Most modern residential air conditioners are reverse-cycle systems, meaning they use a heat pump cycle to both cool and heat, rather than generating heat directly through electric resistance. In cooling mode, the system extracts heat from indoor air and rejects it outside; in heating mode, the cycle runs in reverse, extracting heat from outside air, even cold air, and delivering it indoors. This is fundamentally different from a resistive electric heater, which converts electricity to heat at a roughly one-to-one ratio. A reverse-cycle system moves considerably more heat energy than the electrical energy it consumes, which is the underlying reason heat pump heating and cooling is generally far more efficient than resistive alternatives.
Sizing matters more than brand
An oversized air conditioner cycles on and off rapidly, short-cycling before it reaches a stable, efficient operating point, which wastes energy and can leave a room feeling clammy because it hasn't run long enough to properly dehumidify. An undersized unit runs constantly at full output and still struggles to reach the target temperature on extreme days. Correct sizing depends on the room's floor area, ceiling height, window orientation and glazing, insulation levels, and the local climate, not simply a rule of thumb like 'one kilowatt per ten square metres', which ignores most of these variables.
Zoning and how it changes running costs
Ducted systems with multiple zones allow conditioning to be directed only to occupied rooms, rather than heating or cooling an entire house uniformly. A household that only needs the living area conditioned during the day and bedrooms at night can significantly reduce the conditioned floor area at any given time by zoning appropriately, which reduces the load the system needs to meet. Split systems achieve a similar effect inherently, by conditioning only the room they're installed in, one reason multiple well-placed split systems can sometimes outperform a single large ducted system on running cost, depending on how the home is used.
Building fabric: insulation and draught sealing
No air conditioner, however efficient, can compensate for a building that loses conditioned air quickly through gaps, poorly sealed doors and windows, or inadequate ceiling and wall insulation. Draught sealing and insulation upgrades reduce the rate at which conditioned air escapes and outside air infiltrates, which directly reduces how hard, and how long, the air conditioner needs to run to maintain a setpoint. For many residential properties, addressing draughts and insulation gaps delivers a more durable running-cost improvement than upgrading to a more efficient unit alone.
Setpoints and duty cycle
Running costs are also driven by the gap between the setpoint temperature and the outside temperature, and by how many hours per day the system operates. A setpoint just a couple of degrees closer to ambient, for example, 19°C instead of 17°C in winter, or 25°C instead of 22°C in summer, reduces the temperature differential the system has to maintain, which reduces compressor duty cycle and therefore energy use. Combined with your specific electricity tariff, particularly if you're on a time-of-use plan with a defined peak window, shifting some conditioning load outside peak hours where practical can also affect the bill outcome, independent of the unit's underlying efficiency.
Where VEU fits for Victorian households
Victoria's Victorian Energy Upgrades (VEU) program includes eligible activities for upgrading to efficient heating and cooling equipment, delivered through accredited providers. Eligibility typically depends on factors such as the equipment being replaced and the efficiency rating of the new system, and the specific incentive structure is reviewed periodically. Victorian households considering an air conditioning upgrade should check current VEU eligibility with an accredited provider before assuming a specific outcome, as program settings change over time.
The practical takeaway for anyone assessing air conditioning running costs is to look past the star rating sticker and consider the whole system: correct sizing for the specific room and climate, sensible zoning, reasonable building fabric, and setpoints that don't fight the outside temperature unnecessarily. These factors, working together, generally have more influence on running cost than the marginal difference between two similarly rated units.
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This article is general information, not financial or electrical advice. Program rules and eligibility change, confirm current settings with the relevant scheme or your Esena engineer before making decisions. Last reviewed: August 2026.