Home heating costs in 2020

We calculate the cost for different methods of heating based on the latest fuel cost data, and also look at renewable and non-renewable forms of energy.

20may home heating costs in 2020 hero

Keeping your home warm and showers hot in winter isn’t cheap. Around one-third of the energy supplied to our homes is used for space heating, with another third going towards hot water. So it makes sense to reduce your heating bill if you can.

What’s new in 2020?

There's great news for many consumers this winter. Advertised electricity and gas prices we track on Powerswitch have fallen slightly since 2019.

In contrast, the average price for a cylinder of LPG continues to climb, up nine percent from last year to $128. It now costs notably more to run an LPG heater compared to a portable electric one – enough that we’d advise you move away from this fuel where possible.

Fixed charges

You still need to cough up for fixed daily charges for electricity and gas mains, or a rental fee for LPG bottles. You could opt for a low-user pricing plan, which drops the fixed charges but has a higher price per unit of electricity. The fixed prices for electricity and gas have risen this year, but not by much. The only way to avoid these fees is by going completely off the grid. While this will appeal to some, you’ll pay big bucks for solar panels (or wind turbines, though this is less common) and battery packs.

On average, fixed daily charges have increased at a rate lower than inflation over the past year:

  • Electricity connection: $636/year (+0.3%)
  • Natural gas connection: $553/year (+1.3%)
  • LPG cylinder rental (2x45kg): $130/year (+0.5%)

Space heating

Electric space heaters run the gamut from efficient heat pumps to power-guzzling portable plug-in electric heaters.

Heat pumps use electricity to shift ambient heat from the air outdoors into your home, and can transform each unit (kW) of electricity into 3 or more units of warmth. Despite electricity costing 25¢/kWh on average, a heat pump produces a kW of heat for 8.3¢.

In contrast, plug-in electric heaters convert electricity directly into warmth via a resistive element with a 1:1 efficiency, meaning each unit of heat costs 25¢/kWh.

The improved efficiency of heat pumps comes with a hefty price tag. They cost at least 10 times more than plug-in electric heaters to buy and install, and can’t be moved from room to room. So, despite their high running costs, electric heaters are often the most cost-effective option for small or occasionally used rooms, such as the office or bedrooms.

However, in decent-sized living areas a heat pump will more than pay for itself, while electric heaters (with a maximum heat output of 2400W) just don’t have the power to tackle anything beyond very small living areas.

GUIDE TO THE FIGURES Bars represent the range between maximum and minimum costs. Black lines represent the national median. Electricity and natural gas costs are based on April 2020 data from powerswitch.org.nz. Other prices were collected during March 2020. GST is included.

Water heating

Natural gas is excellent for heating water if you’re already connected for cooking or space heating. If not, you probably won’t save enough to recoup the daily connection charge.

For those who can’t get piped gas, a heat pump water heater or wetback woodburner is a good option. Unfortunately, reducing your heating bill isn’t as simple as ripping out your electric cylinder and installing one of these. If your existing water heater is still going strong, the cost of buying and installing a new heater will usually outweigh any savings in running costs.

You can reduce your bill by cutting back on the amount of hot water you use. If your shower at its normal setting can fill a 10L bucket in less than a minute, it’s worth installing a low-flow shower head. You can also encourage your household to take showers rather than baths. And if your hot taps drip, get them fixed! It’s money going down the drain.

Installing an insulating cylinder wrap on your hot water cylinder is a good way to minimise heat loss, even if your cylinder is modern. Ensure your pipe lagging (insulation) is adequate, especially on the hot-water delivery pipe near the cylinder.

Renewable vs non-renewable fuels

Some heating fuels are much more environmentally friendly and sustainable than others. What are your options for staying clean and green?

Renewable

  • Firewood is a good, eco-conscious heating option as long as you’re using a woodburner. But ensure dry wood is burned hot to minimise emissions and get more heat. An open fire or burning wet wood can generate significant pollution.

  • Wood pellets are made from sawmill waste, a byproduct of an existing industry, giving an even smaller environmental footprint. Semi-renewable

  • Hydroelectric power stations provide more than half of New Zealand’s electricity, making the sector fairly sustainable.

Non-renewable

  • Natural gas and other non-renewable sources make up about 25% of our power sources. Natural gas and LPG are clean-burning, but they are still fossil fuels that release carbon dioxide when burned.

  • Diesel is a non-sustainable fossil fuel.

Solar

Photovoltaic (PV) panels, mounted on your roof, generate electricity whenever the sun shines. It’s as renewable as it gets. In a grid-tied system, the electricity you generate supplies your home’s energy needs, with any surplus power sold back into the grid. The economics depend on where you live, your home, and how you use electricity.

Solar is unlikely to substantially reduce your winter heating bills. A PV system generates most power on sunny summer days, and less on gloomy winter ones.

Will solar suit you?

The system is most suited to homes that use electricity as it’s generated. Batteries can store excess power for use later in the day, but they are expensive – the cost of batteries means retail power is much cheaper than generating electricity from the sun and storing it for later use. For more on solar power, see our article on whether solar panels are right for your home.

Solar hot water

You can use the sun to reduce the cost of heating your water, but solar water heating is expensive to install and has to remain operational and trouble-free for many years before you recover costs. This doesn’t always happen.

Solar hot water systems also use an electric heater. During winter, you are likely to need to supplement the sun’s energy, which adds to the running cost. The electric heater is also used to make sure the water is regularly heated above 60°C to prevent the bacteria that cause legionnaires’ disease from growing.

Before you jump for solar water heating, you should reduce the hot water you use and cut heat loss in your existing hot water system.

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