Compare gas and electricity costs in Australia. Discover which energy source offers better value for heating, cooking & hot water. Start saving today!
Published on 29/08/2025
By Pallav Verma
Struggling with rising energy bills? You're not alone. Many Australian households are questioning whether gas or electricity offers better value for their energy needs. The answer isn't straightforward, it depends on your usage patterns, appliances, and location. Let's break down the costs to help you make an informed decision about your energy future.
Understanding the cost differences between gas and electricity can help you assess which energy mix may suit your household. Any potential savings will vary depending on factors such as your usage, location, and the provider plan you choose.
When comparing gas and electricity for household heating and hot water, government sources emphasise that efficiency, not just unit price, is the key factor in running costs.
Source: energy.gov.au
Key Takeaway: According to government data, gas appliances may have lower upfront purchase costs, but electric heat pumps used for both heating and hot water offer significantly higher efficiency, which can reduce ongoing energy expenses. The right option will depend on your household’s usage patterns, current setup, and local energy prices.
Government data shows that heating, hot water systems, and refrigeration are the biggest contributors to household energy costs in Australia (energy.nsw.gov.au).
If heating and hot water are your main needs, these will likely drive most of your bill. According to Australian Energy Upgrades, reverse-cycle air conditioners (electric heat pumps) can be cheaper to run than gas ducted heating, with average running costs of around $500–$900 per year compared to $800–$1,200 annually.
Actual costs vary depending on household usage, location, and system efficiency. Electricity costs can be reduced by shifting high-energy tasks to off-peak times if you’re on a time-of-use tariff. Gas prices usually remain consistent throughout the day, offering predictable costs but fewer savings opportunities from timing.
For the most accurate estimate, use the government’s Energy Made Easy tool to compare running costs based on your household’s actual usage.
The type of appliance you use has a major influence on energy consumption and running costs.
Electric reverse-cycle heat pumps can operate at 150–600% efficiency (COP 1.5–6.0), meaning they deliver far more heat energy than the electricity they consume ( en.wikipedia.org). High-efficiency condensing gas heaters can achieve 90–98% efficiency by capturing additional heat from exhaust gases (en.wikipedia.org).
Induction cooktops transfer roughly 70–74% of their energy directly into the cookware, making them one of the most efficient cooking methods. Gas cooktops, while offering immediate heat control, operate at around 35–40% efficiency as much of the heat is lost to the surrounding air. (en.wikipedia.org)
Heat pump water heaters are highly efficient, using around 30% of the energy of a conventional electric hot water system. This technology leverages a refrigeration cycle to extract heat from the air for water heating, making it a substantially more energy-efficient option. (Energy.gov.au)
Key Point: While some gas appliances can be highly efficient, especially condensing heaters, electric options like heat pumps and induction cooktops often deliver lower long-term running costs. Your choice should consider not only appliance efficiency but also your household’s energy tariffs and usage patterns.
Setting up gas versus electricity involves different upfront investments. Connecting electricity to a new home typically costs less initially, as electrical infrastructure is more widespread.
Gas connections require more substantial upfront investment. Installing gas connection can cost between $1,200-5,000 depending on your property's proximity to gas mains and installation complexity.
According to The Guardian, switching from gas heating to reverse-cycle air conditioning could save an average of $999–$2,215 per year, with upfront decommissioning costs (~$800) potentially recouped in 5–10 months.
Electricity costs differ significantly across states due to factors such as infrastructure, market competition, and resource availability. The following figures are based on regulator “safety-net” prices the Default Market Offer (DMO) for NSW, SE Queensland, and SA, and the Victorian Default Offer (VDO) for Victoria plus equivalent regulated tariffs for other states and territories. These are standing offer reference prices and represent the maximum retailers can charge customers who have never switched; most households pay 15–25% less on discounted market offers.
2025–26 Simple Average Across National Electricity Market Zones
|
State / Territory |
Annual Bill |
Monthly |
|
Victoria (VDO avg) |
$1,675 |
$140 |
|
NSW (DMO avg) |
$2,370 |
$198 |
|
SE Queensland (DMO) |
$2,143 |
$179 |
|
South Australia (DMO) |
$2,301 |
$192 |
|
Western Australia |
$2,200 |
$185 |
|
Tasmania |
$2,480 |
$207 |
|
ACT |
$2,336 |
$195 |
|
Northern Territory |
$1,960 |
$163 |
Read in detailed - Average Electricity Bill in Australia
While not covered by DMO/VDO, regulator and retailer data suggest typical annual gas bills:
Understanding electricity prices per kWh in your area helps you make accurate cost comparisons with local gas rates.
Environmental impact is now a key factor in energy choices. When used directly in homes, natural gas produces significantly fewer emissions than coal-fired electricity. However, the cleanest option is renewable electricity generated from sources like solar and wind.
Across Australia, uptake of rooftop solar continues to grow more than 4 million systems are now installed, contributing to reduced household electricity costs and emissions. For many households, this makes electric appliances, especially those paired with solar, more cost-effective over time.
Gas appliances produce emissions at the point of use, whereas the environmental footprint of grid electricity depends on the energy mix in each state. Jurisdictions with higher renewable energy generation, such as Tasmania, South Australia, and the ACT, provide cleaner electricity options than states relying more heavily on fossil fuels.
Natural gas, when used directly in homes, produces significantly fewer greenhouse gas emissions than coal-generated electricity up to around 50% less, depending on the energy mix in your state (Energy Information Australia). However, renewable electricity remains the cleanest option overall.
In 2023, renewables supplied about 35% of Australia’s total electricity generation, with solar, wind, and hydro all contributing (energy.gov.au). Rooftop solar is playing a major role over 4 million Australian households now have solar panels, generating close to 20% of electricity in the National Electricity Market and SWIS.
State-level differences matter. For example, South Australia generates around 70% of its electricity from renewables and is targeting 100% by 2027, meaning electric appliances there already run on a cleaner grid. In states with a coal-heavy supply, gas appliances may still have a lower carbon footprint.
Ultimately, the greener choice depends on your location, appliance type, and whether you can use renewable electricity—either from the grid or your own solar system.
Rather than choosing between gas and electricity, many Australian households benefit from using both energy sources strategically—gas for heating and hot water, electricity for lighting and appliances.
The key to maximising savings lies in comparing available plans and finding providers that offer competitive rates for your energy mix. Market conditions change regularly, making periodic comparisons essential for ongoing savings.
Ready to find better energy deals? Compare gas plans at electricityprovider.com.au to discover potential savings on your energy bills. Our comparison platform helps you evaluate both gas and electricity options from trusted providers, ensuring you get the best value for your household's unique energy needs.
Don't let rising energy costs catch you off guard. Take control of your energy expenses today and start saving with the right energy plan for your home.
