Quick Answer
For most Melbourne households in 2026, electricity is now cheaper than gas for heating and cooking when you factor in efficient reverse-cycle air conditioners and induction cooktops. Gas appliances typically cost 2–4× more to run than their electric equivalents due to rising gas tariffs — the average Victorian household saves $400–$900 per year by switching to all-electric. The exception: homes already on cheap gas tariffs with old, paid-off gas appliances may see little short-term benefit.
Gas vs Electric Running Costs: The Real Numbers for 2026
Victorian energy prices shifted dramatically in the early 2020s. Wholesale gas prices spiked after the 2022 energy crisis and never fully returned to pre-pandemic levels. Meanwhile, solar has driven wholesale electricity prices down in the middle of the day, and efficient electric appliances extract 3–5 units of heat per unit of electricity consumed. The result: the economics that once favoured gas have largely reversed.
Energy Tariff Comparison (Victoria, 2026)
| Energy Type | Typical Rate | Effective Cost per kWh of Heat |
|---|---|---|
| Natural gas (reticulated) | $0.038–$0.055/MJ | $0.14–$0.20 (80% appliance efficiency) |
| Electricity (off-peak) | $0.12–$0.18/kWh | $0.04–$0.06 (reverse-cycle, COP 4–5) |
| Electricity (peak/flat rate) | $0.28–$0.38/kWh | $0.09–$0.13 (reverse-cycle, COP 3) |
| Electricity (rooftop solar) | $0.00/kWh (daytime) | Near-zero when consuming own generation |
| LPG (bottled gas) | $1.60–$2.20/kg | $0.70–$1.10 — far more expensive than either |
Heating Cost Comparison
| Heating Method | Typical Annual Cost | Notes |
|---|---|---|
| Ducted gas heating (4-star) | $900–$1,600 | Whole-home, 3-bedroom house in Melbourne |
| Ducted reverse-cycle electric | $600–$1,100 | Same home, 6-star rated system |
| Portable gas heater | $800–$1,400 | Excludes safety risks — CO risk in enclosed rooms |
| Reverse-cycle split system (living area) | $150–$350 | Zoned use, living area only, modern unit |
| Electric panel heater | $600–$1,000 | Resistance heating — no efficiency multiplier |
| LPG ducted heating | $2,000–$3,500 | High-cost fuel — avoid if grid-connected |
Hot Water Cost Comparison
| Hot Water System | Annual Running Cost | Notes |
|---|---|---|
| Gas storage (4-star) | $350–$550 | Common in older Melbourne homes |
| Gas continuous flow (6-star) | $280–$420 | More efficient, widely installed |
| Electric storage (off-peak) | $350–$600 | Depends on off-peak tariff access |
| Heat pump hot water | $180–$320 | 3–4× more efficient than resistance electric |
| Solar hot water (gas boost) | $80–$200 | Lowest cost, high upfront price |
| LPG hot water | $900–$1,600 | Not recommended unless no gas grid |
Cooking Cost Comparison
| Cooktop Type | Annual Running Cost | Notes |
|---|---|---|
| Gas cooktop | $120–$220 | Includes pilot light and burner waste |
| Electric coil/ceramic | $90–$160 | Resistance, moderately efficient |
| Induction cooktop | $60–$110 | 85–90% efficiency — cheapest to run |
What Affects the Gas vs Electric Comparison?
1. Your Current Tariff Structure
Victorian households on controlled-load (off-peak) electricity tariffs get hot water for $0.12–$0.18/kWh overnight — making electric storage competitive with gas. If you’re on a flat-rate tariff with high peak rates, the comparison is less clear. Check your retailer’s controlled load rates.
2. Whether You Have Rooftop Solar
With rooftop solar, daytime electricity is effectively free. Running an induction cooktop, heat pump, or reverse-cycle system during solar hours pushes running costs close to zero. This fundamentally changes the economics — a household with 6.6kW of solar panels effectively runs their kitchen and daytime heating for nothing.
3. Age and Efficiency of Your Current Gas Appliances
A 2-star gas ducted heater installed in 2008 is expensive to run regardless. A brand-new 6-star gas continuous flow hot water system is genuinely efficient. Before deciding to switch, check the star ratings and age of what you already have.
4. Victorian Government Incentives
The Victorian Energy Upgrades (VEU) program offers subsidised upgrades for heat pumps, reverse-cycle systems and induction cooktops for eligible households. Energy.vic.gov.au lists current rebate amounts — these can reduce payback periods substantially.
Total Annual Cost Comparison: All-Gas vs All-Electric Home
| Household Type | All-Gas Annual Cost | All-Electric Annual Cost | Annual Saving |
|---|---|---|---|
| 3-bed house, no solar | $2,400–$3,200 | $1,500–$2,200 | $600–$1,200 |
| 3-bed house, 6.6kW solar | $2,400–$3,200 | $700–$1,200 | $1,400–$2,200 |
| Apartment, no solar | $900–$1,400 | $600–$1,000 | $200–$500 |
The Electrification Decision: When It Makes Sense
Switching all appliances from gas to electric is a big upfront investment. You’ll typically spend $8,000–$20,000 replacing a gas ducted heater, gas hot water, and gas cooktop with electric equivalents. The payback period is 5–12 years depending on rebates, solar, and your current tariff.
Best time to switch: When an appliance needs replacing anyway. Replacing a broken gas hot water system with a heat pump (instead of a like-for-like gas unit) costs only $500–$1,500 more upfront but saves $200–$300 per year. Payback in 3–6 years.
Don’t switch just yet if: Your gas appliances are less than 8 years old and in good condition. The running cost savings won’t justify replacing working equipment.
Top 10 Tips and Gotchas
- Calculate cost per useful kWh, not tariff rate. A reverse-cycle system at COP 3.5 and $0.32/kWh electricity costs $0.091 per useful kWh of heat. Gas at $0.045/MJ with 80% efficiency costs $0.056 per kWh. The gap is narrower than it looks on the tariff alone.
- Check VEU rebates before you act. Victorian Energy Upgrades can cut the installed cost of a heat pump hot water system by $500–$1,200. Apply through an accredited provider, not a general plumber.
- Don’t cancel gas until you’re fully switched. Gas network connection fees still apply even if you’re using very little gas — once you disconnect, reconnecting costs $2,000–$5,000.
- Your electricity plan matters enormously. A controlled-load tariff (also called off-peak or Economy 7) can make electric hot water as cheap as gas. Shop plans on the Victorian Energy Compare site.
- Induction cooktops need compatible cookware. Cast iron and magnetic stainless work fine. Aluminium, copper, and old non-magnetic pans don’t. Factor in $200–$500 for new pots and pans.
- Heat pumps struggle below 5°C. In very cold Dandenong Ranges winters, performance drops. Look for cold-climate models rated down to -10°C (Sanden, Reclaim, and some Rheem and iStore models).
- Gas meter rental is a fixed charge. The supply charge on gas is $0.55–$0.90/day regardless of how much you use. If you’re barely using gas, you’re paying $200–$330/year just for access.
- Reverse-cycle cooling is included. Switching from gas to a reverse-cycle system doesn’t just solve heating — you get air conditioning included. Don’t count the cooling value as “zero” when comparing costs.
- Factor in gas network shutdown risk. The Victorian Government has signalled intentions to phase out gas in new homes by 2035. Investing in gas infrastructure now may have reduced resale value.
- Get multiple quotes. Heat pump installers vary enormously in pricing. Get at least 3 quotes and ensure they include VEU rebates if eligible.
Local Melbourne Resources
- Victorian Energy Compare — compare electricity and gas plans, find controlled-load tariffs
- Victorian Energy Upgrades (VEU) — rebates for heat pumps, reverse-cycle systems, induction
- Solar Victoria — solar rebates and interest-free loans for eligible households
- Energy Rating — compare star ratings for all appliance types
- Reece Plumbing — heat pump hot water systems, Dandenong branch: (03) 9794 0566
- Bunnings — induction cooktops from $149, portable electric heaters
Frequently Asked Questions
Is gas or electric cheaper for heating in Melbourne in 2026?
Electricity is now cheaper for most Melbourne households when using a reverse-cycle air conditioner (COP 3–5). A well-sized split system running on a competitive electricity tariff delivers heat at roughly $0.08–$0.12 per kWh — comparable to or cheaper than ducted gas heating at current Victorian gas tariffs.
How much can I save by switching from gas to electric?
A typical 3-bedroom Melbourne home switching all appliances to efficient electric alternatives (heat pump hot water, reverse-cycle heating, induction cooking) saves $400–$900 per year without solar. With rooftop solar, annual savings can reach $1,400–$2,200 compared to an all-gas home.
Is gas being phased out in Victoria?
The Victorian Government has announced that new residential homes cannot connect to the gas network from 1 January 2024 (with some exceptions). Existing homes can keep gas connections, but the long-term direction is electrification. Gas network charges are also expected to rise as fewer customers share fixed network costs.
What about cooking — is induction really better than gas?
Induction is faster, more efficient (85–90% vs 40% for gas), and significantly cheaper to run — typically $60–$110/year vs $120–$220 for gas. The main downsides are upfront cost ($300–$2,000 for a quality induction cooktop) and needing magnetic-compatible cookware. Most professional chefs who’ve switched to induction don’t go back.
Should I disconnect my gas supply?
Only consider disconnecting once all gas appliances are replaced. Reconnecting costs $2,000–$5,000 if you change your mind. Once fully electric, disconnecting eliminates the daily supply charge ($0.55–$0.90/day = $200–$330/year), which improves your ongoing savings.
Do I need VEU rebates to make the switch worthwhile?
VEU rebates significantly improve payback periods but aren’t always essential. A heat pump hot water system has a payback period of 3–6 years even without rebates; with VEU it’s often 2–4 years. For larger investments like ducted reverse-cycle, rebates make a bigger difference to the decision.
Final Thoughts
For most Melbourne homeowners in 2026, the question is no longer whether electric is cheaper — it’s when to make the switch. The economics favour electricity for heating, hot water and cooking, with the gap widening further if you have or plan rooftop solar.
The smartest approach: switch each gas appliance to its best electric equivalent at the point of natural replacement. Don’t rip out a working 3-year-old gas system, but don’t replace a dead gas heater with another gas heater either.
- Hot water system dying? Replace with a heat pump — VEU rebates available
- Gas heating system aging? Get quotes for ducted reverse-cycle or additional split systems
- Planning a kitchen renovation? Include induction in the design
- Have solar panels? Prioritise daytime appliance use to maximise your self-consumption
