Comparing gas vs electricity: Which is cheaper?

When deciding between gas and electricity for your home, understanding the cost and efficiency differences is crucial.

In this guide, we'll help you choose the most cost-effective and energy-efficient option for your needs, whether for heating, cooking, or hot water.

We'll also consider factors like lifestyle, property constraints, market rates, and appliance energy efficiency to find the right energy mix for your home, budget, and environmental goals.

Is gas cheaper than electricity? Let’s find out.

Powering your home in Australia

When it comes to powering homes, households can choose between gas and electricity. While electricity is more common, with nearly every home connected to the grid, around 70% of Australian homes still use mains or bottled gas as of 2020.

Gas is not as powerful as electricity, requiring 3.6 megajoules of gas to equal one kilowatt-hour of electricity.

However, the charging methods and rates for gas and electricity differ, depending on your distributor, retailer, and plan choice. Below are average usage rates in major cities for reference.

Types of household gas

Households have two choices when it comes to gas: natural gas, distributed through the main gas network, and liquefied petroleum gas (LPG), delivered in tanks.

This guide predominantly discusses natural gas due to its widespread use. While cost-effective, its applications are limited to hot water systems, tumble dryers, fireplaces, heaters, cooking, and BBQs. Electricity, on the other hand, powers a broader range of appliances and the building itself.

Gas vs electricity: Is one cheaper than the other?

To answer this question, we have to consider that whether gas is cheaper than electricity depends on the way it’s used. Electric heating, for example, is often the cheapest option but gas cooking can be cheaper and much more efficient.

Gas is a fraction of your bill but often has lower usage and supply costs than electricity. Factors such as appliance efficiency and energy plans determine which is cheaper and whether you’ll pay more for gas than electricity.

For example, mains gas is often cheaper than LPG, and GreenPower is slightly pricier than standard electricity and solar electricity is cost-effective but requires initial investment. So, we can already say that comparing costs between gas and electricity isn't straightforward.

MJ vs kWh

Gas is typically cheaper per MJ compared to electricity's cost per kWh. For instance, in NSW, you might pay around 30 cents per kWh for electricity and 4 cents per MJ for gas.

However, it's important to note that it takes about 3.6MJ of gas to produce 1kWh of electricity at maximum efficiency. This means that while gas appears cheaper initially, the actual comparison is more like 30 cents per kWh of electricity versus 14.4 cents for an equivalent 3.6 MJ of gas, making electricity roughly twice the cost of gas.

Other factors, such as the cost of setting up a gas connection in your home, should also be considered, as not all homes have this option.

Typical electricity usage costs by state

Electricity customers are billed based on their electricity consumption, measured in kilowatt-hours (kWh), and a daily supply charge covers the cost of delivering electricity to homes, typically ranging from 75c to $1.30 per day depending on the location and tariff.

While most homes use electricity for power, gas availability and usage vary. Here's a summary of gas and electricity rates in four major states as of June 2020, sourced from the Australian Energy Regulator's report:

• NSW: 30c/MJ
• VIC: 36c/MJ
• QLD: 28c/MJ
• SA: 42c/MJ

Note that these rates are typical for a single-rate tariff and may differ for customers on time-of-use or block tariffs.

Typical gas usage costs by state

Natural gas users are billed based on their consumption in megajoules (MJ), along with a fixed daily supply charge, which can range from 22 to 85 cents per day, depending on the location and distribution network.

Here are the typical gas usage rates for different states:

• NSW: 4c/MJ
• VIC: 3c/MJ
• QLD: 8c/MJ
• SA: 5c/MJ

These rates are based on a single-rate tariff. Many gas tariffs, however, operate on a block-rate system, where the rate decreases as you use more gas.

Which is more powerful: gas or electricity?

Gas is less potent than electricity, requiring more gas to achieve the same output as electricity. Specifically, it takes 3.6 megajoules (MJ) of gas to equal 1 kilowatt-hour (kWh) of electricity.

Understanding the energy consumption of gas and electricity appliances can help estimate which would be more costly to operate, considering that gas usage charges are generally lower than electricity in Australia.

Gas or electric appliances: Which is cheaper?

Comparing gas and electric appliances for cost efficiency is like comparing apples to oranges. Installing a gas connection can be costly, ranging from $1,200 to $5,000 for both materials and labour.

If you have the option to choose between gas and electric appliances or are considering an all-electric setup, it's essential to weigh the pros and cons carefully. Most appliances have a lifespan of at least 10 years, so thorough research before purchasing is crucial.

Appliances powered by gas

Gas powers a range of appliances, but these can be more expensive to purchase than electric counterparts. Here are some common gas-powered appliances:

Stove cook-tops and ovens

While gas ovens are typically more expensive upfront, these can have lower energy usage costs in the long run. However, it may waste energy if not used correctly.

When deciding between a gas stove and an electric one, several factors come into play, including your cooking habits, available energy sources, and lifestyle. There are also other stove types to consider, each with its own advantages and disadvantages. Let's take a closer look at the available options and the pros and cons of them all:

Gas stove and oven

Electric stove and oven

Electric induction stove and electric oven

Dual fuel gas stove and electric oven

Choosing the right stove for your kitchen depends on various factors such as your cooking preferences, energy options, and budget. Gas stoves offer precise cooking control, while electric stoves are known for being easy to clean. Induction stoves provide quick heating and safety features, and dual-fuel stoves offer versatility.

Hot water systems

Gas hot water systems are more efficient and economical to run than electric ones, but it often has a higher upfront cost. Electric heat-pump water heaters are environmentally friendly and can lower energy costs, especially when paired with a solar PV system.

Households typically spend about a quarter of their total power bill on heating hot water, used for showering, dishwashing, and laundry.

While instant gas systems were once considered the cheapest, the landscape has changed with solar electric, heat pump, and gas continuous-flow systems now offering cost-effective options.

Here's a general ranking of water heating methods with pros and cons:

Solar electric hot water systems

Electric heat pump hot water systems

Gas continuous-flow hot water systems

Gas storage hot water systems

Instant electric hot water systems

Heaters

Gas heaters can be cost-effective for heating specific rooms, especially if running on natural gas. Whole-home gas heating systems can be efficient if the house is zoned, but installation costs can be high.

When comparing the cost-effectiveness of gas ducted heating versus electric, several factors come into play. In Australia, gas heating tends to be more cost-effective for several reasons:

• Energy prices: Natural gas is typically cheaper than electricity in Australia, making gas heating more economical in the long run.
• Efficiency: Gas ducted systems are known for being higher in efficiency when converting fuel to heat, offering better value.
• Climate: Gas heating is more efficient in colder climates, like in southern parts of Australia, where electric heaters may use more energy.
• Installation costs: While initial installation costs can vary, gas ducted systems may require a higher upfront investment. However, lower running costs can offset this over time.
• Zoning and control: Both gas and electric ducted systems allow for room zoning and temperature control, making them equally efficient in heating your home.
• Environmental impact: Gas heating produces fewer greenhouse gas emissions compared to coal-generated electricity.

Clothes dryers

Gas dryers can heat faster than electric ones, drying clothes more quickly. However, these are more expensive upfront and harder to maintain. Heat pump dryers are the most energy-efficient option but may cost more initially.

The cost efficiency of gas versus electric appliances depends on the efficiency of your appliances and your usage patterns.

What do these appliances cost to run?

Gas appliances typically have higher upfront and installation costs but lower running costs than electric appliances. However, some modern electric appliances, like split-system heating, can be more efficient and cheaper to run than most gas systems.

Different models and brands vary in power usage, so considering the energy efficiency rating is important. More efficient devices use less power, resulting in lower energy bills. Ways to reduce gas bills include periodic system maintenance and adjusting the thermostat. For electricity, saving methods include using off-peak tariffs and controlled loads.

Consider the affordability of gas versus electric appliances and whether the higher installation cost of gas is worth it. If natural gas isn't available, LPG bottles can be used, but may require conversion. Some gas appliances still have electrical components, adding to running costs.

How much does a natural gas connection cost?

If your home doesn't already have a natural gas connection, you'll need to arrange one with your local gas distribution network. The cost can range from a few hundred to several thousand dollars, depending on the network and the complexity of the installation.

If you're not close to a mains network, LPG might be your only option. Additionally, if you're renting, you'll need permission from your landlord before installing any gas connections or appliances.

To check if you qualify for a mains natural gas connection, contact your gas distributor.

Gas vs electricity: Pros and cons

The pros and cons of gas appliances are evident, but it’s important that we point out the environmental impact of gas.

For the environment, gas is not the ideal option and running gas appliances in your home has the potential to be dangerous, too. A scent is added to gas so that we can tell if there is a leak, but carbon monoxide is odourless and a carbon monoxide leak could permanently damage your health.

There may be cheaper running costs for gas, but electricity offers far more in the way of pros than cons. If your home has the ability to run electricity and power your appliances with it, it’s the better option by far. Take a look at the pros and cons below:

Gas appliances

Electric appliances

So, is gas cheaper than electricity?

The best choice between gas and electric depends on your home location and needs. If you're far from the grid, gas might be your only option. But if you have access to the gas main, gas appliances could be cheaper in the long run.

Depending on where you live and your situation, you might qualify for energy rebates and concessions. Researching these options can help you save on power bills and the switch to electric.

Before buying new appliances or installing connections, it's wise to do your research. You can also check ratings for gas and electricity providers to explore your options further.

Alternatively, you can give our team a call at Compare Energy. We’ll walk you through what your options are for the best gas and electricity plans in your state, helping you to make the best possible decision about your usage. Talk to our team today.