There’s a government scheme in Victoria that will substantially discount a heat pump hot water system or a new reverse-cycle air conditioner, and a surprising number of households have never heard of it.
It’s called Victorian Energy Upgrades. Here’s how it works, without the sales pitch that usually surrounds it.
What it is
VEU is a Victorian government energy efficiency scheme. It works by requiring energy retailers to fund efficiency improvements, which they do by creating certificates when someone upgrades an inefficient appliance to an efficient one.
The value of those certificates is passed to you as a discount at the point of sale. You don’t apply, you don’t claim, and you don’t wait for a payment. The accredited provider handles the paperwork and the price you pay is already reduced.
That’s the single most important thing to understand about it, because it changes how you compare quotes. Two suppliers may quote wildly different prices for the same unit purely because one has applied the discount and the other hasn’t mentioned it.
What’s covered
The activity list is revised over time, but the categories most relevant to Melbourne households:
Heat pump hot water systems. The biggest and best-supported upgrade in the scheme. Replacing an electric resistive or gas storage system with a heat pump attracts substantial support, and heat pumps are dramatically cheaper to run than what they replace.
Reverse-cycle air conditioning. Replacing inefficient heating — including gas ducted and old resistive electric — with efficient reverse-cycle systems.
Ceiling insulation. Added to the scheme for 2026. Pairs particularly well with a heating upgrade, since there’s limited point heating a house efficiently and then losing it through the roof.
Solar hot water, efficient lighting, and various commercial and small business activities.
How it stacks with other programs
This is where real money is available, and where most people leave some on the table.
VEU discounts the appliance at point of sale.
Federal STCs (small-scale technology certificates) apply separately to solar hot water and heat pump hot water systems. These are a Commonwealth scheme and they stack with VEU.
Solar Victoria runs its own hot water rebate, plus the solar PV rebate and Residential Electrification Grants. Note that the household income cap for the PV and hot water rebates dropped from $210,000 to $150,000 on 1 July 2026, which has changed eligibility for a lot of households.
The federal battery program is separate again — covered in our guide to home battery rebates.
Stacked properly, a heat pump hot water system can end up costing a fraction of its list price. But the combinations have eligibility rules, and not everything stacks with everything.
Ask any supplier to itemise which programs they’re applying. If a quote just says “after rebates”, ask which ones.
Where the catch is
Not a catch exactly, but things worth going in knowing.
“Free” rarely means free. A lot of advertising in this space leads with “$0 upfront” or “free upgrade”. Sometimes that’s accurate for a straightforward swap. Often there are exclusions — non-standard installations, electrical work, removal of the old unit, or a specific model you may not want. Read what’s included.
You must use an accredited provider. Only accredited providers can create the certificates. Check before you book.
Existing appliance requirements. Most activities require you to be replacing something specific. You generally can’t claim for a new installation in a new build.
The electrical work is often extra, and often necessary. This is the part we see most.
The bit most quotes leave out
A heat pump hot water system or a new reverse-cycle system needs a dedicated circuit. Frequently it needs a circuit that doesn’t currently exist on a board that has no spare ways.
In the period homes across Hawthorn, Kew, Camberwell and Balwyn, we regularly get called after someone has booked a subsidised heat pump, only to find the switchboard can’t accommodate it. The rebate covers the appliance; it doesn’t cover the switchboard upgrade that makes the appliance installable.
That’s not a reason to avoid the scheme. It’s a reason to have someone check the board before you book, so the cost isn’t a surprise on installation day.
Two other practical points:
Heat pump siting. They need outdoor space with airflow and they make some noise. Not directly outside a bedroom window, and not boxed into a narrow side passage.
Controlled load or timer. Running a heat pump during the day on solar, or overnight on off-peak, makes a large difference to what it costs to run. Worth setting up at installation.
What we’d do in what order
If you’re working through this:
Get the switchboard assessed. Find out what capacity you’ve got before committing to appliances.
Hot water first. Biggest energy user with the best rebate support.
Heating and cooling next. See our split system installation guide.
Then cooking, when the cooktop is due.
Then disconnect the gas — the supply charge runs until the meter is abandoned.
That order is set out properly in our guide to switching your home from gas to electricity.
Where to check current details
Program details change. The authoritative sources:
veu.vic.gov.au — current activities, accredited providers
solar.vic.gov.au — Solar Victoria rebates and eligibility
Don’t rely on a supplier’s summary, including this one. Check the scheme, then get quotes.
Talk to us
We’re not a VEU provider and we’re not trying to sell you an appliance. What we do is the electrical work that makes these upgrades possible — switchboard capacity, dedicated circuits, and telling you honestly what your house needs before you commit to anything.
Registered Master Electrician (REC 25989). Over 200 five-star Google reviews. Lifetime workmanship warranty.
Send us a photo of your switchboard and tell us what you’re thinking of upgrading. We’ll tell you what’s involved.
Details current as at August 2026. VEU activities and discount values are revised periodically — check veu.vic.gov.au before making a decision.
