Should You Just Ditch Gas?

Most people think of solar panels as the big energy upgrade. And they are right. Solar is usually the first thing you should do. But the second-best upgrade for a lot of Australian homes is not a battery, or insulation, or an EV. It is getting off gas.

That surprised me too. When I first ran the numbers through the calculator, gas-switching upgrades kept showing up at or near the top of the optimal sequence for almost every state. In some states, switching your hot water system from gas to a heat pump ranked ahead of solar. Here is why.

You are paying $300 a year for the privilege

Before you use a single megajoule of gas, you are paying a daily supply charge just to stay connected. In most states this is between 61 and 84 cents per day. That adds up.

NT excluded (no piped gas network). WA supply charge is regulated and significantly lower than other states.

That is money you are spending regardless of how much gas you actually use. If you can eliminate every gas appliance in your home, you cancel that connection and those dollars go straight to your bottom line, every year, forever. In Victoria and South Australia, that is over $300 a year before you even count the savings on gas usage itself.

Gas appliances are surprisingly inefficient

The other thing that surprised me was just how much energy gas appliances waste compared to their electric replacements.

A gas cooktop converts about 40% of the energy in the gas into heat in your food. The rest heats your kitchen. An induction cooktop converts about 85%. That is more than double the efficiency.

A gas hot water system runs at about 72% efficiency (blended across storage and instantaneous types). A heat pump hot water system has a COP of 3.5 in a temperate climate, which means it produces 3.5 units of heat for every unit of electricity it consumes. In energy terms, that is roughly a 65% reduction in the energy needed to heat the same amount of water.

Gas space heaters are similar. A ducted gas furnace runs at about 75% efficiency. A reverse-cycle air conditioner in heating mode has a COP of 3.0 to 4.5 depending on your climate. In Melbourne, where gas heating is most common, a reverse-cycle system uses about 55 to 65% less energy to produce the same warmth.

So you are not just switching fuel. You are switching to machines that waste far less of it.

The three switches

There are three gas appliances in a typical Australian home, and each one can be replaced independently. The calculator evaluates them separately because the economics are different for each. All costs below are the full price of the electric replacement, not the difference over a new gas unit.

1. Hot water (gas to heat pump). This is almost always the best place to start. A heat pump hot water system costs about $4,000 installed. Federal STCs reduce that at point of sale, though the exact amount depends on your climate zone: roughly $585 in cool zones (15 certificates), $975 in temperate zones (25 certificates), or $1,170 in subtropical zones (30 certificates), all at $39 each. Several states add their own rebates on top. In Victoria, the VEEC program provides about $560 off. Hot water is 30% of your gas bill and runs perfectly off solar during the day.

2. Cooktop (gas to induction). An induction cooktop costs about $1,500 installed. In Victoria, the VEU program knocks about $140 off. Cooking is only 5% of your gas bill, but the induction is faster and more controllable, and if this is your last gas appliance, removing it lets you disconnect from gas entirely and eliminate the supply charge.

3. Heating (gas ducted to reverse cycle). This one only applies in cooler climates: Victoria, ACT, Tasmania, and parts of NSW. A ducted reverse-cycle system costs about $8,000 installed. State rebates can take a significant chunk off: Victoria offers a $3,500 VEU rebate, NSW provides $1,000 through the ESS (note: the NSW ESS gas-to-electric incentive expires June 2026), and SA offers $500 via the REPS. It is the most expensive switch, but in homes where gas heating is 60% of the gas bill, it also delivers the biggest savings.

What this looks like by state

Here is the full picture for a 3-bedroom home with gas hot water, gas cooktop, and gas heating (where applicable). Costs are the full replacement price minus all federal and state rebates. NPV uses a 10% discount rate over 15 years, the same hurdle rate I use across the calculator (equivalent to stock market returns).

HW = hot water, Cook = cooktop, Heat = space heating. Costs are the full price of the electric replacement minus applicable rebates (STCs, state programs). NPV uses 10% discount rate. States without significant gas heating demand (NSW, SA, QLD, WA) only show hot water and cooktop switches. Assumes 3-bed, 20-year-old home, 15-year analysis period.

Every single state is positive NPV. Victoria leads by a wide margin thanks to its generous VEU and VEEC rebates combined with high gas supply charges. Even the weaker states like Queensland still show a positive return over 15 years. And unlike a battery, where the economics are marginal in some states, getting off gas beats the 10% stock market hurdle in every state.

A note on the ACT

The ACT government offers up to $5,000 in rebates for gas disconnection through the Home Energy Support program, but this is only available to concession card holders. It is not a universal rebate. For most ACT homeowners, the upfront cost of switching all three appliances sits around $11,215, which is the highest of any state. The 15-year return is still positive, but the ACT is no longer the standout case it was when this rebate was widely reported as universal.

All ACT residents can, however, access low-interest loans through the Sustainable Household Scheme to spread the cost of electrification upgrades. If you hold a concession card, the combination of the $5,000 rebate and federal STCs makes the ACT one of the most affordable places to switch.

Start with hot water

If you are not ready to rip everything out at once, start with hot water. Across every state, it is the upgrade with the strongest long-term return. A heat pump costs around $4,000 before rebates, and after STCs and any state incentives, the net cost varies from roughly $2,500 to $3,500 depending on your location. The 15-year savings comfortably exceed that in every state. Even in the weakest case, it is still strongly positive.

There is a practical reason to start here too. A heat pump hot water system heats water during the day using solar electricity, or cheap daytime grid power if you do not have solar yet. It is essentially a thermal battery. Switching hot water first reduces your gas bill immediately, and if you later add solar, the heat pump becomes one of the best loads to run off your panels.

The supply charge is the key

Here is something most people miss when they think about gas-to-electric switches in isolation. Swapping your cooktop from gas to induction saves you a modest amount on gas usage. Cooking is only 5% of a typical gas bill. Taken alone, that does not seem like much.

But if the cooktop is your last gas appliance, removing it lets you disconnect from gas entirely. And that eliminates the $245 to $307 annual supply charge. The calculator models this correctly: the gas disconnection saving only gets attributed to whichever appliance switch comes last. That is why the cooktop NPV sometimes looks surprisingly high. It is not the cooking savings driving it. It is the supply charge elimination.

This also means the switches are worth more together than separately. If you only switch hot water and keep a gas cooktop, you still pay the supply charge. It is the combination that unlocks the full value.

When you should not ditch gas

• Your gas appliances are brand new. The costs above are the full price of the electric replacement. If you just installed a new gas hot water system last year, you would be paying that full price while the gas unit still has years of life left. The calculator lets you specify the age of your existing appliances to see adjusted figures, but in general, wait until your gas appliance is near end-of-life.
• You rent. These are capital upgrades to the property. If you do not own the home, you cannot make these changes without your landlord's agreement.
• You are selling soon. You will capture the ongoing savings only if you stay long enough to earn them back. If you are planning to sell within the next year or two, the upfront cost may not be recovered in time, and buyers may not value the upgrades at what you paid.

The gas death spiral

There is a structural problem with staying on gas that goes beyond today's rates, and it is worth understanding because it affects the long-term value of every number in the table above.

The gas network costs about $1 billion a year to maintain. That cost gets spread across everyone who is still connected. As more households disconnect (east coast gas customer numbers are expected to fall by more than a third in the next 10 years and more than two-thirds over 20 years), those fixed costs get divided among fewer and fewer remaining customers. Your supply charge goes up. That pushes more people to leave. Which pushes charges up further.

This is what energy commentators like Anne Delaney on the SwitchedOn podcast have been calling the gas death spiral. It is not theoretical. In March 2025, gas network owner AGIG threatened to increase Victorian network access charges by 16 to 20 percent per year in response to the state's gas phase-out plans. That would affect 1.4 million households. And from October 2026, an AEMC ruling means new gas connections must reflect the true cost of connecting to a shrinking network, which will make them dramatically more expensive.

The numbers in the table above already make a strong case for switching. But they use today's gas rates. If supply charges increase at even half the rate AGIG threatened, the real savings will be significantly higher. Getting off gas is not just about what it saves you today. It is about avoiding a cost trajectory that is structurally guaranteed to get worse.

Gas prices are also tied to international LNG export markets, which means your heating bill is exposed to geopolitical risk, as we have seen recently. Electricity from solar panels on your roof is not subject to any of that.

Run your own numbers

The figures above are for a typical 3-bedroom home. Your situation will vary depending on how much gas you use, what appliances you have, and which incentives apply in your state. The calculator evaluates each gas switch individually (hot water, cooktop, and heating) and works out the optimal order based on your postcode, home size, and existing setup. It also accounts for the interaction with solar: if you have panels, running a heat pump during the day costs you almost nothing.

Where these numbers come from

Gas rates from Selectra and AER gas monitoring reports (2025-26). Supply charges from published retailer tariffs. Heat pump and cooktop costs from SolarChoice and installer surveys. STC values from the Clean Energy Regulator. State incentive details from published government programs. Full data source list on the data sources page.