The Melbourne University-based MEI claimed last Tuesday that Victorian homes could save as much as $658 per annum if they switch off gas heating and increasing used air conditioners with electric heat pump technology in them that brings outside ambient heat into the home for warmth.

Across eastern Australia the analysis concluded there could be up to a million households that have reverse cycle air conditioners installed but do not currently use them for heating.

"It is possible that in Victoria alone, households could collectively and immediately save on the order of $250 million per year simply using the reverse-cycle air conditioners they already have in their homes for space heating," the report concluded.

MEI said efficient heat pump technology can heat a room as comfortably as gas-ducted heating at lower costs.

It also claimed that less gas is being used by industry and for power generation, and it is getting more expensive because of the LNG export boom, and that decline could be exacerbated by heat pumps and other so-called “disruptive technologies”, such as induction cooktops.

The report was partly funded the Australia Institute and by farmers in Gippsland and western Victoria who are concerned about CSG exploration in Victoria.

ENA CEO John Bradley was sceptical of the results.

“Gas has always competed as a fuel of choice and Australia should not lose sight of the benefits of dual fuel energy networks to our households and economy,” Bradley said.

“Consumers will consider a range of factors including what kind of home they have, their appliance mix, cost effectiveness, environmental performance, amenity and cooking preferences.

“Gas is very price competitive – in the case of Victorian customers, the Australian Technology Association notes it remains about a quarter of the price of electricity on an equivalent energy basis.

“For households that have adopted solar to reduce emissions, gas plays an important role when the sun is not shining, by avoiding 85% of the greenhouse gas emissions from electricity use,” Bradley said.

He added that although wholesale gas prices were increasing, they are only 20-25% of a typical residential bill and are being offset in many places by falling network charges.

“An 11% reduction in network charges for South Australian residential customers is currently proposed and a 34% reduction in network charges has been delivered for NSW customers,” he said.

“This will mean annual gas bill reductions of about $46 a year in South Australia and $118 a year in NSW,”

Bradley said a more balanced approach was needed than the MEI report, which had been funded by opponents of coal seam gas development.

“All energy options should be expected to compete on the basis of their value to customers and their ability to contribute to greenhouse gas abatement.

“For instance, hot water appliance markets in Australia are currently distorted by significant subsidies for heat pumps which are more emissions intensive than efficient gas hot water heaters which receive no subsidy.

“The report also recommends a widespread, increased use of air-conditioning without assessing the impacts on electricity peak demand, which is the major driver of network costs.

“Its previously been estimated that without natural gas for heating in NSW, the peak demand for electricity in winter could be up to 20% higher," Bradley said.