Heat Pump Hot Water: All-in-One vs Split CO2
If you're going to electrify one thing in your house, hot water is usually where to start.
It's typically the largest or second-largest energy use in a home, the technology is mature, the payback is the clearest of any electrification measure, and it's a self-contained job — no rewiring the house, no reworking your heating.
Key points
- Heat pump water heaters deliver roughly three to five units of heat per unit of electricity.
- All-in-one units are cheaper and simpler to install but place the compressor at the tank.
- Split CO2 systems are extremely quiet, allow the tank indoors and hold performance on cold mornings.
- CO2 systems generally avoid electric boosting, which is where conventional heat pumps lose their advantage.
There's also a deadline attached for some people. From 1 March 2027, when a gas hot water system in a Victorian rental fails and can't be repaired, it must be replaced with an electric heat pump. Like-for-like gas replacement stops being an option.
The technology question is which sort of heat pump. That's where the decision actually sits.
How a heat pump water heater works
It's a refrigeration circuit running in reverse. Rather than generating heat by burning gas or passing current through an element, it extracts heat from the outside air and moves it into the water.
Because it's moving heat rather than creating it, it delivers roughly three to five units of heat for every unit of electricity — where a resistance element gives you one, and a gas heater rather less than one after flue losses.
That efficiency ratio is the entire argument, and it holds up.
All-in-one units
Everything in a single appliance: compressor, heat exchanger and storage tank in one package, usually with the compressor mounted on top of the tank. The refrigerant circuit is sealed at the factory.
Where they're strong.
Installation is simple. In most cases it's close to a tank swap. One unit, one location, no refrigerant lines to run between components, less labour. That makes it the cheaper option to buy and to install, often by a meaningful margin.
Fewer things to site. One appliance, one place to put it.
Faster. Straightforward replacements can often be done in a day.
Where they struggle.
Noise, where the tank is. The compressor sits at the tank location, which is frequently against a bedroom wall, near a neighbour's boundary, or beside an outdoor living area. This is the most common complaint about all-in-one units, and it can't be relocated afterwards without replacing the system.
They need airflow. The unit is drawing air across a heat exchanger, so it can't sit in a tight enclosed alcove or a small sealed cupboard. Some existing gas tank locations simply don't suit one.
They blow cold air out. A by-product of extracting heat from air. Unpleasant if it's discharging across a patio or an entry.
One appliance, one failure. A compressor fault generally means replacing the whole unit rather than a component.
Split systems
The compressor sits in a separate outdoor unit, connected to the tank by refrigerant lines — the same architecture as a split air conditioner.
Where they're strong.
They're extremely quiet. This is the point worth leading with, because it's better than it sounds. The compressor units on split systems run at very low sound levels — quiet enough that in normal use most people won't register it running at all. So it isn't a case of moving a noise problem further from the bedroom; there's very little noise to move. Worth asking for the sound rating of the specific model you're quoted, since it varies.
You can also put it somewhere sensible. The compressor goes down the side of the house, away from bedrooms and boundaries. Combined with the low sound level, that puts acoustic complaints largely off the table — which on tight blocks, townhouses and anywhere with close neighbours is often the deciding factor.
The tank can go indoors. A garage, laundry or plant room. Protected from weather, less standing heat loss on cold nights, and out of sight.
Better siting flexibility generally — useful on heritage properties, awkward blocks, and anywhere the obvious tank position doesn't suit an all-in-one.
Components are independent. Tank and compressor can be replaced separately.
Where they cost you.
More expensive, both in equipment and installation.
More installation work. Refrigerant pipework between the units means licensed refrigerant handling and a more involved job — done properly, with the same evacuation and charging standards as any split system.
Two locations to find and run services to.
CO2 systems specifically
Most split heat pump water heaters worth having use CO2 as the refrigerant, and it's worth understanding why, because it isn't only an environmental argument.
The environmental part first. CO2 — R744 — has a global warming potential of 1. The HFC refrigerants used in most all-in-one units sit in the hundreds to over a thousand. With refrigerant regulation tightening internationally, natural refrigerants are the direction of travel.
But the performance is the real reason.
They produce genuinely hot water. CO2 systems run a transcritical cycle, which lets them deliver water at 60–70°C and above in a single pass. Cold water enters the bottom of the tank, hot water leaves the top, with no recirculating and mixing.
No electric boosting needed. Many conventional heat pumps rely on an electric element to reach temperature in cold weather or to run periodic high-temperature cycles. Every time that element runs, you're back to resistance heating and the efficiency advantage disappears. A CO2 system generally doesn't need it.
Legionella control is inherent. Because the water genuinely reaches high temperature, you're not depending on a booster cycle to manage it.
They hold up in the cold. This matters in Victoria. HFC heat pumps lose capacity and efficiency as ambient temperature drops — which is precisely when you want hot water. CO2 systems maintain performance far better on a 2°C winter morning, and that's when the difference is felt.
Effective storage is better. Because water is stored hotter and tempered down at the outlet, a given tank size delivers more usable hot water than the same volume stored cooler.
What they cost you. Higher purchase price. Transcritical CO2 runs at very high pressures, which means specialist components and a smaller pool of technicians qualified to service them — so establish who's looking after it before you buy. They're also sensitive to inlet water temperature: they want genuinely cold water returning, and a poorly configured system that feeds them pre-warmed water loses much of its advantage.
Comparison
| All-in-one | Split CO2 | |
|---|---|---|
| Compressor location | At the tank | Remote outdoor unit |
| Noise | Compressor at the tank | Very low, and sited remotely |
| Tank indoors | No | Yes |
| Installation cost | Lower | Higher |
| Cold weather performance | Reduced | Strong |
| Electric boosting | Often required | Generally not |
| Refrigerant GWP | Moderate to high | 1 |
| Component replacement | Whole unit | Independent |
| Service availability | Wide | Specialist |
How to choose
An all-in-one makes sense if the existing tank location has good open airflow, isn't against a bedroom or a neighbour's boundary, isn't beside an outdoor living space, and budget is the priority. For a lot of straightforward suburban replacements, it's the right and sensible answer.
Go split CO2 if the tank position is acoustically difficult, you want the tank indoors or out of sight, the site is tight or sensitive, you want the best cold-weather performance and no reliance on electric boosting, or you're specifying for the long term and want to be on a natural refrigerant.
Two things people get wrong
Sizing. Heat pumps recover more slowly than gas instantaneous. Size it on your household's actual peak demand — a family that showers at the same time each morning needs more stored volume than the same number of people spread across the day.
Run time. Set it to run in the middle of the day. If you have solar, it soaks up your own generation instead of importing at night, and ambient air is warmest then so the unit is at its most efficient. This single setting makes a large difference to what it costs to run, and it's routinely left at the default.