Quick Answer

Heater running costs in Australia vary widely by type: a reverse-cycle split system costs $0.25–$0.45/hour, ducted gas heating runs $0.50–$0.80/hour, and electric panel heaters cost $0.50–$0.99/hour. For most Melbourne homes, a modern reverse-cycle heat pump is the cheapest way to heat, followed by efficient gas heating, with electric element heaters being the most expensive option per hour.

Heater Running Costs: Side-by-Side Comparison

With gas prices rising and electricity tariffs varying dramatically by plan, the “cheapest heater to run” question deserves a more nuanced answer than most energy comparisons provide. This guide compares every common heater type with real running cost figures for Melbourne in 2026.

Running Cost Comparison: All Heater Types

Heater Type Output Capacity Input Power Running Cost/Hr Suitability
Reverse-cycle split system (heat pump) 3.5kW heating 0.85–1.1kW $0.28–$0.36 Single room to large open plan
Reverse-cycle split system (large) 6.0kW heating 1.4–1.9kW $0.46–$0.63 Large rooms or open plan
Ducted gas heating (4-star) Whole home ~15–20MJ/hr $0.54–$0.72 Whole home, all zones
Ducted gas heating (2-star, older) Whole home ~20–28MJ/hr $0.72–$1.01 Whole home — inefficient
Gas wall furnace (flued) ~5kW ~9–12MJ/hr $0.32–$0.43 Single room, reasonable efficiency
Gas space heater (unflued) ~4kW ~7–10MJ/hr $0.25–$0.36 Not recommended — moisture risk
Electric panel heater 1.5–2.4kW 1.5–2.4kW $0.50–$0.79 Small rooms only — expensive per kWh
Oil column heater 1.5–2.4kW 1.5–2.4kW $0.50–$0.79 Holds heat longer but no savings
Infrared radiant heater 1.0–2.5kW 1.0–2.5kW $0.33–$0.83 Spot heating only — heats people, not rooms
Ducted reverse-cycle (heat pump) Whole home 3.5–6.0kW $0.75–$1.30 (all zones) Whole home — costly but efficient
Pro tip: Electric panel heaters and oil column heaters are 100% efficient at converting electricity to heat — but electricity costs roughly 9x more per unit of energy than gas, making them expensive. The only electric heating that’s genuinely cheaper than gas is a heat pump (reverse-cycle), which delivers 3–4 units of heat per unit of electricity consumed.

Heating a Melbourne Home: Annual Cost Estimates

Scenario Heater Type Daily Use Annual Cost (May–Aug)
Small apartment (60m²) 2.5kW split system 6 hrs/day $140–$200
3-bed house — lounge only 3.5kW split system 8 hrs/day $240–$380
3-bed house — whole home Ducted gas (4-star) 8 hrs/day $620–$960
3-bed house — whole home Ducted reverse-cycle 8 hrs/day $520–$800
Single room (bedroom) Electric panel heater 4 hrs/day $160–$240
Single room (bedroom) 1.5kW split system 4 hrs/day $55–$90

Gas vs Electric Heating: Which Wins for Melbourne?

The answer depends on your situation:

Choose reverse-cycle heat pump if:

  • You’re heating one or two rooms, not the whole house
  • You have (or plan to install) solar panels
  • Your existing gas ducted system is over 10 years old and due for replacement
  • You’re in an apartment or rental where you only need to heat your own zone

Gas ducted heating may still make sense if:

  • You have a large home (4+ bedrooms) that you heat all zones of regularly
  • Your gas ducted system is relatively new (under 5 years) with a high star rating
  • You’re not planning solar panels in the near term
  • You need even heat throughout a large area (ducted systems distribute heat more evenly)

Avoid electric element heaters for regular use:

Panel heaters, oil column heaters, and bar heaters are fine for occasional use in a single room. As a primary heating source for a Melbourne winter, they’ll add $600–$1,200 to your electricity bill compared to a reverse-cycle split system providing the same warmth.

Pro tip: Draught-proofing your home is the most cost-effective “heating upgrade” available. Sealing gaps under doors, around windows, and in the ceiling space can reduce your heating bill by 15–25% for a $50–$200 investment in foam seals, door unakes, and draught excluders.

Victorian Rebates for Heating Upgrades

Victoria’s Energy Upgrades (VEU) program offers substantial point-of-sale discounts on efficient heating replacements:

Upgrade Typical Rebate Eligibility Where to Claim
Replace old gas heater with split system $500–$900 Remove existing gas heater, install reverse-cycle VEU-accredited installer
Upgrade old gas ducted to high-star gas $200–$400 5+ year old system replaced with 5-star+ rated unit Licensed gas fitter
Ceiling and underfloor insulation $500–$1,200 Homes built before 2005 Accredited VEU installer
Draught-proofing $80–$200 All eligible homes VEU-accredited supplier
Safety warning: Unflued gas heaters (including portable LPG heaters used indoors) produce water vapour, carbon monoxide, and nitrogen dioxide. They should never be used in bedrooms, bathrooms, or rooms under 50m³ without adequate ventilation. Victorian regulations restrict their installation — check with the Victorian Building Authority before purchasing or installing any unflued gas heater.

Tips and Gotchas

  1. Heating costs climb exponentially in poorly insulated homes. An older Melbourne home built before 1980 with minimal ceiling insulation and no wall insulation loses heat 3–4x faster than a well-insulated modern home. The heater runs longer, costs more, and still feels cold near windows and exterior walls.
  2. Gas supply charges are fixed regardless of usage. If you only use gas for heating (and have electric hot water and cooking), you’re paying $300–$450/year just to stay connected — even before you use a single MJ. Low gas users often save money by going all-electric.
  3. Inverter split systems are cheapest for smaller spaces. For a bedroom, study, or lounge room, a 2.5kW reverse-cycle split system is the most cost-effective heating solution available, typically costing $0.20–$0.35/hour during normal operation.
  4. Regular servicing of gas heaters is essential. A gas heater that hasn’t been serviced in 3+ years may be 20–30% less efficient than its rated output, and potentially unsafe. Annual servicing ($120–$200) maintains efficiency and safety.
  5. Heat rises — use zoning wisely. In two-storey homes, the upper floor is almost always warmer than the lower floor. Set upstairs zones 2–3°C lower than downstairs to avoid overheating and wasting energy.
  6. Check for rebates before replacing. VEU rebates can reduce the upfront cost of switching from an old gas heater to a reverse-cycle split system by $500–$900. This can make the payback period under 3 years in some cases.
  7. Thermal curtains cut heating costs significantly. Heavy lined curtains on south-facing windows reduce heat loss overnight and can cut heating needs by 10–15% in a typical Melbourne winter home.

Local Melbourne Resources

What is the cheapest heater to run in Australia?

A reverse-cycle split system air conditioner (heat pump) is the cheapest heater to run in Australia for most households. A 3.5kW model costs $0.28–$0.36/hour to heat a room, compared to $0.50–$0.79/hour for an electric panel heater and $0.50–$0.72/hour for ducted gas heating. The heat pump effect — delivering 3–4 units of heat per unit of electricity — makes it uniquely efficient.

Are electric heaters cheaper to run than gas in Victoria?

Standard electric heaters (panel heaters, oil column heaters) are more expensive to run than gas heating because electricity costs roughly 9x more per unit of energy than gas. However, reverse-cycle heat pumps (split systems) are cheaper than gas because they deliver 3–4 units of heat per unit of electricity consumed, overcoming the price difference.

How much does it cost to run ducted gas heating per day in Melbourne?

A 4-star ducted gas heating system running 8 hours per day costs approximately $4.30–$5.76 per day, or $130–$170 per month during the three core winter months (June–August). Older systems with lower star ratings can cost 30–50% more for the same heat output.

What Victoria government rebates are available for heating upgrades?

Victoria’s VEU program provides point-of-sale discounts for replacing old gas heaters with efficient reverse-cycle split systems ($500–$900), upgrading ducted gas systems, installing ceiling insulation ($500–$1,200), and draught-proofing ($80–$200). Check energy.vic.gov.au for current eligible upgrades.

Is it worth replacing a gas heater with a heat pump in Melbourne?

For most Melbourne households, yes — especially if the gas heater is over 7–10 years old. A modern reverse-cycle split system typically saves $200–$450/year in running costs compared to ducted gas heating for a standard 3-bedroom home. With VEU rebates reducing upfront costs, the payback period can be as short as 2–4 years.