Gas vs electricity: a surprising switch that could save up to $450 a year

Could this be one way to beat rising energy prices? Monash University has estimated switching from gas to electricity could save each Australian household around $450 a year while also accelerating the decarbonisation of Australia's economy. Carolyn Tate dives in to explain - the catch is that it might take some households 10 years to plan the switch.

By Carolyn Tate

A simple switch that could save you $450 on your energy bill

Have you noticed energy prices going up? Just kidding, of course you have. Everyone has. Electricity prices have risen dramatically over the past few years, with an increase of around 20-25% in many parts of the country since 1 July 2023.

There’s a lot of doom and gloom when it comes to power prices, but if you’re looking for a reprieve, this could be it: one simple switch could save you up to $450 on your annual power bill.

Given the rising cost of electricity, it’s a switch that could surprise you, but a recent report from Monash University’s Climate Change Communications Research Hub reports that Australian households could be a whole lot better off if they ditch the gas entirely.

Why gas prices are soaring

While we’ve all been distracted by the rising electricity costs, gas prices have quietly been on an upward trajectory as well, increasing at nearly double the rate of electricity. The result? Many households, especially those on limited incomes, are now grappling with unexpectedly large gas bills.

Gas appliances are often also less efficient than electric appliances.

“A modern split system is three times more efficient at warming a home than a gas heater,” reports Monash University in its key findings. “Similarly, induction cooktops boil water almost twice as fast as their electric counterparts.

“This increased efficiency can help save money too. For example, a gas hot water system costs three times as much to operate as one run by a heat pump.”

The financial benefits of switching

Monash University projects that swapping gas for electricity could collectively save Australian households a staggering $4.9 billion annually. On an individual level, that equates to about $450 per household.

We use gas primarily in three key areas: space heating (57%), hot water heating (35%), and cooking (5%). The study suggests that, as a nation, we could save over $2 billion by switching to electric water heating, more than $1 billion by adopting electric space heating, and over $340 million by transitioning to electric cooking.

“Ultimately, electrification is more efficient, cheaper to run, and allows us to tap into our abundant renewable energy resources like solar and wind, and will accelerate the decarbonisation of Australia’s economy,” said Amelia Pearson, Monash University’s research hub project coordinator.
“As gas prices continue to overtake the cost of electricity, electrification makes more financial sense for Australian households.”

Scientist Saul Griffith agrees. Writing for The Guardian, he suggests that Australians should consider following a 10-year plan to phase out fossil fuels, including gas, and move to electric energy – simply replacing old machines with an electric version when they break or die.

“While upfront costs to electrify are now higher, they cost much less to run and maintain, and because we are early in the technology revolution, they will only improve,” he wrote.

Research from the Grattan Institute shows that most Australians will be better off if they switch to all electricity, saving up to $13,908 per year (this figure is estimated household savings for homes that go all-electric, including vehicles).

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You can work out how much you could save in your household by switching from gas to electricity with the Climate Council’s interactive Bill Savings Simulator.

The health and environmental impact

Switching to electricity not only benefits your bank account but it also has the potential to improve your health and wellbeing. Electrified homes tend to be more efficient, cost-effective, and healthier for their residents.
Concerns have arisen lately about indoor pollution caused by gas use, with a 2020 US study finding that indoor air pollution from gas stoves often reaches levels that would be illegal outside the home.

The National Asthma Council of Australia reports that cooking with gas stoves or other exposure to gas appliances may be linked with new asthma cases, and it may make existing asthma worse.

Pearson’s colleague at the hub, Dr James Burgmann-Milner, says making the switch can improve some health conditions, particularly for those with pre-existing respiratory ailments like asthma.
“Making the switch from gas to electric drastically reduces exposure to pollutants that pose short and long-term health risks,” Dr Burgmann-Milner said.

How to make the switch

Making the switch from gas to electricity is a straightforward process that begins with contacting your local energy provider. They can guide you through all the steps you’ll need to take.

Making the full transition from gas to electricity often involves updating your appliances to electric versions, such as water heaters and cooktops, which may incur some upfront costs. And if you have gas that needs to be disconnected, your provider can help with that as well.

Remember to explore any available government incentives or rebates that may further reduce your transition costs.

The Monash University report assessed state and territory governments' performance in implementing policies that facilitate the switch from gas to electricity. The Australian Capital Territory and Victoria receive high marks for their financial support measures, which help households in making the transition. At the other end of that spectrum, Western Australia and the Northern Territory are currently lagging behind in offering similar financial support. But it’s always worth checking to see what support you can get in your area. Read more on 8 easy actions to save big on energy or 16 practical energy-saving tips.

One last tip is to shop around before you commit to a supplier. Use a comparison site like iSelect to see what's on offer in the market so you can choose the most cost-effective plan for you. You might be surprised to see how much the price varies between suppliers. Especially when the end result is really the same product for you.

By taking these steps, you'll not only save money, and perhaps improve your health, but you’ll also be contributing to a greener and more sustainable future. What could you do with an extra $450 a year?