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Gas vs Electricity: What’s better for your wallet?

Decide whether electricity or gas is better for your home and wallet with this comprehensive guide.

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What's cheaper: Gas or electricity? Compare rates
Gas vs electricity: Costs Average costs

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When buying appliances for your home, it can be tough to decide. Should you buy an electric space heater or one powered by natural gas? Which will save you more money in the long run and which one is a better environmental pick? In this guide, we'll explore these questions and more, laying out everything you need to know when comparing electricity and gas.

Gas and electricity are available in all Australian states, but electricity is regulated by the state government in Tasmania, the Australian Capital Territory and parts of Queensland. You can choose your gas provider in all states, though some states will have fewer providers to choose from.

Gas vs electricity: Costs

Average costs for gas (by state)

Gas usage rates, or how much you pay per MJ of gas, vary across Australia. The amount you pay is largely up to your distributor and what gas plan you're on.

While very few retailers operate in every state, we've taken the three major providers in Australia and averaged the usage rates on their main market offers. The retailers included are: AGL/ActewAGL, Origin and EnergyAustralia.

StateAverage usage rates (c/MJ)
New South Wales (postcode: 2000)3.21 c/MJ
Victoria (postcode: 3000)2.19 c/MJ
Queensland (postcode: 4000)5.18 c/MJ
South Australia (postcode: 5000)3.98 c/MJ

Something to keep in mind with gas usage rates compared to electricity usage rates is that gas is often charged on a "block tariff". This means that gas rates change the more you use per day. The prices listed above are just the average usage rates for the first block of gas used in a day.

Average costs for electricity (by state)

Electricity usage rates, or how much you pay per kWh of electricity, are not consistent across Australia. How much you pay will depend on where you live, your distributor and your energy plan.

To give a good idea of rates across Australia, we've chosen six major retailers that each operate in four states and averaged usage rates for their main market offers. The retailers included are: AGL, Alinta Energy, Click Energy, EnergyAustralia, Origin and RedEnergy.

StateAverage usage rates (c/kWh)
New South Wales (postcode: 2000)24.47
Victoria (postcode: 3000)23.04
Queensland (postcode: 4000)21.69
South Australia (postcode: 5000)35.11

What's cheaper: Gas or electricity?

Generally gas is cheaper, but this isn't the whole story.

While usage rates per unit are significantly cheaper for gas per unit, 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.

On top of this, you have to consider how efficient gas is for what you're using it for.

In the next section we'll compare how well heaters run on gas versus electricity.

Gas vs electricity for heaters

As a rule, gas heaters are more efficient than electric ones, though exactly how efficient is highly dependent on the type of heater you're using. To give you an idea of how the two compare, we've listed common electric and gas heater technologies, their typical hourly energy consumption, and how much that might cost you if you're using them every day for 3 hours during all 90 days of winter.

The tables below assume a gas usage rate of 2c/MJ and an electricity usage rate of 30c/kWh.

Heater TypeHourly energy consumptionWinter running costs (3 hours per day for 90 days)
ElectrickW/h
Oil-filled column heater1.6$125.55
Tower heater2.0$160.20
Reverse cycle air conditioner3.5$279.82
GasMJ/h
Radiant convection heater19$102.60
Convection heater20$108.00
Radiant bar heater35$189.00

Source: Finder research conducted in June 2020.

As you can see, a lot depends on your specific use and the technology of your heater, but gas is almost always more efficient. However, while your standard electric column heater probably won't run you more than $200 to purchase, a natural gas heater is likely to cost $1,000 or more, so your initial outlay is much higher.

Should I use gas or electricity?

This section is intended for those who are primarily concerned with which technology will be overall cheaper in the long run. We've put together an answer for a few scenarios based on the results of a study published in the Apr-Jun 2018 edition of Renew magazine. If you're interested in the full assumptions and methodology of the study, read the article itself. Our guide simply sums up the major conclusions.

For new homes

Around Australia, your best bet for saving money is to go all electric appliances with solar energy in a new home. Even in the city with the worst return, Melbourne, the authors estimate that you'll be $10,000 ahead in 10 years compared to gas appliances and no solar power.

If you are unable to install solar, the benefits of going all electric may be far smaller, but still positive in most cases.

One gas appliance

If you only have one gas appliance and it fails, the authors found that you're better off replacing it with an efficient electric model. This will save you money because any extra usage costs for electricity are outweighed by disconnecting your house's gas supply and not having to pay the fixed supply charge anymore.

Multiple gas appliances

With multiple gas appliances, the situation is more difficult, because it's not a matter of simply cutting your gas supply after your last appliance is replaced. It depends on what appliance fails.

If it's a gas space heater, the authors state it's marginally cheaper to replace it with an efficient electric model. They also say that replacing other gas appliances like stoves at the same time could bring you benefits. For those who already have a reverse-cycle air conditioner, they can use one less appliance overall.

However, if your gas water heater fails, you are almost always better off replacing it with another gas one, unless you're already transitioning to an all-electric home.

Considering solar

The authors state that installing solar power is almost always a sound financial idea if you have good solar access on your roof, even if you have several gas appliances. Relying on many electric appliances or transitioning to electric stovetops and the like can simply make an existing solar system an even better financial proposition.

Pros and cons of gas vs electricity for each type of usage

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A general rule of thumb for most things is that gas will be more expensive to install and purchase, but cheaper to run.

Type of useGasElectricity
Cooking
  • Stoves running on gas heat faster and more evenly than electric and also have a longer lifespan.
  • Electric ovens tend to cook food more evenly than gas ones.
  • Both ovens and stoves are cheaper to buy and easier to use
  • Higher running costs.
Space heating
  • Gas heaters are quick and efficient at heating rooms.
  • As with many gas appliances, you'll need ventilation to deal with the fumes.
  • Wider selection.
  • You could alternatively invest in a reverse-cycle air conditioner which can both heat and cool for potential savings.
  • Less efficient than gas heaters
Water heating
  • It's significantly cheaper and more efficient in the long run than electric.
  • Pay far more upfront for a gas heating system,
  • Cheaper to buy and install.
  • A "controlled load" tariff can help reduce running costs.
  • Electric water heaters will chew through a heap of energy and have greatly increased operating costs compared to gas,
Clothes dryer
  • Super cheap to run.
  • Dries clothes faster than an electric dryer
  • Expensive to buy
  • Requires ventilation to prevent toxic fume buildup.
  • Cheaper to install
  • Far less efficient and more expensive to run than gas.
  • An electric clothes dryer will burn through heaps of electricity, but may be necessary depending on the layout of your laundry.

What's safer?

Both gas and electricity pose safety risks that must be addressed in your home. Neither is really safer than the other, since both can be dangerous.

With gas, you run the risk of carbon monoxide building up in your house, which can cause suffocation in high enough concentrations. Basically, your house will need sufficient ventilation plus a carbon monoxide alarm to let you know if it's reaching dangerous levels.

Electricity can cause either fires or electrocution if it isn't wired, handled or maintained properly. Keep all your appliances up to date and make sure you aren't using things in ways they're not meant to be used. Perform any obvious maintenance such as replacing frayed wires and so forth.

What's better for the environment?

Since many appliances require less energy to run on gas than they do on electricity, gas is in many ways more environmentally friendly. The less energy you're consuming as a rule, the lower your impact on the environment.

This only holds true when you're comparing gas against electricity that is largely generated by fossil fuels e.g. burning coal. If you're relying upon electricity that has been entirely generated from renewable sources like wind or solar, the emissions tied to your power may be low to none compared to the emissions that burning natural gas produces.

However, in Australia at the time of writing, gas is by far more environmentally friendly.

Bottom line

If you're purely interested in price and you don't have access to solar energy, it's almost certainly cheaper in the long run (though more expensive initially) to opt for gas appliances like water heaters, space heaters and clothes dryers. Gas is also better for the environment unless you know your electricity comes from a purely renewable source, but Australia's current energy landscape doesn't really support that.

If you have access to good amounts of solar, going all electric with your appliances might save you money because you can cut off your gas connection and stop paying daily supply charges. Of course, all of this advice is general and will depend on your particular circumstances.

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