- Good to know: Electricity is charged at a rate per kWh (kilowatt hour) of energy used. Gas is charged per MJ (megajoule) of gas used.
Gas vs Electricity: What’s cheaper for your home?
There's no clear cut answer but one can be better than the other depending on your living situation.
Whether gas is cheaper than electricity really depends on your current lifestyle, the limitations of your property, market rates and the energy efficiency of the appliances you purchase.
We've broken down the variables to help you determine the right energy mix for your home, wallet and the environment.
Gas costs less per MJ in comparison to the amount you'll pay per kWh in electricity. For example, in NSW you'll pay roughly:
- 30 cents per kWh of electricity
- 4 cents per MJ of gas
Keep in mind that it takes about 3.6MJ of gas to produce 1kWh of electricity at maximum efficiency so it is cheaper to use gas, but not as much as it appears on the surface. In reality, it's more like:
- 30 cents per kWh of electricity
- 14.4 cents for an equivalent 3.6 MJ of gas
This make electricity roughly twice the cost of gas. However, there's other factors involved, like the cost of setting up your house with a gas connection - which not all homes have.
Gas vs electricity: What's the main difference?
Practically all homes are powered by electricity but gas fittings vary from house to house and you can use as little or as much as you want. Below, you'll find an overview of gas and electricity usage prices in the four major states. The stats, as of June 2020, are from the Australian Energy Regulator's annual retail markets report.
Average usage costs for gas (by state)
|State||Average usage rates (c/MJ)|
|New South Wales||4c/MJ|
Average usage costs for electricity (by state)
|State||Average usage rates (c/kWh)|
|New South Wales||30c/kWh|
While usage rates per unit appear cheaper for gas, it actually takes about 3.6MJ of gas to produce 1kWh of electricity at maximum efficiency. This makes gas cheaper, but not by as wide a margin as it seems at first.
Types of gas
There are two types of gas that households can purchase. The most common option is natural gas, which is distributed through the main gas network. You can also get liquefied petroleum gas (LPG), which is delivered in tanks.
This page primarily focuses on natural gas on this page as it's more frequently used. It can be cost effective, but its uses are limited to hot water, tumble dryers, fireplaces, heaters, cooking and the classic BBQ. In comparison, electricity powers a lot more appliances and the building itself.
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Apples and oranges. While usage rates per unit appear cheaper for gas, it actually takes about 3.6MJ of gas to produce 1kWh of electricity at maximum efficiency. This makes gas cheaper, but not by as wide a margin as it seems at first.
Gas actually costs more to set-up in your house
If you don't have an existing gas connection, installing one will set you back anywhere between $1,200 and $5,000 plus1. This includes both material and labour costs.
However, if you have the option to mix and match (or are considering going all-electric), here's a look at the pros and cons of running appliances with either gas or electricity.
Keep in mind that most appliances you'll invest in will have at least a 10-year runtime so don't jump the gun and buy something without thorough research.
- Cheaper running costs.
- Gas-powered stoves heat faster and more evenly than electric ones.
- Gas heaters are quick at warming up the room.
- Appliances can be more expensive to purchase.
- Possibility of explosion and bad air quality indoors due to carbon monoxide.
- Not a sustainable energy source and has a poor environmental impact.
Sometimes, the choice may even come down to being conservative with your energy use. You can read about the most expensive appliances that run in your home here and tips on saving energy and your money.
- They cost less to buy and install (electric ovens, heaters, clothes dryer) – most homes already have an electric connection.
- You get a wider selection, including eco-friendly and energy-efficient appliances.
- Comparatively safer to run – you won't have to worry about explosions and bad air quality indoors.
- Electric ovens tend to cook food more evenly than gas ones.
- You have the option to invest in a reverse-cycle air conditioner, which can both heat and cool, for potential savings.
- Higher running costs.
- Possible risk of fire and electrocution.
- Worse environmental impact than gas if you're using coal-generated electricity.
Solar power and all-electric homes for long-term savings
It's worth noting that households can expect to pay about $120 (or 9%) less for electricity in 2023 than they do today, according to the Australian Energy Market Commission's annual residential electricity price trends report, released in December 2020.
Now combine this with Australia's emphasis on renewable energy and uptake in solar panel installations – 2.7 million solar panel systems in the past 20 years – and you'll soon realise that the gas versus electricity debate isn't so clear cut.
If you can afford to install solar panels on your rooftop, and bear the brunt of the upfront costs, you'll benefit from solar (and wind) being the cheapest new sources of electricity2.
How much could I save?
A study by not-for-profit sustainability outfit Renew has found that an all-electric new-build home with rooftop solar and no gas appliances could save households in Western Australia up to $10,500 on energy costs over 10 years. This is compared to homes powered with both gas and electricity without solar.
What's our verdict?
- Safety risks. Both gas and electricity face their own set of safety risks. You'll need to make sure all your appliances are up to date and performing well.
- Savings. It might take a lot longer to recover the costs of installing a gas connection if you live in a smaller household with generally lower energy consumption.
- Location. The best energy option for you will depend on your location as prices can vary between states and postcodes within. You'll need to consider if you get enough sun to install solar panels and if you can handle the upfront costs. Will low temperatures affect the performance of your electric appliances such as a heat pump? Is natural gas even available in your area or will you need LPG?
- Rebates and concessions. It might be worth checking out what energy rebates and concessions you're eligible for in your state. These could help you decide what's cheaper for your home.
- Environment. Australia is widely focused on renewable energy to eliminate carbon emissions. It's important to keep this front of mind when leaning on any source of energy for your home. You can read about and compare GreenPower plans here.
If you don't live in a rental and are building or renovating your home, Dr Arianna Brambilla, lecturer for architectural technology at the University of Sydney has a few words of advice.
"The most environmentally conscious way to heat and cool a building is to…design it well!"
"Ideally, we want our buildings to be able to keep a comfortable indoor condition by taking advantage of the surroundings. For example, enhancing cross ventilation and capturing the cool summer breeze, or appropriate sun shading for cooling while maximising the penetration of free warm solar radiation during winter."
Don't forget about the environment
"When the above is not possible, think about what is the best option for the environment. We should probably take into account what will happen in the near future: with Australia moving toward carbon neutral-ready buildings, electricity will be the preferable choice.
In the future, the electricity grid will be powered mainly (and, hopefully, totally) by renewable sources, such as sun, wind or, why not, waves and tides, making electricity a so-called 'green' energy. Hence, a forthcoming and environmentally conscious builder could prepare for this scenario by building the infrastructure necessary to support the transition to a renewable-powered grid."
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