Dean Lombard, Senior Energy Analyst, Alternative Technology Association

Last month the Alternative Technology Association published Household Fuel Choice in the National Energy Market, an analysis of the relative costs of gas and electricity as a household fuel.

Households don’t typically make conscious fuel choices. Rather, people move into a house that may or may not have gas fuelling some appliances; and when an appliance needs replacing, they replace it with another of the same type. When people buy a new house, the choice may have been already made for them by the builder or developer.

Around Australia, there’s a general belief that gas is cheaper than electricity for heating and hot water. This used to be the case, but changes in technology mean it’s no longer so simple: while 1 kWh of gas is about a third the price of 1 kWh of electricity, modern electric appliances are far more efficient. For example, the heatpumps used in split system reverse cycle air conditioners are typically over four times more efficient than gas heaters. When you need four times the amount of gas as electricity to produce the same amount of heat, it’s no longer the cheaper option.

We compared  (in 17 locations and for four household types) the net present value of choosing electric appliances (multiple split system reverse cycle air conditioners, heat pump storage hot water systems, and electric stoves with induction cooktops) instead of gas appliances (ducted gas heating or wall furnaces with portable heaters, instantaneous or storage hot water systems, and gas stoves) when replacing end-of-life gas appliances. We considered purchase, installation, and ten-year running costs. We also assessed the value of going all electric versus dual fuel in a new home.

The results were striking:

  • New homes with rooftop solar were many thousands of dollars better off over ten years by going all-electric. Even without solar, they were significantly better off except in Sydney and Adelaide (marginally better off).
  • Existing homes with only one gas appliance were always materially better off replacing with the electric option and cutting their gas connection.
  • Homes replacing gas heating were always better off with split systems.
  • Results varied for homes with hot water needing replacement: switching away from gas was best in Queensland, and often beneficial in other places only when also switching other appliances (due to the value of avoiding the fixed charge). In Sydney, gas hot water was generally better economically.
  • Fuel-switching cooking was usually immaterial unless it enabled disconnecting gas and avoiding the fixed charge.
  • Rooftop solar always improved the value of switching to electric.

Further analysis showed that for homes with both gas space heating and split system air conditioning installed to the main living area, simply using the split system instead of the gas heater for heating saved between $100 and $500 per year in running costs.

The main implications of this work are:

  • Consumers need to understand these economic differences so they can make an informed choice when replacing appliances or purchasing or renting homes.
  • Government policies subsidising gas network expansion or replacing gas appliances in public housing should be re-examined.
  • Marketing claiming gas is cheaper than electricity should be held to account.


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