VEU signals changes for commercial and industrial heat pump incentives

The proposed changes come in response to feedback received in last year’s consultation on the Commercial and Industrial (C&I) Heat Pump Water Heater (HPWH) activity, which supports medium-to-large commercial and industrial businesses to upgrade to efficient commercial-sized heat pump hot water technologies.

The changes focus on adjusting the product eligibility thresholds introduced in July 2025 to better define “commercial and industrial-sized” HPWH systems and prevent domestic-sized HPWH units receiving higher incentives than appropriate for the facilities they were installed in.

There are several proposed changes:

• The average heating capacity eligibility threshold (previously 20kW) is proposed to be removed
• The load factor threshold is proposed to be increased from 10kW to 12kW, with scaled incentives to apply to products failing to meet an average heating capacity of 12kW
• For products below the 12kW minimum heating threshold, the scaled incentive is proposed to be increased slightly based on the total number of heat pumps in the registered product
• The eligible minimum average tank volume is proposed to be reduced from 700L to 425L
• The minimum co-payment amount is proposed to increase from $1,000 to $10,000 (including GST).

DEECA has advised stakeholders not to make any decisions related to the activity until final specifications have been approved and published. The proposed changes are expected to come into effect in early 2026, subject to approvals.

DEECA says it received valuable input on changes beyond product eligibility. These changes will be considered in the comprehensive review of all water heating activities in the VEU program, to be conducted throughout 2026.

For more information, visit the DEECA website.

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