We Have Developed Policy Recommendations for Electrifying Domestic Hot Water Production

A relatively simple intervention with significant energy savings

Comprehensive building energy renovations involve high investment costs, lengthy preparation and complex implementation. Replacing a standalone gas water heater, by contrast, is one of the simpler interventions. In most cases, the appliance can be replaced in its existing location, although an appropriate electricity connection may need to be installed.

Electric water heaters are also more energy-efficient than gas-powered appliances. While a gas water heater typically operates at an efficiency of 60-80%, a conventional electric storage water heater can achieve an efficiency of approximately 95%. Heat pump water heaters or domestic hot water storage tanks connected to a heat pump can achieve efficiencies of 200-250%.

The proposal focuses on households in which domestic hot water is produced by a standalone gas appliance. In buildings using combination gas boilers, the electrification of hot water production should instead be linked to the replacement of the entire heating system as part of a comprehensive building energy renovation.

An electric water heater is not only a consumer but also a low-cost energy storage device

The wider adoption of electric water heaters would not only reduce residential natural gas consumption. It could also contribute to balancing the electricity system.

Due to the rapid expansion of solar power in Hungary, periods of electricity surplus are becoming increasingly common during sunny hours, while solar power production falls in the evening. However, the timing of water heating can easily be shifted to periods of high daytime solar generation using a simple timer or smart control device.

The heated water effectively functions as stored energy. A single household can store approximately 7 kWh of energy in the form of hot water, while 150,000 households could provide around 1 GWh of storage capacity. If half of the households concerned replaced their gas water heaters, their electric water heaters could store approximately 3 GWh of energy in total, at a substantially lower cost than battery storage.

A continuously available ten-year support programme is needed

The Energiaklub Climate Policy Institute proposes a long-term support programme that would remain continuously available for ten years, operate with minimal administrative requirements and allow households to replace their appliances gradually rather than requiring all replacements to take place at once.

Under the detailed proposal, the programme would:

• support the purchase and installation of a new electric water heater;
• also cover any electricity network capacity upgrades required to operate the appliance;
• primarily support conventional electric storage water heaters, while allowing the funding to be used for heat pump water heaters where appropriate;
• require the simultaneous removal and disposal of the old gas appliance;
• provide an 80% support intensity, up to a maximum gross amount of HUF 160,000;
• allow municipalities to provide additional means-tested support;
• require the installation of a smart meter at the energy supplier’s expense.

The estimated annual funding requirement of the full ten-year programme would be approximately HUF 13.5 billion in present-value terms. According to our calculations, depending on international natural gas prices and the euro-forint exchange rate, the public funding invested in the programme could be recovered in approximately 7.5 years through avoided natural gas purchases.

Appliance subsidies alone will not be sufficient

The electrification of domestic hot water production can only succeed if energy regulation and administrative procedures are adapted alongside the introduction of the support programme.

Under the current residential tariff system, heating water with electricity may be more expensive than using natural gas, even where a reduced electricity tariff is available. In addition, the electricity required to produce domestic hot water could easily push affected households above the annual consumption threshold for regulated-price electricity.

A tariff system is therefore needed that considers household gas and electricity consumption together and ensures that electrification does not result in higher energy costs. Regulation should also encourage households to heat water primarily during periods of peak solar generation.

We also recommend:

• simplifying the current procedure for increasing household electricity connection capacity, which can be lengthy and expensive;
• reviewing the maximum electrical capacity permitted on shared main supply lines in multi-apartment buildings;
• reducing unnecessary administrative and technical requirements related to disconnecting gas appliances;
• requiring energy suppliers to cover the cost of installing smart meters;
• prohibiting the installation of new gas-based domestic hot water systems in new buildings and buildings undergoing major renovation.

An overwhelming majority of the public supports appliance replacement

According to a nationally representative survey conducted by the Energiaklub Climate Policy Institute in January 2026, 91% of the Hungarian population supports replacing inefficient gas appliances. At the same time, respondents considered it important that the transition should not be mandatory but voluntary and supported by appropriate financial assistance.

More than half of respondents also recognised that replacing gas appliances could strengthen energy security and help Hungary prepare for a future in which obtaining natural gas may become more difficult or more expensive.

“Utility Cost Reduction 2.0”: long-term savings instead of temporary price discounts

In addition to regulatory and financial measures, a supportive, multi-year communication programme would also be needed. This could be framed as a “Utility Cost Reduction 2.0” campaign, shifting the focus from artificially maintaining low energy prices towards permanently reducing consumption through modernisation and long-term savings.

The purpose of the campaign would not be to stigmatise households that currently use gas appliances. Instead, it should demonstrate that switching technologies is a realistic, supported and beneficial long-term choice. It could improve household comfort, reduce energy consumption and environmental impacts and, with an appropriate tariff system, lower household energy expenditure.

The campaign could also highlight the controllability of electric water heaters, their potential integration with solar energy and the possibility of automatically adjusting household consumption to periods characterised by lower electricity prices and high renewable electricity generation.

Conclusion

The Energiaklub Climate Policy Institute considers the replacement of standalone gas water heaters with electric alternatives to be one of the quickest and simplest residential electrification measures available.

A well-designed, long-term support programme could simultaneously reduce Hungary’s natural gas imports, improve energy efficiency, decrease household fossil fuel consumption and provide the electricity system with a significant volume of low-cost and controllable energy storage capacity.

However, supporting the purchase of new appliances alone will not be enough. Predictable tariffs, simpler grid connection and administrative procedures, smart controls and communication that presents the transition as a safe, convenient and economically beneficial opportunity for households will also be required.

📄 The full text (in Hungarian) of our policy recommendations is available here: The Electrification of Domestic Hot Water Production (PDF)