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Home heating costs in 2018

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.

We’ve calculated the rates charged for different methods of space and water heating based on the latest fuel cost data, and also look at renewable and non-renewable forms of energy.

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What's new in 2018?

The results will be music to your ears if you’re blasting a heat pump this winter. In the past year, we found per-unit electricity prices rose by less than the rate of inflation. This makes heat pumps generally the cheapest way to keep warm.

That won’t be much consolation for those relying on their portable electric or LPG heaters, still the most expensive sources of warmth, costing more than 3 times as much to run as heat pumps.

Fixed daily charges continue to rise, reflecting the increasing share of our bills taken by electricity distribution (lines companies) and transmission. But unless you’re going completely off grid, you’ll always incur fixed electricity connection fees, so they shouldn’t factor in your choice of heating appliance.

Your most economical option for hot water is natural gas, especially if you have an instant “continuous flow” system. Electric storage cylinders are one of the most expensive ways to heat water – but don’t rip yours out just yet as the hefty upfront cost of a new water heater often outweighs any savings.

Fixed charges

In addition to the cost per kWh, you also pay a fixed daily charge for electricity lines and gas mains, or an annual LPG rental fee.

Unless you’re going off-grid, the fixed electricity charge is unavoidable – but you can always replace gas with electricity when it comes to cooking and heating. So if you’re considering gas when choosing a space or water heater, factor in the fixed daily charge (or rental fee for LPG cylinders).

Electricity

The fixed charges for being connected to the grid have stayed constant this year. The average daily fee was $1.72 at the time of our survey, but this ranged from as low as 75¢ up to $3.09. If you use less than 8000kWh per year (or 9000kWh in the lower South Island), your retailer must offer you a low fixed-charge tariff option of no more than 30¢ per day.

Natural gas

The average fixed daily charge for piped natural gas was $1.46, an increase of less than 1¢ on last year. It ranged from 96¢ to $1.84.

LPG

The annual rental fee for two 45kg LPG cylinders sets you back $119 (33¢ a day).

Space and central 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 26¢/kWh on average, a heat pump produces a kW of heat for 8.5¢.

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 26¢/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 COSTS are for providing one kilowatt of heat for one hour. Bars represent range between maximum and minimum costs. Black dotted line represents the national median. Electricity and natural gas costs are from powerswitch.org.nz based on April 2018 data. Other costs are from pricing data collected during April 2018. GST is included.

Water heating

Natural gas (both instant and storage) is the cheapest way of keeping your shower hot, followed by heat pump water heaters and wetback woodburners. Most expensive are electric storage cylinders and LPG heaters.

Water heating makes up about a third of your household energy bills. Unfortunately, reducing your water heating bill isn’t as simple as ripping out your electric cylinder and installing an instant gas heater. If your existing water heater is still going strong, the cost of buying and installing a new water 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.

If you think solar could be for you, the Energy Efficiency and Conservation Authority (EECA) has a calculator that assesses the economic payback for your home. It includes the amount of sunshine that reaches your home, the suitability of your home (for example, roof direction and pitch), and allows for your household behaviour (such as whether someone is at home during the day). In the best cases, payback is between five to seven years, while many Kiwi homes won’t see a net return for 20 years or more. For most homes, improving its efficiency and making it warmer and drier is a better option than installing a PV system and can give similar or greater reductions to your power bill.

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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