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Gas isn’t so cheap any more

Gas used to be the smart option, but that was 10 years ago when it was cheap as chips. At that time it cost around 1c/MJ. A lot has changed since then.

  • Today in NSW and the ACT, gas is three times what it cost in the early 2000s (around 3c/MJ).
  • Daily supply charges have also risen dramatically. Today it costs $220 a year in NSW just to have the gas switched on (and $250 in the ACT).

That means it’s not such a smart idea to have gas appliances any more. A 2014 study found that Sydney households could save $400 a year just by switching from a gas hot water system to a heat pump water heater.

Another study, also in 2014, looked at whether households should switch to efficient electricity-based appliances. They looked at new homes, existing homes, households of different sizes and in different climatic zones, and whether they had new or end-of-life gas appliances.

For new houses they found it was nearly always best to install electrical appliances throughout.

For existing houses they found that

  • Replacing gas space heaters with reverse cycle air conditioners saved money
  • Replacing gas water heaters with heat pumps saved money if gas was expensive (as it is in Sydney)
  • Heat pump water heaters were more cost-effective than gas in warmer regions, and
  • Only where the gas price was low and the climate cool, such as Melbourne, did gas water heaters remain cost-effective.

What does it mean for you?

  • If you are building a new house, you should probably go all-electric.
  • If you already have gas appliances and they’re fairly new, you could stay with them, but you’ll be paying a lot for the gas.
  • If you have old gas appliances that are due for replacement anyway, it’s a good idea to switch.
  • If you mainly use gas for space heating and water heating then the case for replacing them is very strong.
  • If your only gas appliance is a water heater you should disconnect from gas and go over to a heat pump.
A 2014 study found that Sydney households could save $400 a year just by switching from a gas hot water system to a heat pump water heater.[2] [1] http://grattan.edu.au/wp-content/uploads/2014/10/817-gas-at-the-crossroads.pdf pp. 17-18.

Working out the cost of gas versus a heat pump water heater

As you can see from the table below, if your only gas appliance is a water heater, across various household sizes you’ll pay about 3 times as much for gas hot water.

Another study, also in 2014, looked at whether households should switch to efficient electricity-based appliances.2
http://www.ata.org.au/wp-content/projects/CAP_Gas_Research_Final_Report_251114_v2.0.pdf p. 5.

Instantaneous gas vs heat pump water heater in Sydney, one gas appliance only1

Hot water system typeHousehold size and daily hot water usageElectricity consumption kWh/yearGas consumption MJ/yearElectricity $/kWh incl. GSTGas $/MJ incl. GSTGas supply charge p.a.$Total cost
Gas instantaneous water heater (5 stars)Very small – 68 L/day(1 shower/day, dishes handwashed)6863600.270.0325220$445.06
Small – 136 L/day 2-3 showers, dishes handwashed68127160.270.0325220$651.63
Medium – 200 L/day 3-4 showers, dishes handwashed71187000.270.0325220$846.92
Efficient heat pump water heaterVery small – 68 L/day (1 shower/day, dishes handwashed)4440.27$119.88
Small – 136 L/day8870.27$239.49
Medium – 200 L/day12910.27$348.57

1 Data sources are Pitt & Sherry (2012) Running costs and operational performance of residential heat pump water heaters
www.pittsh.com.au/assets/files/CE%20Showcase/Residential_heat_pump_water_heaters.pdf

Energy Consult Pty Ltd (2010), Estimated hot water system running costs in Victoria, prepared for Sustainability Victoria
www.solarthermalworld.org/content/estimated-hot-water-systemrunning-costs-victoria-2010

Alternative Technology Association 2014, Are we still cooking with gas?
http://www.ata.org.au/wp-content/projects/CAP_Gas_Research_Final_Report_251114_v2.0.pdf;

AGL Energy Price Fact Sheet 1 Sept 2016; AGL Gas Energy Price Fact Sheet 7 Oct 2016.

Instantaneous gas water heater vs heat pump in Canberra, one gas appliance only1

Hot water system typeHousehold size and daily hot water usageElectricity consumption kWh/yearGas consumption MJ/year“Electricity $/kWh incl. GST”Gas $/MJ incl. GST“Gas supply charge p.a.$”Total cost
Gas instantaneous water heater (5 stars)Very small – 68 L/day(1 shower/day, dishes handwashed)687,0900.180.03252$476.94
Small – 136 L/day 2-3 showers, dishes handwashed6814,1890.180.03252$689.91
Medium – 200 L/day 3-4 showers, dishes handwashed7120,6200.180.03252$883.38
Efficient heat pump water heaterVery small – 68 L/day (1 shower/day, dishes handwashed)5700.18$102.60
Small – 136 L/day1,1390.18$205.02
Medium – 200 L/day1,7720.18$318.96

Data sourced from Pitt & Sherry (2012) Running costs and operational performance of residential heat pump water heaters
www.pittsh.com.au/assets/files/CE%20Showcase/Residential_heat_pump_water_heaters.pdf

Energy Consult Pty Ltd (2010), Estimated hot water system running costs in Victoria, prepared for Sustainability Victoria
www.solarthermalworld.org/content/estimated-hot-water-systemrunning-costs-victoria-2010

Alternative Technology Association 2014, Are we still cooking with gas?
http://www.ata.org.au/wp-content/projects/CAP_Gas_Research_Final_Report_251114_v2.0.pdf;

AGL Energy Price Fact Sheet 1 Sept 2016; AGL Gas Energy Price Fact Sheet 7 Oct 2016.”