Quick Answer

In Australia, electricity is generally more expensive per unit than gas, but the gap is closing fast as gas prices rise. For heating and hot water, a modern reverse-cycle air conditioner or heat pump system typically costs 40–60% less to run than a gas heater when measured in dollars per kilowatt-hour of heat delivered. The best fuel choice depends on your existing appliances, your local tariff, and whether your home has solar panels.

Comparing gas vs electric running costs at home — the right choice depends on your appliances, tarif
Comparing gas vs electric running costs at home — the right choice depends on your appliances, tariff, and whether you have solar panels feeding free daytime electricity.

Gas vs Electric Running Costs: The 2026 Snapshot

Australian energy markets shifted significantly in 2024–2026. Gas prices in Victoria and NSW rose sharply following east-coast supply constraints, while electricity tariffs plateaued or fell slightly in states with high solar uptake. The result: the traditional cost advantage of gas for heating has largely evaporated for most Melbourne households.

Here is how the two fuels compare on a like-for-like basis using current Victorian tariffs:

Metric Natural Gas (VIC) Electricity (VIC)
Typical unit cost (2026) $0.035–$0.045 per MJ $0.28–$0.38 per kWh
Equivalent cost per kWh of energy $0.13–$0.16 $0.28–$0.38
Typical appliance efficiency 85–92% (ducted gas) 300–500% (reverse-cycle)
Effective cost per kWh of heat $0.14–$0.19 $0.06–$0.13
Daily supply charge $0.55–$0.85/day $1.10–$1.40/day
Pro tip: The daily supply charge matters as much as the unit rate. If you have a gas hot water system and a gas heater, keeping the gas connection costs around $200–$300 per year in supply charges alone — even before you use a single MJ of gas.

Appliance-by-Appliance Comparison

Space Heating

This is where the gas vs electric debate matters most for Melbourne households, where winters are cold enough to run heating for 4–6 months of the year.

Heater Type Fuel Typical Running Cost (per hour) Annual Cost (6 hrs/day × 5 months)
Ducted gas (zoned, 20kW) Gas $0.90–$1.40 $810–$1,260
Gas wall furnace (5kW) Gas $0.22–$0.35 $200–$315
Reverse-cycle split (6kW) Electric $0.17–$0.32 $153–$288
Ducted reverse-cycle (12kW) Electric $0.55–$0.95 $495–$855
Electric panel heater (2kW) Electric $0.56–$0.76 $504–$684
Electric blanket (100W) Electric $0.028–$0.038 $25–$34

Checking a ducted gas heating vent — while gas ducted systems are common in SE Melbourne homes, thei
Checking a ducted gas heating vent — while gas ducted systems are common in SE Melbourne homes, their per-hour running cost now rivals modern reverse-cycle systems once supply charges are factored in.

Hot Water

System Type Fuel Annual Cost (4-person household) Notes
Gas storage (3–4 star) Gas $400–$650 Older systems less efficient
Gas continuous flow Gas $350–$550 Only heats when needed
Electric storage (off-peak) Electric $350–$500 Requires off-peak tariff
Heat pump hot water Electric $120–$250 3–4× more efficient than storage
Solar hot water (gas boost) Gas + Solar $80–$180 Free solar heat most of the year
Resistive electric (peak) Electric $700–$1,100 Avoid — very expensive to run

Cooking

Cooktop Type Fuel Annual Cost (daily use) Notes
Gas cooktop (5-burner) Gas $60–$120 Cheap per use, supply charge adds up
Induction cooktop Electric $55–$110 90%+ efficient; fast, precise heat
Ceramic/radiant electric Electric $80–$150 Less efficient than induction
Pro tip: If you’re paying a $0.65/day gas supply charge mainly to run a gas cooktop, switching to induction and dropping the gas connection entirely can save $230+ per year in supply charges — even before you compare unit rates.

How Solar Changes the Equation

If your home has rooftop solar panels, the gas vs electric debate tips heavily toward electricity — sometimes decisively. A 6.6kW solar system in Melbourne generates roughly 24–26 kWh on a clear day, which can offset most of your household electricity use during daylight hours.

Solar panels on a Melbourne suburban home — when you generate your own electricity during the day, r
Solar panels on a Melbourne suburban home — when you generate your own electricity during the day, running electric appliances becomes dramatically cheaper than gas for households that shift usage to daylight hours.

Scenario Effective Electricity Cost Impact vs Gas
No solar, peak tariff $0.28–$0.38 per kWh Gas often slightly cheaper for heating
Solar self-consumption (daytime) $0.00–$0.05 per kWh Electric dramatically cheaper
Solar + battery storage $0.03–$0.10 per kWh (stored) Electric significantly cheaper
Off-peak tariff (no solar) $0.12–$0.18 per kWh Comparable to gas for storage hot water

The True Cost of Keeping a Gas Connection

Many Melbourne households are evaluating whether to remove gas entirely. The calculation comes down to gas supply charges versus the cost of replacing gas appliances with electric alternatives.

Gas Appliance Electric Alternative Replacement Cost Annual Running Saving
Gas ducted heating Ducted reverse-cycle $4,000–$8,000 $200–$600
Gas hot water (storage) Heat pump hot water $1,800–$3,500 $300–$500
Gas cooktop Induction cooktop $400–$1,200 $60–$150 + $230 supply charge saving
Gas wall furnace Reverse-cycle split system $1,200–$2,500 $50–$200
Expert advice: The annual gas supply charge saving alone ($200–$300/year) means a $400 induction cooktop pays for itself in 2–3 years purely from eliminating the daily supply charge — even without factoring in unit rate savings.

Which Is Cheaper? Decision Framework

Your Situation Cheapest Option Why
Have solar + electric appliances Electric Near-zero daytime electricity cost
New build or major reno All-electric Avoid gas connection costs, future-proof
Old gas ducted heating (10+ yrs) Switch to reverse-cycle Modern units 3–5× more efficient
Existing gas hot water system (<8 yrs) Keep gas for now Replacement cost outweighs savings short-term
Gas cooktop only (no other gas) Switch to induction + drop gas Supply charge saving justifies switch
No solar, all-electric home Add heat pump HWS Biggest single running cost saving

Top 10 Tips and Gotchas

  1. Don’t compare raw unit rates. Gas is measured in MJ, electricity in kWh. Always convert to cost per kWh of heat delivered, accounting for appliance efficiency.
  2. The supply charge is unavoidable. Keeping gas connected costs $200–$300/year before you use a single MJ. If your only gas appliance is a cooktop, you’re paying $200+ per year for a small convenience.
  3. Reverse-cycle beats resistive electric every time. Electric panel heaters and bar heaters are the most expensive way to heat a home. A split system delivers 3–5 units of heat for every unit of electricity consumed.
  4. Check your tariff before comparing. If you’re on a time-of-use electricity tariff, running appliances during off-peak hours (typically 10pm–7am) can halve your effective electricity cost.
  5. Victorian rebates can change the maths. The Victorian Energy Upgrades (VEU) program offers rebates of $300–$1,200 on heat pump hot water systems and reverse-cycle air conditioners. Check energy.vic.gov.au for current offers.
  6. Gas prices are rising faster than electricity. East-coast gas supply constraints pushed Victorian residential gas prices up 15–25% between 2023 and 2025. The trend is likely to continue.
  7. Induction is faster and cheaper than gas. Modern induction cooktops heat pots faster than gas burners, use 90% of their energy compared to 40–55% for gas, and eliminate combustion pollutants in the kitchen.
  8. Heat pump hot water is the single best switch. If you have a resistive electric storage hot water system, replacing it with a heat pump unit typically saves $400–$600 per year and pays back in 3–5 years even without rebates.
  9. Gas appliances have hidden service costs. Ducted gas systems require annual servicing ($120–$220), gas heater safety checks, and eventual valve and burner replacements. Add these to your running cost comparison.
  10. Solar + battery makes all-electric the clear winner. With a home battery, you can store daytime solar generation for evening use, making the effective electricity cost $0.03–$0.10/kWh for stored power — well below gas equivalent cost.
Safety warning: Never attempt to disconnect or modify gas appliances or pipework yourself. All gas work in Victoria must be carried out by a licensed gasfitter — DIY gas work is illegal and can be fatal. If you smell gas, leave the property immediately and call the gas emergency line on 132 771.

Gas disconnection and appliance removal must be done by a licensed gasfitter — DIY gas work is illeg
Gas disconnection and appliance removal must be done by a licensed gasfitter — DIY gas work is illegal in Victoria and dangerous anywhere. If switching to all-electric, a gasfitter will cap the lines safely before removal.

Local Melbourne Resources

Frequently Asked Questions

Is gas or electric cheaper in Victoria in 2026?

For space heating, a modern reverse-cycle air conditioner running on electricity now costs about the same or less per hour than a ducted gas system when you account for appliance efficiency. For hot water, a heat pump electric system is significantly cheaper to run than gas — often 50–60% less. Gas still has a raw unit rate advantage, but high supply charges and inefficient older appliances erode that advantage quickly.

How much do I save by switching from gas to all-electric?

Most Melbourne households switching from gas heating and hot water to reverse-cycle and heat pump systems report annual savings of $400–$900 once supply charges are eliminated. Exact savings depend on your current appliance age, gas tariff, electricity tariff, and whether you have solar. Use the Victorian Energy Compare tool to model your specific situation.

Should I switch from a gas cooktop to induction?

If your gas cooktop is your only gas appliance, switching to induction and dropping the gas connection typically saves $250–$400 per year — mostly from eliminating the daily supply charge. Induction cooktops are also faster, safer (no naked flame), and produce no combustion gases indoors. The main barrier is the upfront cost of the induction cooktop ($350–$1,200) and any required electrical upgrades.

Does solar make electric heating cheaper than gas?

Yes, significantly. If you run a reverse-cycle air conditioner or heat pump during daylight hours using solar energy, the effective electricity cost can be close to zero. A 6.6kW solar system in Melbourne generates enough power on most days to run household heating with little or no draw from the grid. Adding a battery extends this advantage into evening hours.

What is the cheapest way to heat a home in Melbourne?

The cheapest way to heat a Melbourne home is a high-efficiency reverse-cycle split system (inverter type, 5-star rating or above) combined with rooftop solar panels. Running costs can be as low as $0–$0.06 per kWh of heat during solar hours. Without solar, a modern split system still typically costs 30–50% less per hour than ducted gas. Adding draught-proofing and ceiling insulation reduces the heating load and further cuts costs.

Will gas prices keep rising in Australia?

Australian east-coast gas prices have risen 15–25% since 2022 and most energy forecasters expect continued upward pressure through 2026–2028 due to declining domestic reserves and LNG export competition. The Australian Energy Regulator’s 2025 report noted that gas is increasingly uncompetitive for household heating compared to electric alternatives, particularly in Victoria where the grid is rapidly decarbonising.

Here’s the Bottom Line

For new appliance purchases or replacements, electricity wins in almost every category in Melbourne in 2026 — especially for heating and hot water. A modern reverse-cycle split system delivers heat at roughly one-third the cost of a ducted gas system, and a heat pump hot water unit cuts hot water bills by 50–60% compared to gas storage.

For existing gas appliances under 8 years old, keep them until they need replacing, then switch to electric. The replacement cost usually doesn’t justify an early switch unless you’re also adding solar.

The single best move for most SE Melbourne households: replace an ageing gas storage hot water system with a heat pump unit and claim the available VEU rebate. It pays back in 3–4 years and cuts your annual energy bill by $350–$600.