Natural Gas vs Electricity: Which Energy Source Is Right for Your Illinois Commercial Operation?
Natural Gas vs Electricity: Which Energy Source Is Right for Your Illinois Commercial Operation?
Most Illinois commercial operations use both electricity and natural gas. Your HVAC system probably runs on gas; your lights run on electricity. Your walk-in cooler runs on electricity; your hot water system probably runs on gas. This dual-fuel reality is the norm for commercial buildings in the Midwest — and for good reason: each energy source has applications where it clearly wins on cost and practicality.
But as energy prices shift, as electrification technology matures, and as sustainability goals reshape procurement decisions, the question of which energy source to use for which application deserves more rigorous analysis than most businesses have given it. This guide compares natural gas and electricity across the dimensions that matter most for Illinois commercial operations: cost, reliability, carbon, and strategic fit — and gives you a framework for making smarter energy-source decisions that save money and support your long-term business goals.
Natural Gas vs Electricity Costs: A Head-to-Head Price Breakdown for Illinois Businesses
Let's start with the numbers. To compare natural gas and electricity on a true apples-to-apples basis, you need to express both in the same units of usable energy, accounting for the efficiency of the conversion from fuel to useful output.
The Basic Cost Comparison
Electricity is purchased in kilowatt-hours (kWh). The all-in commercial rate in Illinois (supply + delivery) ranges from roughly $0.10 to $0.20/kWh depending on rate schedule, demand charges, and location. For comparison purposes, use $0.13/kWh as a reasonable mid-market estimate for a typical small-to-mid commercial account.
Natural gas is purchased in therms or MMBtu (1 MMBtu = 10 therms). Illinois commercial natural gas commodity rates have ranged from approximately $4.00–$7.00/MMBtu in recent years, with delivery (distribution) adding another $3–$5/MMBtu. Total delivered cost: roughly $7–$12/MMBtu depending on season and location.
Converting to a common unit (BTU of usable heat):
- 1 kWh = 3,412 BTU of electricity
- 1 therm = 100,000 BTU of natural gas
At $0.13/kWh, electricity costs approximately $38.10 per million BTU (MMBtu) before accounting for efficiency.
At $10/MMBtu (delivered), natural gas costs approximately $10.00 per MMBtu before accounting for efficiency.
The raw energy cost ratio: natural gas is roughly 3.8x cheaper per BTU than electricity at these prices.
But Efficiency Changes Everything
The relevant cost isn't raw BTU cost — it's usable energy cost. The efficiency of the conversion equipment matters enormously.
| Application | Gas Efficiency | Electric Efficiency | Gas Cost/Unit | Electric Cost/Unit |
|---|---|---|---|---|
| Space heating (boiler) | 80–92% | 95–100% (resistance) | $10.87–$12.50/MMBtu delivered | $40.11/MMBtu |
| Space heating (heat pump) | N/A | 250–350% COP | N/A | $10.89–$15.24/MMBtu |
| Hot water (storage) | 78–85% | 90–95% (resistance) | $11.76–$12.82/MMBtu | $40.11/MMBtu |
| Hot water (heat pump) | N/A | 250–300% COP | N/A | $12.70–$15.24/MMBtu |
| Industrial process heat | 70–90% | 95–99% (electric resistance) | $11.11–$14.29/MMBtu | $38.50–$40.11/MMBtu |
| Lighting | N/A | 90%+ (LED) | N/A | Effectively electric only |
| Electric motors | N/A | 85–95% | N/A | Effectively electric only |
Key insight: For applications requiring high-temperature heat (above 400°F) or high-volume heat, natural gas almost always wins on cost. For motors, lighting, and electronics, electricity wins. For space heating, the answer depends heavily on whether you use a heat pump (which can achieve 250–350% "efficiency" by moving heat rather than generating it).
Illinois Price Trends: 2024–2026
| Fuel | 2024 Average (Commercial) | 2025 Average | 2026 Outlook |
|---|---|---|---|
| Electricity (all-in, ComEd) | ~$0.125/kWh | ~$0.135/kWh | Rising (capacity costs) |
| Natural gas (Nicor, delivered) | ~$0.80/therm | ~$0.85/therm | Moderate (LNG export impact) |
The rising commercial electricity rates in Illinois — driven by historic PJM capacity auction results and ongoing delivery charge increases — are widening the cost gap between electricity and natural gas for heat applications in the near term. For businesses with flexibility to optimize fuel use, this is worth noting.
Which Energy Source Saves Illinois Commercial Operations More Money in 2024?
The answer is almost always: both, used strategically.
The most energy-efficient and cost-optimized Illinois commercial operations don't choose between gas and electricity — they use each for the applications where it delivers the most cost-effective performance. Here's how that breaks down by major application category.
Space and Process Heating: Natural Gas Wins (Usually)
For space heating in commercial buildings, natural gas boilers and furnaces remain the cost leaders for most Illinois applications. The math is straightforward: even with 85% efficiency, natural gas at $10/MMBtu delivered costs about $11.76/MMBtu of usable heat. Electrical resistance heating at $0.13/kWh costs about $38.10/MMBtu — more than 3x more expensive.
The heat pump exception: High-efficiency commercial heat pumps achieving a 3.0 coefficient of performance (COP) effectively cost $12.70/MMBtu for delivered heat — approaching natural gas parity. In Illinois's climate, this is achievable during the shoulder seasons (spring and fall) but becomes much less efficient in deep winter below 10–20°F. Hybrid systems (electric heat pump for mild weather, gas backup for cold snaps) represent the current best practice for new construction.
Industrial Process Heat Above 300°F: Natural Gas Dominates
For industrial applications requiring high temperatures — commercial kitchens, food processing, chemical manufacturing, metal treatment — natural gas is typically the only practical choice at this price differential. High-temperature electric resistance heating at commercial rates costs roughly 3–4x more per BTU than gas.
Motors, Pumps, and Compressors: Electricity Wins
Electric motors are extraordinarily efficient — typically 85–95% — and there's simply no practical gas alternative for most motor-driven applications (pumps, fans, compressors, conveyors). The relevant question for electric motor loads isn't gas vs. electricity; it's how to reduce the electrical demand through variable frequency drives, efficient motor selection, and operational scheduling.
Lighting: Electricity Wins Overwhelmingly
LED lighting has transformed the economics of commercial lighting. A well-designed LED system can deliver the same illumination as older fluorescent or incandescent systems at 40–70% lower wattage. There is no viable natural gas alternative for commercial lighting.
Refrigeration and Cooling: Electricity Wins
Refrigeration and cooling equipment runs on electricity. While natural gas absorption chillers exist for large commercial applications, they are rarely more cost-effective than electric chillers at current Illinois price levels. The relevant optimization here is reducing electric demand through equipment scheduling, setpoint management, and high-efficiency refrigeration equipment.
Pros and Cons of Natural Gas vs Electric Power for Illinois Commercial Buildings
Natural Gas: Pros and Cons
Pros:
- Lower cost per BTU for heat applications in most scenarios
- High reliability (buried distribution infrastructure less vulnerable to weather)
- Established technology with well-understood maintenance requirements
- Available with competitive supplier contracts (ARNGS) for additional savings
- Practical for large-scale heat applications where electricity is cost-prohibitive
Cons:
- Combustion generates on-site (Scope 1) greenhouse gas emissions — increasingly problematic for ESG reporting
- Methane leak risk in distribution and building systems
- Price volatility exposure — winter 2022 and 2023 saw Illinois natural gas prices spike dramatically during cold weather events
- Long-term regulatory risk: Illinois CEJA mandates accelerating transition away from fossil fuels in the building sector
- Infrastructure constraints: not all commercial locations have adequate gas service capacity for expansion
Electricity: Pros and Cons
Pros:
- No on-site combustion emissions (Scope 1 = zero)
- Compatible with renewable energy sourcing (green supply contracts, RECs)
- Eligible for utility demand response programs that generate revenue
- Essential for motors, lighting, electronics, EV charging
- Heat pump technology increasingly competitive with gas for heating
- Grid decarbonization makes electricity cleaner over time without building changes
Cons:
- Higher cost per BTU for heat applications in most current scenarios
- Demand charges can add significant cost for operations with spiky demand profiles
- Capacity charge volatility (PJM BRA results create multi-year cost swings)
- Grid outage vulnerability — though very rare in ComEd/Ameren territory
- Price has been rising (2025–2026) due to capacity market dynamics
How to Choose the Right Energy Source for Your Illinois Business and Start Saving Today
Here's a practical decision framework for Illinois commercial operators:
Step 1: Conduct an End-Use Energy Audit
Categorize your energy uses into three groups:
- Heat applications (space heating, hot water, process heat) → evaluate gas vs. electric heat pump
- Motor and equipment loads → almost always electricity; optimize efficiency
- Lighting → LED electricity; no viable alternative
Step 2: Model the Economics for Your Heat Applications
For each heat application, calculate the annual cost under:
- Current natural gas (commodity + delivery at your actual rates)
- Competitive natural gas with an ARNGS fixed-rate contract
- High-efficiency electric heat pump (COP 2.5–3.5 depending on application)
- Electric resistance (only if no heat pump option is viable)
Step 3: Evaluate Carbon and ESG Implications
If your business has sustainability commitments, carbon reporting obligations, or ESG-conscious customers/investors, assign a cost to emissions and include it in your analysis. The emerging Illinois carbon landscape — including CEJA's carbon reporting requirements and potential future carbon pricing — is shifting the total cost equation toward electrification.
Step 4: Optimize Procurement for Both Fuels
Regardless of your fuel mix, both electricity and natural gas can be purchased competitively in Illinois:
- Electricity: Shop ARES suppliers for supply; see how to switch energy suppliers in Illinois
- Natural gas: Shop Alternative Retail Natural Gas Suppliers (ARNGS) for fixed or indexed commodity contracts
For a detailed guide on natural gas procurement, see natural gas procurement for Chicagoland businesses.
Conclusion: The Best Answer Is "Both, Optimized"
For Illinois commercial operations, the debate isn't really natural gas versus electricity. Both fuels play essential, complementary roles in the typical commercial building's energy profile. The strategic question is how to use each fuel optimally — leveraging natural gas's cost advantage for high-volume heat while maximizing the efficiency and flexibility benefits of electricity for everything else.
What's changing is the margin of advantage. With electricity prices rising on the back of PJM capacity auction results, the near-term economics favor natural gas where substitution is practical. But with Illinois's long-term energy policy pointing toward electrification, businesses with major heating infrastructure investments should plan for an eventual shift toward high-efficiency electric systems.
In the meantime, the single most impactful action for most Illinois commercial businesses is straightforward: make sure you're buying both fuels at competitive market rates, not utility default service. Competitive ARES and ARNGS contracts can save 5–15% on supply costs for both electricity and natural gas — delivering real savings to your bottom line with minimal effort.
illinoiscommercialenergy.com helps Illinois commercial businesses optimize procurement for both electricity and natural gas. Our licensed brokers analyze your dual-fuel cost structure, identify competitive opportunities, and help you lock in the best available rates for both fuels simultaneously. Contact us for a free dual-fuel energy analysis.
Sources:
- U.S. Energy Information Administration – Illinois Natural Gas Prices
- U.S. Energy Information Administration – Illinois Electricity Prices
- Illinois Commerce Commission – Natural Gas Deregulation Overview
- American Council for an Energy-Efficient Economy – Commercial Heat Pump Guide
- Illinois Power Agency – Commercial Energy Procurement Resources
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Frequently Asked Questions
QIs natural gas cheaper than electricity for Illinois commercial operations?
On a BTU-equivalent basis, natural gas is generally less expensive than electricity for direct heat applications in Illinois — typically by a factor of 3–5x per unit of usable energy. However, the 'right' choice depends on the application: electricity is often more cost-effective for lighting, motors, and precision processes, while natural gas is typically cheaper for space heating, process heat, and hot water.
QWhat are current natural gas rates for commercial businesses in Illinois?
Illinois commercial natural gas commodity prices have ranged from approximately $4.00–$7.00 per MMBtu in recent years, though winter spikes during cold weather events can push rates significantly higher. Nicor Gas and Peoples Gas serve northern Illinois; Ameren Illinois Gas serves central and southern regions. Competitive natural gas suppliers can often offer fixed rates below the utility's monthly variable rate.
QShould Illinois commercial buildings use gas or electric heat?
For most Illinois commercial buildings, natural gas remains the more cost-effective choice for space heating due to its lower cost per BTU delivered. However, high-efficiency heat pumps have closed the gap significantly in mild weather, and the availability of electricity from renewable sources at competitive rates is shifting the calculus for ESG-focused businesses. A full lifecycle cost analysis specific to your building and usage is recommended.
QWhat are the advantages of natural gas over electricity for Illinois businesses?
Natural gas advantages include: lower cost per BTU for heat applications, reliable delivery independent of grid congestion, easier and less expensive on-site storage (for certain applications), lower carbon intensity than coal-heavy grid electricity (though this varies by time of day), and extensive existing infrastructure in most commercial buildings.
QWhat are the advantages of electricity over natural gas for Illinois businesses?
Electricity advantages include: superior efficiency for motors, lighting, and electronics, no on-site combustion emissions, compatibility with renewable energy sourcing and ESG goals, better precision control for manufacturing processes, eligibility for utility demand response programs, and declining costs as the grid becomes cleaner and more renewable.
QCan Illinois commercial businesses shop for competitive natural gas rates?
Yes. Illinois is deregulated for natural gas as well as electricity. Commercial businesses can choose an Alternative Retail Natural Gas Supplier (ARNGS) for their natural gas commodity, while the utility (Nicor, Peoples, or Ameren Illinois Gas) continues to handle distribution. Competitive fixed and indexed natural gas contracts can provide cost savings and budget certainty.
QHow does the Illinois energy source choice affect carbon emissions reporting?
Natural gas combustion at your facility generates Scope 1 greenhouse gas emissions. Purchased electricity generates Scope 2 emissions based on the emissions factor of your grid or supply source. For businesses with carbon reporting obligations or ESG goals, the choice between gas and electricity directly affects your reported emissions — and switching to renewable electricity can dramatically lower your Scope 2 footprint.
QWhat industries in Illinois benefit most from natural gas vs. electricity?
Manufacturing and food processing operations with high process heat requirements typically benefit most from natural gas. Businesses with heavy motor loads (pumps, compressors, conveyors), lighting-intensive operations, and data centers typically favor electricity. Many Illinois commercial operations use both strategically — natural gas for HVAC and process heat, electricity for all other loads.