Quick Answer

In Australia in 2026, electricity is cheaper than gas for most households when using efficient appliances like heat pumps and induction cooktops — especially with solar panels. Natural gas averages around $0.036/MJ while electricity averages $0.33/kWh, but a reverse-cycle air conditioner uses 3–4 units of heat per unit of electricity, making it 2–3x more efficient than gas heating in practice.

Gas vs Electric Running Costs: The Complete Breakdown

The answer to “which is cheaper — gas or electric?” has shifted dramatically in Australia over the past five years. Rising gas network charges, combined with plummeting solar costs and increasingly efficient electric appliances, have tipped the balance firmly toward electricity for many households — particularly in Victoria and New South Wales.

This guide compares actual running costs for the appliances that matter most: heating, hot water, cooking, and general use. All figures use 2026 average tariff rates.

2026 Average Energy Tariff Rates (Australia)

Energy Type Average Rate State Variation Notes
Electricity (flat rate) $0.28–$0.38/kWh VIC: ~$0.33 | NSW: ~$0.32 | QLD: ~$0.30 Time-of-use plans vary widely
Electricity (off-peak) $0.10–$0.18/kWh Available on controlled load/TOU plans Good for hot water systems
Natural gas $0.030–$0.045/MJ VIC: ~$0.036 | NSW: ~$0.040 Supply charges add $0.80–$1.20/day
LPG (bottled) $0.06–$0.12/MJ Regional areas pay more Not on network — cylinder costs apply
Solar (self-consumption) $0.00/kWh Effective rate during daylight hours Saves at your retail rate (~$0.33)
Pro tip: The supply charge (daily connection fee) for gas is often $300–$450/year before you use a single megajoule. If you only use gas for cooking or heating one room, ditching the gas connection and switching to electric can save $300+ annually in standing charges alone.

Heating: Gas vs Electric

Ducted Gas Heating vs Reverse-Cycle Air Conditioning

This is the most significant cost comparison for Melbourne homeowners, especially heading into winter. The critical factor is the coefficient of performance (COP) — how many units of heat you get per unit of energy consumed.

Heating Type Efficiency Running Cost (per hour) Annual Cost (3 months winter use)
Ducted gas heating (4-star) ~82% efficient ~$0.50–$0.80/hr $600–$960
Ducted gas heating (older unit) ~60–70% efficient $0.70–$1.20/hr $840–$1,440
Reverse-cycle split system (COP 4.0) ~400% efficient ~$0.25–$0.45/hr $300–$540
Reverse-cycle ducted (COP 3.5) ~350% efficient ~$0.40–$0.65/hr $480–$780
Gas space heater (unflued) ~90% efficiency, but moisture risk $0.35–$0.60/hr $420–$720

Pro tip: A modern reverse-cycle split system with a COP of 4.0 gives you 4 kWh of heat for every 1 kWh of electricity. Even at $0.33/kWh for electricity vs $0.036/MJ for gas, the electric heat pump wins because it multiplies your input energy — gas heating cannot do this.

Gas Hot Water vs Heat Pump Hot Water

Hot Water System Annual Running Cost CO₂ Emissions Eligible VIC Rebate
Gas continuous flow (6-star) $280–$420/year ~1.8 tonnes CO₂/yr None
Gas storage (3-star) $380–$580/year ~2.5 tonnes CO₂/yr None
Electric element (off-peak) $200–$350/year ~1.2 tonnes CO₂/yr None
Heat pump hot water $80–$180/year ~0.5 tonnes CO₂/yr Up to $1,000 via VEU
Heat pump + solar panels $20–$80/year Near zero VEU + solar rebate

Cooking: Gas Cooktop vs Induction

Gas cooking has long been the chef’s preference, but induction cooktops have closed the performance gap — and they’re significantly cheaper to run.

Cooktop Type Energy Use (per hour) Running Cost (per hour) Annual Cost (1hr/day cooking)
Gas cooktop (4-burner) ~4–6 MJ/hr average ~$0.15–$0.22/hr $55–$80/year
Electric coil cooktop ~1.2–1.8 kWh/hr ~$0.40–$0.60/hr $146–$219/year
Induction cooktop ~0.8–1.2 kWh/hr ~$0.26–$0.40/hr $95–$146/year
Induction + solar ~0.8–1.2 kWh/hr ~$0.00–$0.15/hr $0–$55/year
Pro tip: Gas cooktops look cheap per-hour, but most of the heat escapes around the sides of pots. Induction transfers nearly 90% of energy directly to the cookware, so you’re actually cooking faster on less energy. The cost-per-meal gap is smaller than the raw MJ comparison suggests.

The Solar Factor: Why This Changes Everything

If you have solar panels (or are planning to install them), the calculation shifts dramatically in favour of electricity. Self-consumed solar costs nothing — every kWh you generate and use yourself saves you the retail rate (~$0.33/kWh). This means:

  • An induction cooktop running during the day: effectively free
  • A heat pump hot water system set to run 10am–2pm: effectively free
  • Running the dishwasher or washing machine during solar hours: effectively free

Gas appliances cannot take advantage of solar generation at all — you’re always paying for gas, even on a sunny day.

When Gas Is Still Cheaper

Gas does retain a cost advantage in a few specific scenarios:

  • No solar, high electricity tariffs: Households paying peak tariffs ($0.38–$0.45/kWh) without solar may still find gas heating marginally cheaper than an older, less efficient split system.
  • Large homes with existing ducted gas: If the ducted gas system is relatively new (under 5 years) and highly rated, the cost to rip it out and replace it with ducted refrigerant may not pay back within a reasonable timeframe.
  • LPG is the exception: Bottled LPG is always more expensive than natural gas and usually more expensive than electricity. If you’re on LPG, switching to electric almost always saves money.
Safety warning: Unflued gas heaters (portable gas heaters used indoors without a flue) release combustion products including carbon monoxide and nitrogen dioxide into your living space. They should not be used in bedrooms or small rooms. Victoria’s building regulations restrict unflued gas heater installation in habitable rooms — check current rules with Victorian Building Authority before installing any gas appliance.

Tips and Gotchas

  1. Don’t ignore supply charges. Gas standing charges of $300–$450/year mean you pay for the connection even if you barely use it. Light gas users (cooking only) often save money by switching to all-electric and eliminating the gas supply charge.
  2. Check your current tariff. If you’re on a flat-rate electricity plan but have solar, a time-of-use plan with low off-peak rates for overnight EV charging or hot water can cut costs further.
  3. Heat pumps work in Melbourne winters. Modern heat pumps extract heat from outside air even at -5°C. Melbourne rarely drops below 2–3°C overnight, so a heat pump operates efficiently year-round.
  4. Induction cooktops need compatible cookware. If your current pots and pans aren’t induction-compatible (test with a fridge magnet — if it sticks to the base, it works), factor in ~$150–$300 to replace them.
  5. VEU rebates close the upfront gap. Victoria’s VEU program provides point-of-sale discounts on heat pump hot water systems, efficient heaters, and insulation. Check energy.vic.gov.au for current offers — these change regularly.
  6. Compare 10-year total cost, not just running costs. A heat pump hot water system costs $2,000–$3,500 installed vs $800–$1,500 for a gas storage system, but saves $200–$400/year in running costs. At $300/year savings, it pays back in 4–7 years.
  7. Gas appliance servicing costs money. Gas heaters require annual servicing ($120–$200) to remain safe and efficient. Electric appliances generally need little maintenance.
  8. Two-person households differ from large families. Large families in big homes (4+ bedrooms) use significantly more hot water and space heating — the dollar savings from switching to efficient electric are proportionally larger.

Local Melbourne Resources

Is gas or electricity cheaper for heating in Melbourne?

In 2026, a reverse-cycle split system running on electricity is cheaper than gas ducted heating for most Melbourne homes, typically costing $300–$540/year to heat a home compared to $600–$960 for ducted gas. The heat pump effect — delivering 3–4 units of heat per unit of electricity — more than offsets the higher per-unit electricity price.

Should I disconnect my gas connection in Melbourne?

If you only use gas for a cooktop or a single heater, disconnecting and switching to electric can save $300–$450/year in standing charges alone. The case is strongest if you also have solar panels, a heat pump hot water system, or are planning to install them. If you have a new ducted gas system and no solar, the payback period for full electrification may be 8–12 years.

Are induction cooktops really cheaper than gas to run?

It depends on solar. Without solar, induction costs $95–$150/year to run versus $55–$80 for gas — slightly more expensive. With solar panels and daytime cooking, induction is effectively free, making it significantly cheaper long-term. Induction is also faster and safer than gas, with no combustion products indoors.

What government rebates are available for switching from gas to electric in Victoria?

Victoria’s Energy Upgrades (VEU) program provides point-of-sale discounts on heat pump hot water systems (up to $1,000), efficient reverse-cycle heaters, and insulation. The Solar Homes program provides rebates on solar panel and battery installations. Check energy.vic.gov.au for current offers as they change regularly.

Do heat pumps work efficiently in Melbourne’s cold winters?

Yes. Modern reverse-cycle heat pumps operate efficiently down to -15°C or below. Melbourne’s winter temperatures rarely fall below 2–3°C overnight, well within the efficient operating range of any current heat pump model. The COP (efficiency multiplier) does reduce slightly on the coldest days, but remains well above 2.5 even in Melbourne’s coldest conditions.