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What's the cheapest way to heat your home this winter?

We'll explain how to keep your electricity costs down, regardless of how you heat your home.

gas heater fan insulation air conditioner on blue background
Last updated: 24 May 2022

Need to know

  • Reverse-cycle air conditioning is the cheapest way to heat your home, but it is the most expensive up-front
  • Portable electric heaters are cheap to buy but have high running costs
  • Shop smart and hack your heating to keep your power bills down this winter

When it comes to heating your home, what is going to be cheapest short-term and long-term are two quite different things. 

If you're fortunate enough to own your own home and have the money for reverse-cycle air conditioning, then it's by far the cheapest way to keep your home warm. 

If you're a renter or simply don't have a spare couple of thousand sitting in your bank account, then an electric heater is probably your best option. Unfortunately you'll need to suck it up and pay more per year for heating costs. 

But there are ways to make sure you're not paying more than you need to. We'll talk you through how to choose the best heater, and how to hack your home so your heating bill doesn't go through the roof. 

Cheapest to most expensive

Air conditioning

Based on running costs alone, reverse-cycle air conditioning is by far the cheapest way to heat your home: our estimates show that a reverse-cycle air conditioner will cost only a little more to run for the entire year than an electric heater will cost to run just for three months over winter. 

But (and it's a big but) the upfront cost of air conditioning is much, much higher. You'll also need to factor in installation time before you can bask in the warmth of your AC. 

"On average you can expect to pay about $2000 for a new split-system air conditioner, but the price range is anywhere from $600 up to $5500," says CHOICE heating expert Chris Barnes

"Installation will add at least a few hundred dollars more. And for  a ducted reverse-cycle air conditioning system expect to pay at least $5000, including installation. 

Reverse-cycle air conditioning will cost only a little more to run for the entire year than an electric heater will cost to run just for three months over winter

"For a typical freestanding house, the cost can easily reach $10,000 or more, depending on the size and type of system you choose. For a large or multi-floor home, you're looking at $15,000 or more."

But an added advantage of a reverse-cycle air conditioner is that it'll keep you cool in the warmer months, too – something an electric heater definitely can't do!

Gas heating

Gas heating is the next cheapest option to heat your home (at the moment, at least). But gas heaters aren't suitable for everyone – you'll need to have gas already connected or set up an LPG system for your heater. 

They can't be installed in bedrooms and confined spaces like bathrooms, and some require a flue to vent outside your house.

And they aren't cheap to buy, either: you're looking at anywhere from $500 up to $1400. And then they need to be serviced regularly, so that adds to the cost. 

Gas heating is associated with some potential health and safety risks, and is also a non-renewable resource

The price of gas is increasing, too, so while it may be a relatively cost-effective way to heat your home now, you could end up paying more than for electric heating such as air conditioning and portable electric heaters. 

Gas heating is associated with some potential health and safety risks, and is also a non-renewable resource. We explain the ins and outs in our gas heater buying guide.

Portable electric heating

It's a win for the portable electric heater on convenience and upfront costs. With no installation required, wide availability and prices starting at around $30, they're definitely a quick and easy fix when the cold snap hits.

Portable electric heaters are ideal for small spaces for short periods of use. They're also a great option for renters or owners of strata apartments who may not be able to install air conditioning.

Of all the different types of electric heaters, oil column heaters are the cheapest to run – but only by a very slim margin. They also take longer to warm up. 

Portable electric heaters are a great option for renters or owners of strata apartments who may not be able to install air conditioning

But portable electric heaters are not nearly as energy efficient as a split-system air conditioner and can get expensive. You'll likely see a hike in your energy bills, particularly if you're running multiple heaters in different rooms. 

In fact, a portable electric heater can cost almost three times as much to run on average than a reverse-cycle air conditioner (based on heating six hours a day over 12 weeks in a moderate winter).

How much do different heaters cost to run?

Obviously, every home is different, and your heating requirements will vary depending on the climate, room size, insulation, and many other factors, but by crunching some numbers we can give you an idea of the price difference between each heating type. 

Here's a comparison  of various heating options for a small room:

Mitsubishi Heavy Industries SRK25ZSXA-W reverse cycle air conditioner

  • Upfront cost: $1500 (plus installation)
  • Running costs over winter: $163

Rinnai Dynamo 15 portable gas heater

  • Upfront cost: $1099
  • Running cost over winter: $237.50* 

DeLonghi HCX3320FTS convection electric heater

  • Upfront cost: $359
  • Running cost over winter: $296*

*Based on 500 hours of use: 6 hours a day for 3 months, with peak pricing at 30c/kWh

So for the first year at least, an electric heater will cost you less – but will cost you more in the long run. 

With many people living month-to-month (and even week to week), a cheaper electric heater with slightly higher running costs may be a more feasible option than dropping thousands of dollars on an air conditioning system. 

So for the first year at least, an electric heater will cost you less – but will cost you more in the long run

Just remember, though, that you'll see a hike in your electricity bill, particularly if you're running multiple heaters in different rooms. And with many of us now working from home, you're likely to have your heater on for longer each day.  

"The more you use your heater, the more important it is to make sure that the heater is the most efficient type you can get, and also that you're using it as effectively as possible," says Barnes.

Choose wisely

So if you do have to buy an electric heater, how can you keep those power bills as low as possible while still staying warm? You don't necessarily need to buy a top-of-the-line electric heater.

"Purchase price isn't always an indicator of better performance or cheaper running costs," says Barnes. 

"Among the electric heaters we've recommended in the past, some have cost less than $100 and others more than $400, yet their winter running costs tend to be similar at around $300 – and we've found other models with similar prices and running costs but which perform much worse."

Some recommended electric heaters have cost less than $100 and others more than $400, yet their winter running costs tend to be similar

However, a cheap purchase price and low running costs don't mean much if your heater isn't effective – a smaller electricity bill in three months' time is cold comfort if you're freezing right now. So finding an electric heater that performs well is vital if you want to stay warm over winter. 

"Purchase price and running costs are important, but it's also important that the heater does a good job of spreading the heat effectively throughout the room," says Barnes. 

CHOICE tip: Our electric heater reviews let you filter by brand, price, running cost, design and features – so you can find a heater that works best for your situation.

Hack your heating

There's more to reducing your heating costs than just buying an efficient heater and using it judiciously. And a high electricity bill can be a sign that you need to make some changes to how you heat your home. 

"If you need to run an electric heater all day every day to stay warm, it's a sign that your home is really not thermally efficient," says Barnes. 

Try these tips to hack your home and make sure you get the most out of your heating this winter. You'll find a lot of these methods are also better for the environment than plugging in an appliance.

1. Insulation

While popping on an extra jumper is an easy way to warm up, having a well-insulated home will make the biggest difference to keeping your house warm. 

You can lose as much as 35% of your home's warmth if it's not insulated, which means that you can rack up the biggest electricity bill ever but still be chilly throughout the winter. Insulation will also keep your home cooler in summer, so it's worth the investment. 

Of course, if you're renting or can't afford insulation then you'll need to look at other options to keep warm – check out our 6 practical DIY tricks for staying warm this winter

Things like sealing draughts, covering floors with rugs and using curtains can all help to keep the heat in and the cold out. 

2. Use your ceiling fan on reverse

You can use a ceiling fan to hack your heater. Modern ceiling fans have a reverse switch, which will make the blades turn clockwise. Since hot air rises, this will push the warm air back down towards the floor. 

It's also important to make sure the warmth from your heater can circulate around the room. As tempting as it might be, that means not sitting on top of the heater. And if you're drying laundry inside, move it back from the flow of hot air – it'll warm the room more effectively. 

3. Harness the sun

While solar panels are also a considerable investment, they can help to reduce your heating costs. 

"For a home with its own solar panel system, running an electric heater or air conditioner in daytime can be significantly cheaper than running a gas heater," says Barnes. 

Find out more with our solar panel buying guide

4. Buy during sales time

If you haven't already bought a heater, you could try to hold out until the end of financial sales (or pick up a more efficient model to replace your existing heater). With the end of financial year coinciding with the start of winter, it's not surprising that electric heaters are CHOICE's most searched product during this sale period. 

But try not to get caught up in the sales frenzy – and make sure to steer clear of these electric heaters that we suggest you avoid buying

If you're thinking of going for air conditioning, don't wait until it's freezing cold or steaming hot to get an air conditioner installed – shop in the off-season.

"If you're looking to install an air conditioner for your winter heating, get it done well ahead of the peak cold season; don't wait until the installers are busy. You might pick up an off-season bargain this way," Barnes says. 

We care about accuracy. See something that's not quite right in this article? Let us know or read more about fact-checking at CHOICE.

Stock images: Getty unless otherwise stated.