As we reported back in May, Exemplary Energy was engaged by the Victorian Department of Energy, Environment and Climate Action (DEECA) to investigate concerns relating to the quality of heat pump water heater products being installed under the Victorian Energy Upgrades (VEU) program.
As part of this work we looked internationally to other jurisdictions in a desktop review of requirements in other incentive and regulatory programs. Back in Australia, we engaged with product manufacturers to establish their concerns and understand best practices in the market here.
Our work discussed previous experiences in Australia where poor quality or inappropriate technologies have been incentivised, resulting in damage to the reputation of heat pump water heating amongst trades, industry and consumers. These sorts of issues carry a tangible risk of delaying the electrification of Victorian households and present additional challenges to our emissions reduction targets.

While we did not find any evidence of quality issues amongst the products being incentivised at present, we identified a number of concerns and made a comprehensive set of recommendations for managing them.
Most risks are currently mitigated through a combination of consumer protections (warranties), manufacturer and supplier quality assurance systems, and technical Standards or quality specifications. However, the high level of incentives is driving the market towards low-cost products, highlighting the importance of mandatory quality benchmarks which are set by policymakers and regulators in charge of the incentive schemes – the challenge is not straightforward, and creates a tension between well-proven designs and new innovations.
This is a common concern amongst policymakers around the world. However, none of the international jurisdictions we investigated can offer technical solutions that are significantly advanced beyond those currently in place for the VEU. That is, the protections created in the VEU program rules (including the relevant Australian Standards and benchmarks in the scheme) are amongst the world’s best practice.
Amongst the non-technical solutions, we could see that the role of warranties is paramount. However, these are are only effective if the supplier is operational at the time of product failure. Although there is no widespread evidence of issues today, we found that the existing protections are limited and we suggested that policymakers in Victoria could learn valuable lessons from the experience in the United Kingdom where Insurance Backed Guarantees have been applied (with limited success to date) in an attempt to mitigate the residual risks.
We also uncovered some concerning loopholes in the application of Australian Standards: certain requirements of AS/NZS 27121 relating to stability, strength, corrosion resistance, durability, serviceability, and weather resistance are not being confirmed by testing and are often overlooked by compliance bodies.
Our recommendations included the following actions:
- Ensuring that products are supported to extend their operating life by encouraging routine servicing of installations and ensuring that warranties are supported by suppliers;
- Increasing engagement between suppliers and policymakers to inform policy using the best information available;
- Making further efforts to reduce information asymmetry;
- Consider and investigate a number of technical aspects of the VEU Specifications; and
- Advocate for product labelling and consider the benefits of applying internationally-consistent labelling (such as the Heat Pump Keymark scheme) here in Australia
Ensuring consumers’ positive experience with technology will a key part a successful energy transition. We look forward to supporting policymakers and the broader sector to improving our approach provide better protection to consumers as we move through a rapid period of change.
1. AS/NZS 2712: Solar and heat pump water heaters — Design and construction



