers, washing, cleaning, and laundry all rely on it. As tariffs increase, the cost of running older gas systems climbs steadily.
Many of these systems are also becoming less efficient as they age. Homeowners are paying more each quarter to operate equipment that is nearing the end of its life and, within a few years, will need to be removed anyway.
This creates an unusual situation. Households are spending more to run a gas appliance that they will soon be required to replace with electric, often without realising the connection between today’s bill and the rule arriving in 2027.
Why waiting for the system to fail is the worst strategy
Gas hot water systems rarely give much warning before they stop working. One day, the water runs cold, and the replacement becomes urgent.
When that happens after March 1, 2026, the decision is no longer flexible. You won’t be comparing gas models or weighing up options. You will be required to switch to an electric system immediately, often with limited time to research, compare installers, or think about how it fits into the rest of the home.
Emergency replacements also remove the chance to plan properly. There’s no time to consider the best location, check electrical capacity, or think about how the system could work with solar during the day. The focus becomes getting hot water back as quickly as possible.
That urgency often leads to higher costs, fewer choices, and a rushed upgrade that could have been handled far more smoothly if planned ahead.
How the VEU rebates make 2026 the smart year to switch
The VEU program currently offers generous rebates for replacing gas hot water systems with efficient heat pump systems. For many, this can reduce the upfront cost by thousands of dollars.
At the same time, ceiling insulation support has recently been reintroduced under the scheme. That creates an opportunity to bundle upgrades that improve comfort, reduce energy use, and lower bills all at once.
The key advantage in 2026 is certainty. Rebate levels are known, availability is strong, and installers aren’t dealing with a surge of last-minute replacements triggered by system failures and new rules.
Waiting until 2027 means competing with urgency. Acting in 2026 means taking advantage of rebates calmly, with time to choose the right system and installer.
Planned upgrade vs emergency 2027 replacement
| Emergency replacement after March 2027 | Planned upgrade in 2026 |
| System fails without warning | Replace on your own schedule |
| Immediate pressure to restore hot water | Time to compare systems and quotes |
| Limited installer availability | Choice of installer and timing |
| No time to assess electrical setup | Opportunity to prepare wiring and placement |
| Pay whatever is required in the moment | Maximise VEU rebates and plan costs |
| Stressful, rushed decision | Calm, considered upgrade |
The difference is not just financial. It’s practical.
One approach happens because you have to. The other happens because it makes sense for the home.
Why heat pump hot water works so well with solar
A heat pump hot water system doesn’t just replace gas. It changes when and how your home uses energy.
Unlike gas systems that turn on whenever hot water is needed, heat pumps can be set to run during the middle of the day. For homes with solar, this means heating water using excess solar generation instead of exporting it to the grid for a low feed-in tariff (FiT).
In effect, the hot water system becomes a storage tool for your solar energy. You’re turning sunlight into stored hot water that can be used later, reducing both electricity and gas costs at the same time.
This makes hot water one of the easiest and most effective first steps toward a fully electric home, especially for households that already have solar installed.
Who should seriously consider switching in 2026
Some homes are far closer to this decision point than others.
If your gas hot water system is more than 8-10 years old, it is already approaching the stage where failures become more common. Many systems installed a decade ago are now running less efficiently and costing more to operate.
Homes with solar are also strong candidates. These households can take immediate advantage of running a heat pump during the day on excess generation, turning a mandatory replacement into an opportunity to lower energy costs.
If you’ve noticed rising gas bills, are planning to remove other gas appliances over time, or simply want to avoid an emergency replacement in the next few years, 2026 is the window where you still have full control over how and when the switch happens.
A simple checklist before 2027 arrives
A small amount of preparation now can prevent a rushed decision later.
- Check how old your current gas hot water system is
- Look into your eligibility for VEU heat pump rebates
- Consider whether ceiling insulation could be upgraded at the same time
- Get quotes while you have time to compare options
- Think about where the system will go and how it can run during the day on solar
These steps don’t commit you to replacing the system immediately. They simply make sure that when the time comes, the decision is already made.
Energy Matters has been in the solar industry since 2005 and has helped over 40,000 Australian households in their journey to energy independence.
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