# Kerang's Decision: LPG vs Natural Gas

Did you know that for many LPG users in Kerang, staying with LPG is less expensive than switching to natural gas?

Or that the cost of converting gas appliances, according to Rinnai, is anywhere from \$270 to \$345 for EACH appliance?

The following information is to help the residents of Kerang make a fully informed decision…

## The Natural Gas Myth

The idea that switching to natural gas is always cheaper is a popular urban myth.

The culprit creating this myth is the natural gas “Daily Supply Charge”.

Whilst the gas itself may have a lower cost, the natural gas Daily Supply Charge adds up to a huge annual bill.

In the case of one Kerang natural gas tariff¹, it is more than 6x the annual cost of the service charge for a 45kg gas bottle.

## Natural Gas Daily Supply Charge vs LPG Service Charge

The most significant cost difference between natural gas and LPG is in the supply or service charge.

Natural gas providers charge a daily supply charge.

Whilst it may look small on a daily basis, when you multiply it by 365 days, it becomes a huge annual cost.

For example, an applicable Kerang natural gas tariff¹ from a major national supplier is \$0.682 per day for the supply charge.

And tariffs can go even higher.

For example, in other areas the same supplier charges as high as \$1.22243 per day³, or \$446 per year, and this doesn’t even include the gas.

So, before any gas use and using the lower tariff, you would have to pay \$248.93 per year.

In contrast, the annual service charge for two 45kg gas bottles is well under \$80.

Cost Summary:  LPG service charge is about \$170 less than natural gas¹

## The Average Kerang LPG User

Based on actual history² of Kerang LPG users, the average LPG customer uses 142L of LPG annually.

That converts to 3,607 MJ worth of LPG per year.

MJ is the symbol for Megajoule, which is a unit of measure relating to energy.

The energy content of LPG and natural gas are both measured in megajoules, so this is the best way to compare costs.

## Total Cost Comparison:

The total cost comparison between LPG and natural gas depends on the tariffs and how much gas you use.

Using the same Kerang gas tariff¹, 3,607MJ of natural gas equates to \$83.32 for gas, based on \$0.0231/MJ (assumes 50:50 peak-off peak).

So, total cost (supply charge and gas) for an average Kerang user would be \$332.25 for natural gas.

Please note that, in this example, the natural gas tariff requires a 1 year contract whilst no contract is required with the LPG.

The 50:50 assumption for peak vs off peak is probably understating the peak use and cost of the natural gas, especially if you were to use it for winter heating.

Consumption would most likely be higher in the peak winter season, when the natural gas tariff is higher, so the total annual cost of the natural gas would also be higher.

You should compare what would be your natural gas cost per year to your annual cost for LPG.

## You spend \$270 to \$345 each: Total could approach \$1,000

Gas hot water heaters, flued gas heaters, gas cookers and gas fireplaces all require field conversion to go from LPG to natural gas.

Converting gas appliances can be quite complex.

As an example of the complexity involved, the accompanying image shows just some of the internal components of a Rinnai gas heater and the four gas jets (Item 6) that require changing on this particular model.

In summary:

•  LPG and natural gas appliances are not interchangeable — they must be converted.

•  Natural gas and LPG appliances operate at different pressures, with 1.1 kPa and 2.75 kPa, respectively.

•  LPG requires an air (oxygen) to gas ratio of approximately 25:1 whilst natural gas is 10:1, for proper combustion.

•  LPG has a higher energy content than natural gas, with 93.2MJ/m3 vs 38.7MJ/m3.

•  Manufacturers typically provide kits with the parts and instructions required to convert from one gas to another.

•  Depending on age, manufacturer and model, some gas appliances cannot be converted.  These would need to be replaced.

•  Gas appliances conversions should only be done by qualified technicians or licensed gas fitters.

Depending on the appliance, a number of parts may require changing, including gas injectors, the burners themselves, dampers, aeration sleeves and air baffles.

According to the Rinnai service department, a Domestic Field Appliance Conversion is \$195 plus parts.

Rinnai also advises that parts range from \$75 to \$150, depending on the appliance and model year.

So, the total cost of conversion for typical Rinnai gas appliances is normally \$270 to \$345 each.

With multiple appliances, your total cost for conversions could approach \$1000.

But it can get even worse…

Depending on the age, make and model of the gas appliance, conversion may not even be possible, necessitating your purchase of a new gas appliance.

Obviously, none of this expense is required if you choose not to switch.

## Your Extra Cost of Installing Natural Gas: \$100s or \$1,000s?

Did you know that the natural gas supplier only runs the gas line from the main to the meter?

Everything after the meter is your responsibility and cost.

But they may even charge you for connecting to the main, depending on the circumstances.

For example, if your meter is further than a certain distance from the main, you may have to pay extra.

The cost of connecting to the natural gas main can be very expensive and varies from property to property and with the gas distribution network owner.

Everything beyond the gas meter is typically at the cost of the homeowner.

The LPG installation would need to be de-commissioned and the connection to the home's service pipe work would need to be re-routed to the gas meter, by a licensed gas fitter, at the homeowner's expense.

There may also be excavation and restoration of council foot paths and roads, as well as possible traffic control costs.

Your home's garden and landscaping may also need to be dug up and subsequently restored.

And then there is the timing issue…

You need to perfectly time the appliance conversions with the installation of the connection to the main and the meter.

You also need to have your gas fitter do all of the work immediately after the meter is installed.

So, this involves the perfect timing of the gas network contractors, the gas appliance conversion technician and your gas fitter.

As you might guess, there is a good chance that you will spend some period of time without the use of your gas appliances. And cold showers are no fun…

All of this cost and inconvenience is totally avoidable by just staying with LPG.

The choice is yours.

What does the future hold in the way of gas costs?

Natural gas is now being exported, in the form of Liquefied Natural Gas (LNG), and is driving projected natural gas shortages and anticipated price escalation.

Australia’s LNG industry is rapidly expanding and, combined with growing worldwide demand, powering increases in natural gas exports.

Before the LNG capacity grew, there was no real way to export natural gas.

Now it can be shipped via special cryogenic ocean tankers (see accompanying image).

According to BREE, LNG exports were up 34% for the 2010-2013 time period.

This expansion will only increase as currently under construction LNG facilities are completed, putting further pressure on natural gas prices.

There are no similar price pressures on LPG.

In fact, there is currently a surplus of LPG in the world market.

In the most recently available LPG statistics, global LPG production was over 284 million tonnes per year compared to only 275 million tonnes per year of consumption.

## Do Your Own Calculations Before Making a Decision

Before you make any decision, you should do the calculations based on your own situation.

We have tried hard to present a fair comparison but you also need to do the maths for yourself.

Your results will vary based on the available tariffs, your gas consumption and your cost to convert.

In addition, tariffs, prices and charges can all vary with time, further affecting the results.

For example, what would happen if the daily supply charge tariff³ rose to the levels seen in other areas or if gas costs go up?

You also need to calulate how many years it will take to pay back the initial conversion costs, in the event that there are any savings.

Does it make sense to spend a lot of money now if it takes 5 or more years to save back the cost of conversion?

These are all of the things you need to know and consider.

The following checklist will help you factor in all of the variables…

## Summary Decision Checklist

If you are contemplating switching to natural gas, you should research all of the following before making, what could be, a very expensive decision:

► Compare your supply or service charges on an annual basis

► Determine how much gas you use in the peak and off peak seasons

► Compare your total cost of the gas and supply charges based on your gas consumption

► Find out if there are any extra costs you must pay to have the gas line and meter installed

► Find out if your gas appliances can be converted and how much they will cost you to convert

► If they cannot be converted, find out how much replacement gas appliances will cost you

► Get a quote, from your gas fitter, for your cost of de-commissioning the LPG and the connection to the meter

Please email us at This email address is being protected from spambots. You need JavaScript enabled to view it. with any questions or comments you may have.

¹Tas Gas Retail - (A subsidiary of the Brookfield Group) Energy Price Fact Sheet. As at May 2016. Gas pricing information: 1st Jan. to 31st Dec. 2016
https://www.vic.tasgas.com.au/price-information
² Average LPG consumption is based on records for Elgas residential customers of Kerang
³AGL Fixed - Queensland residential gas market offer - AGL93381MR 122.243 cents per day incl GST
* Results shown is for the average user, at 142L of LPG per year. Results will vary, upward or downward, based on the volume of gas consumed and the tariff selected.