As Australia gears up for another winter, understanding the running costs of different heating methods is crucial for managing your household budget. For 2026, reverse cycle air conditioners remain the most energy-efficient and cost-effective heating solution, with running costs potentially as low as $0.08 per hour under optimal conditions. Electric resistance heaters are consistently the most expensive, while gas heating sits in the middle, though its costs are rising.
This guide provides a comprehensive comparison of electric heaters, reverse cycle air conditioning (RC AC), and gas heating, using current 2026 Australian energy prices and product specifications to help you make an informed decision.
The Contenders: Electric Heaters, Reverse Cycle AC, and Gas
Australians typically choose from three primary heating technologies: direct electric resistance heaters, reverse cycle air conditioners (which are heat pumps), and gas heaters (natural gas or LPG).
Each has distinct advantages and disadvantages regarding upfront cost, installation complexity, heating performance, and, crucially, ongoing running costs. With the federal Energy Bill Relief Fund ending on 31 December 2025, households are now facing full retail prices, making efficient heating choices more important than ever.
Understanding Heating Efficiency: COP and Star Ratings
Before diving into costs, it’s essential to understand how efficiency is measured:
- Coefficient of Performance (COP) / Seasonal COP (SCOP): For reverse cycle air conditioners, COP measures how much heat energy is produced per unit of electrical energy consumed. A COP of 4 means 1kW of electricity generates 4kW of heat. SCOP is a more comprehensive seasonal average. Higher numbers mean greater efficiency. Modern units often boast SCOPs between 4 and 5, with some exceeding 5.
- Energy Star Rating (Gas Heaters): Gas heaters carry a star rating based on their net thermal efficiency, comparing gas and electrical inputs to heat output. A higher star rating indicates better efficiency, with some top models reaching 5.9 or 6 stars. Electric resistance heaters do not typically have a star rating as their efficiency is close to 100% (all electricity converted to heat), but this doesn’t make them cheap to run due to the high cost of electricity.
Electric Heaters: The Instant Warmth, High Cost Option
Electric resistance heaters, such as fan heaters, convection heaters, and oil column heaters, offer instant, portable warmth. Their simplicity and low upfront cost (typically $50 to $200 for a 2.4kW model) make them popular for supplementary heating or small rooms. However, they are the least efficient in terms of running costs.
A 2400W (2.4kW) electric heater consumes 2.4 kilowatt-hours (kWh) of electricity per hour. With average Australian electricity prices sitting around $0.32 per kWh (ranging from $0.28/kWh in SE QLD to $0.38/kWh in SA for flat rates), the hourly running cost is substantial.
- Average Running Cost (2.4kW heater): 2.4 kW * $0.32/kWh = $0.77 per hour.
While convenient, relying on electric resistance heaters for extended periods can lead to significantly inflated electricity bills.
Reverse Cycle Air Conditioners: The Efficiency Champion
Reverse cycle air conditioners operate as heat pumps, extracting heat from the outside air (even on cold days) and transferring it indoors. This process makes them three to five times more efficient than direct electric heaters.
For example, a 5kW heating capacity reverse cycle AC with a Seasonal COP (SCOP) of 4 would only consume approximately 1.25kW of electricity per hour (5kW / 4 SCOP). A smaller 2.5kW unit with an SCOP of 4 would draw about 0.625kW.
Popular models like the Daikin Cora (e.g., FTXM25WVMA 2.5kW, FTXM50WVMA 5.0kW) or Mitsubishi Electric MSZ-AP series offer excellent efficiency. Upfront costs for a professionally installed split system range from $1,500 to $2,500 for a 2.5kW unit and $2,500 to $4,000 for a 5kW unit.
Using an average electricity rate of $0.32/kWh:
- Average Running Cost (2.5kW RC AC, SCOP 4): 0.625 kW * $0.32/kWh = $0.20 per hour.
- Average Running Cost (5kW RC AC, SCOP 4): 1.25 kW * $0.32/kWh = $0.40 per hour.
For households with solar power, the cost can drop significantly, especially if you are self-consuming generated electricity or taking advantage of specific tariffs like Queensland’s new Solar Sharer Offer which provides three hours of free electricity between 11 am and 2 pm daily. This is how running costs can be as low as $0.08 per hour for a small, highly efficient unit (e.g., 2.5kW RC AC with SCOP 5 consuming 0.5kW during a period where electricity is effectively free or at a very low marginal cost). Integrating a home battery can further maximise self-consumption and reduce reliance on grid electricity. For more information, explore our guide on Best Home Batteries in Australia 2026: Models, Costs & Up To $7,500 Rebates.
Many state governments also offer rebates and zero-interest loans for energy-efficient upgrades, including reverse cycle air conditioning. For instance, the NSW Home Energy Saver Program provides zero-interest loans up to $15,000 for eligible households (income under $210,000) for upgrades like RC AC, and a $4,000 discount for lower-income households (under $80,000 or concession card holders) opening later in 2026.
Gas Heating: Convenience with Rising Costs
Natural gas heaters provide strong, consistent heat, often preferred for larger, open-plan areas. Popular models include the Rinnai Avenger 25, which has a maximum input of 25 MJ/h and a 5.8-5.9 energy star rating. Upfront costs for portable gas heaters like the Avenger 25 typically range from $1,000 to $2,700. Ducted gas systems can be significantly more expensive to install.
However, it’s important to note that unflued gas heaters above 18 MJ/h are not available in Victoria, and in South Australia, gas heaters over 18 MJ must be flued.
Gas prices have been on an upward trend in recent years, with South Australia experiencing the highest growth at +5.1% year-on-year. Average natural gas usage rates in 2026 vary across states:
- Queensland: 2.45 cents/MJ
- Victoria: 2.58 cents/MJ
- New South Wales: 2.72 cents/MJ
- South Australia: 3.05 cents/MJ
Using a national average gas price of $0.027 per MJ:
- Average Running Cost (Rinnai Avenger 25, 25 MJ/h): 25 MJ/h * $0.027/MJ = $0.68 per hour.
While often cheaper than electric resistance heaters, gas heating’s environmental impact and rising costs mean many households are exploring electric alternatives, especially with the push towards electrification.
2026 Australian Winter Heating Running Costs: A Direct Comparison
Here’s a simplified comparison of typical hourly running costs based on average 2026 Australian energy prices. These figures exclude daily supply charges, which can add $0.80 to $1.30 per day to your bill regardless of usage.
| Heating Type | Example Product/Capacity | Energy Input/Output | Efficiency (COP/Stars) | Avg. Hourly Cost (AUD) |
|---|---|---|---|---|
| Electric Heater | 2.4kW Fan/Convection | 2.4 kW | ~100% | $0.77 |
| Reverse Cycle AC | 2.5kW Heating Capacity | 0.625 kW (electrical) | SCOP 4 | $0.20 |
| Reverse Cycle AC | 5kW Heating Capacity | 1.25 kW (electrical) | SCOP 4 | $0.40 |
| Reverse Cycle AC | 2.5kW Heating Capacity | 0.5 kW (electrical) | SCOP 5+ (optimised) | $0.08 (with solar/off-peak) |
| Gas Heater | Rinnai Avenger 25 (NG) | 25 MJ/hr (gas) | 5.8 - 5.9 Stars | $0.68 |
“Electricity prices will fall for most households and small businesses on the Default Market Offer (DMO) from 1 July, with the AER today releasing its final prices for 2026-27. The DMO provides a regulated safety net for households and small businesses on standing offer electricity plans and acts as a reference price to help consumers compare market offers.”
State-by-State Energy Prices and Rebates
Energy prices and available rebates vary significantly by state. While the federal Energy Bill Relief Fund has concluded, targeted state and territory concessions remain in place for eligible cardholders.
- New South Wales: Residential electricity DMO flat rates are decreasing by 3.4% to 5.0% from July 1, 2026. Gas usage rates average 2.72c/MJ. Concessions include the Low Income Household Rebate ($285/year), Family Energy Rebate ($180/year), and Seniors Energy Rebate ($200/year). The NSW Home Energy Saver Program offers zero-interest loans up to $15,000 for energy-efficient upgrades, including reverse cycle AC.
- Victoria: The Victorian Default Offer (VDO) for 2026-27 has seen a 5% average reduction for households. Average electricity rates are around 29c/kWh, and gas rates are 2.58c/MJ. Eligible Victorians can claim the Annual Electricity Concession (17.5% off usage/supply) and a Non-Mains Energy Concession for LPG or firewood.
- Queensland (South East): Residential DMO flat rates are decreasing by 7.2% from July 1, 2026. Electricity rates average around 28c/kWh, with gas at 2.45c/MJ. The Queensland Electricity Rebate provides $372.20 per year for eligible cardholders. A new Solar Sharer Offer provides 3 hours of free electricity daily for smart meter households.
- South Australia: Residential DMO flat rates are increasing by 1.4% from July 1, 2026. Electricity rates are among the highest, averaging 38c/kWh, and gas rates are 3.05c/MJ. SA offers an Energy Bill Concession ($272/yr electricity, $154/yr gas) and the SA Concessions Energy Discount Offer (SACEDO) with Origin Energy, providing 20% off electricity and 15% off gas for eligible customers.
For a detailed breakdown of current government support, consult our guide: Australian Energy Bill Relief & Utility Concessions 2026: Your Comprehensive Guide.
Strategies to Reduce Your Heating Bills
Beyond choosing the right heating method, several strategies can further reduce your winter energy consumption and costs:
- Insulation and Draught Proofing: A well-insulated home retains heat more effectively. Sealing gaps around windows, doors, and floors can prevent significant heat loss. Many states offer rebates for insulation and draught proofing. Refer to Unlock $1,500+ Winter Savings: Your 2026 Australian Insulation & Draught Proofing Rebate Guide for details.
- Zoning: Only heat the rooms you are using. Reverse cycle AC units often allow for zoning, and portable heaters are best for single rooms.
- Thermostat Settings: Set your thermostat to a comfortable but not excessive temperature (e.g., 18-21°C). Each degree higher can add 10% to your heating costs.
- Optimise Reverse Cycle AC Use: Use the ‘auto’ fan setting and ensure filters are clean for optimal efficiency.
- Smart Energy Management: Consider smart thermostats or energy monitoring systems to track and control your heating more effectively.
- Compare Retailers: Even with DMO/VDO changes, competitive market offers often provide better value. Regularly compare plans using government comparison sites like Energy Made Easy or Victorian Energy Compare.
Bottom Line
For Australian households in 2026, reverse cycle air conditioning stands out as the most cost-effective and energy-efficient heating solution for winter. While the upfront investment is higher than a basic electric heater, the significant long-term savings on running costs, coupled with potential state-based rebates and zero-interest loans, make it the superior choice. Electric resistance heaters should be used sparingly for targeted, short-term warmth due to their high running costs. Gas heating offers strong performance but comes with rising fuel prices and environmental considerations, making it less attractive for new installations or those looking to minimise ongoing expenses. Prioritise insulating your home and exploring available government incentives to maximise your winter comfort and minimise your energy bills.