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How to save money on your home heating and cooling costs

These expert tips will help you keep a lid on your electricity bill in both winter and summer.

air conditioner savings tips
Last updated: 16 April 2024

Need to know

  • Running costs can vary dramatically between models, so it pays to look for an energy-efficient unit
  • We reveal the most efficient temperature settings for winter and summer, plus other bill-busting expert tips
  • Consider becoming a CHOICE member to access expert reviews of more than 300 air conditioners

If you've just installed air con to heat your home, or you're planning to, you're probably looking forward to never having to shiver through winter or swelter through summer again.

But before you go cowboy with the temperature remote and turn your living room into a furnace (or an icebox when the hot weather hits), it's important to understand how much energy your air con will use, and how much it will affect your bills. 

Heating and cooling appliances account for about 40% of energy use in the average Australian home. The good news is that just a few small changes can help lower your electricity costs and your carbon footprint, which helps the planet too.

Follow these expert air con tips to help keep your energy bills in check. 

How much do air conditioners cost to run?

In our air conditioner reviews, we've calculated annual running costs for more than 320 models, based on each model's rated power consumption.

As the table shows, electricity costs for similar units can differ by hundreds of dollars a year. That'll add up to thousands of dollars over 10 years, which would cover a large chunk of your air conditioner installation costs

It's even more reason to do your research and shop wisely.

Running costs of reverse-cycle units we tested
Size Annual cost*
Small (up to 4kW) $150–370
Medium (4–6kW) $340–650
Large (over 6kW) $530–1160
*Based on the estimated annual energy usage for each model, in cooling and heating modes (calculated as per the Australian Standards for air conditioners), with the remainder of the year in standby mode, and with electricity costs of 40 cents/kWh. It's only indicative – your actual running costs will vary depending on your home and how much you actually use the air conditioner.

Other factors affecting running costs

Of course, it also depends how much you plan to run your air con, too.

"If you use it rarely – say, only a few days a year during cold snaps or heatwaves – you may be OK to buy a cheaper unit that's less efficient to run, since the running costs are less of a concern," says CHOICE air con expert Chris Barnes.

"But if you use it a lot, such as most of winter or summer, then you absolutely should be looking for a very efficient model."

Chris also stresses that there are many factors beyond the unit itself that will affect the running costs.

"Variables like the climate zone you live in, your home's location, thermal efficiency and insulation, outdoor temperature and the set target indoor temperature can all significantly impact how hard the air conditioner has to work," he says.

Electricity costs for similar units can differ by hundreds of dollars a year

Energy star ratings are now based on the Zoned Energy Rating Label (ZERL), which shows ratings based on climate zones to help you decide which is best for where you live.

Typically, running costs in the cold zone (e.g. Canberra, Melbourne or Hobart) or hot zone (e.g. Darwin or Brisbane) tend to be higher than for the average zone (e.g. Sydney, Perth and Adelaide). That's because the air conditioner usually runs for longer in those areas, and may also have to work harder in the more extreme cold or heat.

Our detailed air conditioner reviews include the zone star rating labels for each model where available. We calculate running costs for cold, average and hot zones based on this zoned energy data, for those models that have it.

reverse cycle air conditioner two women

Running costs can vary between models by hundreds of dollars a year, so it pays to choose well.

How to reduce your air conditioner electricity costs

Air con is great, but great big power bills? Not so much. Here are the key things to consider to keep your costs down.

1. Get the right size for your home

Before you buy your air conditioner, make sure you're choosing the most efficient option for your home.

First, you need to ensure you choose the right size air conditioner.

Too big and you could be using more electricity than you need because the unit may run frequent short cycles to achieve the target temperature. Too small and it will have to work too hard to heat or cool your space.

"Aim for the sweet spot in terms of size," says Chris.

Aim for the sweet spot in terms of size

CHOICE air conditioning expert Chris Barnes

Second, keep in mind that most models these days are inverter units. This means the air conditioner adjusts its output to the target temperature of the room.

So, if you have a bigger, more powerful air conditioner operating in a well-insulated house, it will be running at quite efficient levels and could be more efficient than a smaller unit that may typically cost less.

Third, if you have a house that's poorly insulated, a smaller unit is going to be working harder and ending up costing more to run than the bigger unit in the more efficient house.

Woman opening indoor air conditioner unit

Make sure your unit is well positioned and regularly maintained for optimal efficiency.

2. Make sure the unit is installed in the best position

Chris says to get a professional to assess your home and make the best possible recommendation as to where the unit should be located, inside and outside. 

"It won't make a huge difference to your running costs, but could definitely have an effect," he says.

"For example, for a typical unit mounted high on a wall, you want to ensure it can blow lengthways across a room without any obstruction – give it a chance to reach across all corners of the room and lower the temperature.

You don't want the outside unit to be baking hot or freezing cold, as it'll have to work harder and therefore cost you more

CHOICE air conditioner expert Chris Barnes

"And for the outside unit, it's best if it's not exposed to extreme temperatures. You don't want the unit to be baking hot or freezing cold, as it'll have to work harder and therefore cost you more."

3. Check energy star ratings and understand power consumption

"Look at the unit's energy star rating, or the running costs that we calculate in our testing based on average usage," says Chris. "These will give you the best idea of which models are the most cost-effective to run." 

The Zoned Energy Rating Label (ZERL) gives a seasonal efficiency rating for three climate zones across Australia and New Zealand, which gives you more targeted energy-saving information to help you choose the best appliance for your needs.

At CHOICE, we regularly find that a unit's performance doesn't always match the advertising hype, so be sure to check our air conditioner reviews before you buy to see how models really rate, and what they cost to run. 

What's the ideal temperature to set for winter?

When you need to warm your cockles in winter, reverse-cycle air conditioners are one of the most efficient and cost-effective ways to heat individual rooms and large living spaces, beating electric and gas heaters on running costs when we crunched the numbers.

The difference between the temperature outside and the temperature you set your air conditioner to will have a significant effect on your power bills. 

"The running costs and energy used by your air conditioner can vary hugely based on a number of factors," says Chris. 

"But generally, for the best efficiency, aim to set your unit around 8°C warmer than the outside temperature."

Each degree warmer usually adds about 10% to the running cost of your air conditioner

(Of course, this rule doesn't necessarily apply in freezing temperatures: no-one's going to set their air condition to 3°C when it's -5°C outside!)

Sticking to this 8°C differential will also save on wear and tear on the air conditioner's motor. 

In general, Chris says, each degree warmer (or cooler in summer) usually adds about 10% to the running cost of your air conditioner.

Combined with a well-insulated home and a few other simple tricks (see below), you can stay toasty for less.

What's the ideal temperature to set for summer?

The same rule goes for when you need to cool down in summer. 

To give you optimal coolness for the cheapest price, you should again stick to a difference of about 8°C between the temperature on your reverse-cycle air conditioner and the outside temperature where you can. 

Obviously this is just a guide, and there'll be times when you need to crank the air con. Setting the air con to 32°C on a 40°C day isn't a great idea, no matter how much money you'll save!

10 extra tips to save money on your air con in winter

Don't let your air con become an energy guzzler. Keep those energy bills down with our expert's handy tips:

  1. Make sure your unit is regularly maintained and the filter kept clean so it can work as efficiently as possible. Learn how cleaning the filters on your appliances can save you money.
  2. Invest in a smart air con with app capability so you can switch it on remotely to warm up the house before you get home, or switch it off if you forgot to when you left the house.
  3. Use the eco setting, if your air conditioner has one.
  4. If you have ducted air conditioning or more than one unit, use zoned heating and cooling so it's only operating in areas people are actually using. Or keep doors closed so the air is circulating only in areas being used.
  5. Insulate your home. You can lose as much as 35% of your home's warmth if it's not insulated. Insulation will also keep your home cooler in summer, so it's worth the investment. 
  6. Consider solar to help reduce your electricity costs. Solar is a considerable investment, but it can significantly reduce how much you pay for heating and cooling your home with air con.
  7. Use a pedestal fan or ceiling fan to help circulate the warm or cool air produced by your air conditioner. Find out how a ceiling fan can slash your heating costs in winter.
  8. Seal your house so the heat won't escape. Even simple solutions like towels or door snakes across gaps under your doors can make a difference to keep the heat in, so your air conditioner won't need to work as hard. 
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.