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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 summer and winter.

air conditioner savings tips
Last updated: 07 December 2023

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 summer and winter, plus other bill-busting expert tips
  • Consider becoming a CHOICE member to access expert reviews of more than 240 air conditioner models 

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

But before you go cowboy with the temperature remote and turn your living room into an icebox or a furnace, 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 240 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 units we tested
Size Annual costs*
Small (up to 4kW) $40–1060
Medium (4–6kW) $90–1840
Large (over 6kW) $150–2760
*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.

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 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 summer or winter, 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, for better or worse.

"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 (eg, Canberra, Melbourne or Hobart) or hot zone (eg, Darwin or Brisbane) tend to be higher than for the average zone (eg, 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 correct-sized unit 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 cool or heat your space. 

"Aim for the sweet spot," says Chris.

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: "Make sure a professional has assessed your home and made 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.

"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 reviews before you buy to see how models really rate, and what they cost to run. 

9 extra tips to save money

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. Read our guide to cleaning and fixing an air conditioner yourself.
  2. Invest in a smart air con with app capability so you can switch it off remotely if you forget to turn it off when you leave the house.
  3. Use the eco setting, if your air conditioner has one.
  4. On mild but very humid days, try your air conditioner's 'dry' mode if it has one. This is a light cooling mode that focuses more on reducing the indoor humidity.
  5. On a very hot day, turn the air con on early rather than waiting until your home becomes very hot (when it will have to work harder).
  6. If you have ducted air conditioning or more than one unit, use zoned cooling so you're operating a machine only in areas people are actually using. Or keep doors closed so the air is circulating only in areas being used, rather than the whole house, which is probably partially empty.
  7. The evenings are usually cooler – set your air con to turn off later in the evening while you sleep.
  8. Keep your house cool and shaded so your air con doesn't have to work unnecessarily hard – see our top 10 tips for cooling.
  9. 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.

What's the ideal temperature to set for summer?

It's no surprise that the harder your air conditioner has to work to cool down your room, the more electricity it's going to use and the more it will cost you. 

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 cooler than the outside temperature.

For the best efficiency, aim to set your unit around 8°C cooler than the outside temperature

Chris Barnes, CHOICE air conditioner expert

"So if it's a sweltering 33°C outside and you're craving a cool blast, try to settle for 25°C instead of running your room at 18°C. You'll still be comfortably cool and it'll cost you less."

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

Of course, on really hot days you'll probably want to go beyond an 8°C difference; no-one's going to set their air con to 32°C on a 40°C day! 

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

What's the ideal temperature for winter?

The same rule goes for 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 cost of using reverse-cycle air con to heat your home can range from $150 for a small unit up to $445 for a large unit (estimate based on 500 hours of use and an electricity price of 40c/kWh). 

Our handy guide helps you compare the costs of heating using reverse-cycle air conditioning versus gas and electric heaters.

To give you optimal warmth 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. 

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

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.