It’s cold in my house and the price of gas is going up – what can I do?

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With gas prices rising, many people are shivering while contemplating how big their next gas bill will be. A switch to electricity is one option.

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Gas may no longer be the most economic way to heat your home. Hideya HAMANO/Flickr, CC BY-NC-ND
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The Conversation

Gas may no longer be the most economic way to heat your home. Hideya HAMANO/Flickr, CC BY-NC-ND
Gas may no longer be the most economic way to heat your home. Hideya HAMANO/Flickr, CC BY-NC-ND

Cold weather has arrived in eastern Australia, to the glee of those who enjoy skiing. But you don’t have to venture onto the slopes for cold to be a danger. With gas prices rising, many in the community are shivering while contemplating how big their next gas bill will be.

Eastern Australia’s gas market is rapidly changing, driven by the first exports of liquefied natural gas (LNG) from Queensland. And this is affecting the whole supply chain, from gas producers, to the way we use gas in our homes.

Gas was cheap, for decades

In Victoria, South Australia, and through to New South Wales, Queensland and Tasmania, gas has long been viewed as the preferred fuel for many applications – from industrial uses right down to warming our lounge rooms. Since the discovery of the massive Bass Strait oil and gas deposits off Victoria in the late 1960s, gas consumption across eastern Australia grew, decade after decade.

But despite these discoveries and growing production, the resource companies involved were often frustrated. While global crude oil prices went up and up, eastern Australian gas prices were stuck in the 1970s. Gas consumers enjoyed access to some of the cheapest gas in the developed world.

On the other hand, gas producers dared not complain too loudly. They often considered this gas nearly a waste product – interfering as it did with the speed at which the far more valuable crude oil and LPG could be drawn from the ground. If eastern Australia had been another jurisdiction such as Nigeria or North Dakota, this nuisance gas could have been quickly disposed of by flaring or venting. However, with some foresight, Australian industry regulators have generally discouraged such wasteful and environmentally damaging practices.

Faced with this constraint, what were the resource companies to do? Unlike crude oil, gas is costly to ship to the more lucrative markets in Japan and Korea, first requiring liquefaction at temperatures as low as minus 160C. Creating new demand “sinks” for gas in-country was one strategy. Pipelines were built to connect up all of the eastern states. Still, this “domestic” gas languished at a sales price far below that of crude oil.

Coal seam gas arrives

Then in the first decade of this century came the realisation that coal seam gas (CSG), located mostly in Queensland but also in New South Wales, could be produced in quantities far exceeding the demands of the staid domestic market, by a factor of three or more.

Following the examples of Western Australia and the Northern Territory, the only option for gas companies was to invest billions of dollars in, at last, building the first liquefaction and export facilities on Australia’s east coast.

For legacy gas producers, even those not directly involved in the LNG-export decisions, this was the dream come true. After decades, a buyers’ market rapidly shifted to become a sellers’ market. Where previously buyers would remind producers they would be happy to take that “waste product” off their hands, producers could now inject into supply contract negotiations the spectres of “world-parity pricing” and “high CSG production costs”.

Nowhere in the world had it ever occurred where an established, reasonably large domestic market, serving customers ranging from large industry to millions of homeowners, was suddenly eclipsed by the mammoth export-focused LNG industry.

Eastern Australia gas demand peaked – three years ago

Even before the launch of the first LNG export cargo from Queensland late last year, major gas buyers raised concerns about future gas costs and contractual availability. The Australian Competition and Consumer Commission is examining transparency and barriers to competition in the gas industry.

When the New South Wales upper house held an inquiry into gas supplies earlier this year, it gave us, at the University of Melbourne Energy Institute, the opportunity to present our analysis of declining future gas demand in that state. Now Victoria’s upper house is likewise having an inquiry where we will present aspects of our extended research into gas supply and demand across all of eastern Australia.

The eastern Australian gas market has experienced significant upheaval and will continue to change over the next ten years. Data from the Australian Energy Market Operator indicates that the volume of gas used in eastern Australia peaked three years ago.

Gas demand will continue to decline across all sectors. In the electricity-generation sector, with rising gas prices, the abolition of the carbon price, and a surplus of coal-fired generation, gas will only be sparingly used. The Australian Energy Market Operator is also forecasting a steep drop in the amount of gas used by industry.

Do try this at home: fuel-switching from gas to electricity

The amount of gas used in buildings will also decline. As we shiver here in Melbourne, how would you like to reduce your heating costs by up to, say, 70%? If interested, you have to do two things: (1) turn your gas heater to “off” and (2) turn your reverse cycle air conditioner to “on” – on heating mode of course!

Infrared image of wall-mounted air conditioner producing heat at 50C. Tim Forcey

In my home we did that for the first time this winter. Our savings are remarkable, though not surprising nor different to what others in the community are reporting. As an example, during two particularly blustery days I found I could comfortably heat my house one day with gas at an energy-only cost of A$4.80 and then do it the next day with my air conditioner at a cost of just A$1.50. Our savings across the full heating season will add up to hundreds of dollars.

Results in other homes will depend on factors including what you pay for electricity and gas, the efficiencies of your gas heater and air conditioner, where your heat sources are located within your home, and individual comfort and convenience preferences. But it should not be long before word gets out to the 4.4 million Australian homes that already have at least one reverse-cycle air conditioner.

Previously I reported on the similarly large savings possible by using an efficient heat pump to heat water, especially if you have excess self-generated solar electricity. Add an induction cooktop and there is no economic need to connect gas to most Australian homes. Businesses are springing up that offer “all-electric” home conversions” to people interested in making the switch.

Collectively, homes are large consumers of eastern Australian gas. This coming “second-era of Australian home electrification” will have a big impact on gas and electricity supply-demand dynamics over the next decade.

The ConversationSource: The Conversation. Reproduced with permission.

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39 Comments
  1. barrie harrop 4 years ago

    Where are the energy cost reductions Aust PM promised us ?

    • Ronald Brakels 4 years ago

      I don’t know, maybe one of the Vice Presidents of Stanwell Corp that manages Queensland’s state owned coal power stations could tell us. They should know because at $8 million a year they get paid 16 times more than the Prime Minister does, so they must be at least 16 times smarter.

      • Chris Fraser 4 years ago

        That must give them an IQ of at least … 64

  2. RobS 4 years ago

    Switch to electricity and add solar, if possible design the system so that in 2-3 years you can add storage without major equipment replacement. Of course add insulation if you don’t have it already, consider double glazing on south facing windows and block up any drafty doors or other openings

  3. Chris Fraser 4 years ago

    If no air source heat pumps are available, one thing you can do is absorb the gas hikes. Just don’t bring the charcoal barbecue inside the house !

  4. Greg 4 years ago

    You could look to the heaters that contain a large ceramic block which is surrounded by insulation. During the solar hours, the ceramic block is heated by the solar array, then later on when the temps drop, you can release the stored heat within the ceramic brick. Time-shifting heat sources is a pretty neat concept.

  5. Smurf1976 4 years ago

    Nothing new here. Reverse cycle air-conditioners, or “heat pumps” as Tasmanians have always universally called them, are the most common means of heating in the island state and have been for years. In second place is firewood with everything else a long way down the list. Residential space heating market share is about 67% electric (roughly 60% of which is heat pumps), 27% firewood, 2% natural gas, 2% LPG, 1% oil, 1% pellets.

    • Tim Forcey 4 years ago

      Smurf1976: Thanks for the report from Tas, and glad to hear “nothing new here”. I have had many holidays down in Tassie but for some reason whilst bushwalking, I keep forgetting to ask people there how they are getting on with their heating!

      Seriously, some continuing education needed in other locations (e.g. Vic).

      I grew up in North America, and heat pumps were used there since the 1970’s. Today’s available models have improved however.

      Take care down there.

      • Smurf1976 4 years ago

        The contrast of Vic versus Tas is stark so far as energy is concerned.

        Victoria – gas is taken for granted, Melbourne having the highest market penetration of gas anywhere on earth (well, it used to and probably still does). The idea of cooking with electricity is anathema to many Victorians as a result.

        Tasmania – has had among the highest per capita consumption of electricity for the past 100 years. The extent to which electricity, and the Hydro as an organisation, is embedded into Tasmanian culture and politics as well as the broader economy is hard to explain to anyone who doesn’t live here but it’s very intertwined with practically everything and has been for longer than anyone can remember.

        As for the “heat pump” terminology to describe what everyone else in Australia calls a reverse cycle air-conditioner, there’s a pretty simple explanation for that one. Back in the 1980’s the Hydro decided to promote them (and did so enthusiastically for the next decade) but realised that if someone said “air-conditioner” then most thought of cooling not heating. Hence they decided upon the “heat pump” term and promoted them as heaters with the “reverse” mode being for cooling. To this day that terminology has stuck – even the national chain stores universally use the term down here and omit reference to it being an air-conditioner.

        Also I’ll mention that split systems would be 99%+ of all heat pumps in Tas in residential use. The odd ducted system here and there but there was basically never any significant market for the window “box” type.

        Also, heat pumps are always hard wired and separately metered for electricity use here too.

        • Jacob 4 years ago

          They are heat pumps.

          Wow I did not know that heat pumps there are separately metered!

          • Tim Forcey 4 years ago

            Double wow.

            The heat pump (heater air conditioner?) we bought can tell you how much energy it has used since you turned it on this morning, and how much energy it has used since you bought it (a running tally).

  6. Flying high 4 years ago

    Re the RC air cons, how does one distribute the warm air throughout the house efficiently, be it zoned or not?
    Or do we only heat the lounge or family room?
    Switching to A/C sounds wonderful however, how many RC A/C units are required?
    One of these units in each room? If so, I’d suggest the the total capx cost will never be recovered/break even before requiring repairs/replacement.
    Secondly, I seem to recall reading numerous times how inefficient heating ‘air’ is.

    • Tim Forcey 4 years ago

      Hi Flying high: All good questions there. Can I suggest, check the Q&A on The Conversation (where this article was originally posted) and see if some of your questions are answered there. Or also, check out some of the links provided in the article, especially to the work done by the ATA.

      If you then have some very specific remaining questions re your own house, send those through to me at Melb Uni.

      All homes and home-resident preferences are different, no doubt, so one size won’t fit all. But there will be a lot of cases where people can use their heat pumps to good economic (and comfort!) effects.

  7. Neil Frost 4 years ago

    When I moved into my house two years ago I was lucky enough that there was already a heat pump hot water system installed. The first thing we did just prior to moving in was to remove the gas space heater and install an reverse cycle AC.
    It was the best thing we could of done. Now I have fitted a 4.5 kW PV system that seems to run the AC free is there is a bit of sunshine around. Even with light cloud cover I can run the AC free. I can’t wait for summer to sit back in the free cool environment I call home.
    As for concern about heating the whole house. Why ?

    • Tim Forcey 4 years ago

      I love it Neil. A bit of nominative determinism there perchance? Good luck with it!

      Oh by the way, in which state do you reside?

      • Neil Frost 4 years ago

        I live in country Victoria

        • Tim Forcey 4 years ago

          I was on ABC radio Murray Goulburn this morning. I was unsuccessful in aiding the presenter to get his head around the concept of a heat pump. I think he does have a fridge at home. Alas…

  8. Alan S 4 years ago

    It’s worth considering the cost saving of the service fee by disconnecting from the gas supply and avoiding the connection fee if building a new home. Induction and halogen cooking plus heat pump space and water heating means gas is unnecessary.

    • neroden 4 years ago

      Gas cooking is awfully fun, but I admit it is a wasteful luxury.

  9. Ronald Brakels 4 years ago

    Heating in Australia? Completely unnecessary! Mind you, I am wearing socks, a singlet, a jumper, a coat, and a beard. “What about women?” you may ask. “They can’t grow beards!” Well, medical science has solved that problem. And anyway, you might be surprised how many women can grow beards if they just gave their chin follicles a chance. “What about children?” you may ask. Well that’s easy. You’re not likely to have more than one child a year, so you just cut off your beard in summer and give it to your child next winter. I used to have my wife and children wear my old beards whenever the weather started to turn cold. Or at least until they all left me.

    • RobS 4 years ago

      I beg to differ, we’ve had three nights in the past week where it fell below -4 here

      • Ronald Brakels 4 years ago

        The snow is for keeping your beer cold in. In fact, the extra insulation it is currently providing is making things quite sultry here.

    • mick 4 years ago

      I shall ask, in the old days the aborigies(sorry black fellas) would build 3 or 4 fires around them and sleep naked or in skins no 8hr sleep pattern someone would stoke the fires all night if you don’t want open fires indoors try polygamy no joy for me I cant win an argument with one let alone 3

      • Ronald Brakels 4 years ago

        Here’s some trivia for you. Sweden’s death rate from hypothermia is 3.3 per 100,000. South Australia’s is 3.9 per 100,000. https://www.adelaide.edu.au/news/news68322.html

        Clearly we need to toughen up a bit. (Or provide more care to our most vulnerable people. That is another option. As is free beards for all!)

        • mick 4 years ago

          swedes live in northen Europe ie cold sa driest hottest driest place on earth no probs getting warm cold however knocks us about a bit

    • Ronald Brakels 4 years ago

      I considered putting on some pants, but since it wasn’t raining liquid oxygen I decided things weren’t cold enough to merit that extreme step yet.

  10. Mike Dill 4 years ago

    Insulation is the cheapest and most ecologically sound way to keep warm. Insulation lasts nearly forever and requires no additional energy over time. Insulate first. if possible, and then go solar/electric.

  11. Jacob 4 years ago

    Why would you get a reverse cycle Air Con and not use it in winter?

    I think 10% of new homes in Vic should be required to have heat pump floor heating.

    • Tim Forcey 4 years ago

      HI Jacob. Thanks for your comment. Can you describe more fully why you have that view? And are you talking about an air-source heat pump to heat floors or a ground-source (like you often see on those from-the-UK TV home shows?

      • Jacob 4 years ago

        To give the industry scale.

        Installing heat pump for floor heating would not cost much if you do it while the house is under construction.

        I think new suburbs are required to have fibre to the home.

        As for air sourced or ground sourced, leave it up to the market to decide.

    • Smurf1976 4 years ago

      I see the point about heat pumps, but why heat the floor? That’s not the most energy efficient way to do it.

      • Jacob 4 years ago

        To do what.

        • Smurf1976 4 years ago

          Heat the living area of a house as per the topic. If the aim is to keep the living area warm then heating the floor, by whatever means, is in most cases not the most efficient way of going about it.

          Timber floors – heat from underneath results in losses that don’t occur if the heat is put directly into the room as hot air.

          Concrete floors – the high thermal mass means that you’re effectively heating the place 24/7 versus intermittent heating if you just heat the rooms as such. Obviously not an issue if you actually do need 24/7 heating, but for most that’s not the case.

          • Jacob 4 years ago

            Some people have asthma.

            Or you could get radiators like they do in England that are heated by heat pumps.

            But till recently I only saw them on British TV shows.

            The issue is that hardly anyone in AUS installs them and so the ones that do, charge a fortune.

          • Smurf1976 4 years ago

            I just don’t see a reason why this technology should be mandated.

            I think that if we’re going to start mandating things then there needs to be a good reason for it and in this case I don’t see a sufficient reason. If people want it then by all means get it, but I don’t see any real reason why it ought to be compulsory.

          • Jacob 4 years ago

            How about mandating double glazed windows in 10% of new houses.

            100% would be communist.

  12. Jan Veselý 4 years ago

    Some remarks from Danish Energy plan, part heating:
    2/3 of households heated by district heating provided by a combination of heat pumps+hot water storage used in high RE periods and biomass/biogas/syngas CHP for low wind days.
    1/3 households will be heated: 70% heat pumps, 15% biomass, 15% stored summer heat.
    All together – incredibly BIG flexible consumption and storage for excess (mainly wind) electricity.

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