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Water heaters

For both residential and commercial. Typical residential 40 gallon gas water heater is $725 installed. Which includes hauling away the old tank?

Consumer Guide to Home Energy Savings: Condensed Online Version

Water Heating

After heating and cooling, water heating is typically the largest energy user in the home because it is necessary for so many domestic activities. Whether you’re replacing a worn-out existing water heater or looking for the best model for a new house you’re building, it pays to choose carefully. Follow these steps to learn more; often you can substantially reduce your energy use simply through water conservation.

Step 1: Fuel Choice and Sizing
Step 2:
Compare Life-Cycle Costs
Step 3: Select a New System

Step 4: Minimize Operating Costs (new and existing systems)


PLEASE NOTE: ACEEE does not rate or make recommendations regarding specific manufacturers or trade names. To get a better sense of the manufacturers that make the most efficient equipment, see STEP 2 for links to regularly updated product listings.

Fuel Choice and Sizing

Fuel Options

The most efficient systems available are generally gas-fired. If you currently have an oil-fired boiler, your best options are to purchase in indirect tank that connects to your boiler (best if your boiler is relatively new), or an integrated unit that provides space heat and hot water in one. Electric water heaters are not recommended.

If you currently have an electric water heater and natural gas is available in your area, a switch might save you a lot of money. Even though electric models have a higher energy factor than fuel-burning models, electric resistance is a very expensive way to generate heat. It does not have great environmental benefits either, since electricity is only as clean and efficient as the fuel (often coal) that generates it. Before you rule out electricity, though, check with your utility company. It may offer special off-peak rates or options for purchasing renewable power that may make electricity a more attractive option for you.

Sizing a Water Heater

The capacity of a water heater is an important consideration. The water heater should provide enough hot water at the busiest time of the day. For a storage water heater, this capacity is indicated by its "first hour rating," which accounts for the effects of tank size and the speed by which cold water is heated. First hour rating is included in product literature and on the EnergyGuide label alongside efficiency rating. To determine your family’s first hour rating, use the Peak Water Demand Worksheet

For tankless, solar and indirect water heaters, sizing requires a few other calculations that your installation contractor can help you with.


Compare Life-Cycle Costs

Water Heater Type Efficiency (EF) Installed Cost 1 Yearly Energy Cost 2 Life (years) Total Cost (Over 13 Years) 3
Conventional gas storage
High-efficiency gas storage
Condensing gas storage
Conventional oil-fired storage
Minimum Efficiency electric storage
High-eff. electric storage
Demand gas (no pilot) 4
Electric heat pump water heater
Solar with electric back-up

1. Purchase costs include our best estimates of installation labor and do not include financial incentives.
2. Operating cost based on hot water needs for typical family of four and energy costs of 9.5¢/kWh for electricity, $1.40/therm for gas, $2.40/gallon for oil.
3. Future operating costs are neither discounted nor adjusted for inflation.
4. Estimates for tankless gas water heaters are based on the federal EF rating method, which may over-estimate the efficiency of tankless water heaters in houses.


Select a New System

Think about replacement now. If you're like most people, you’re unlikely to go out looking for a water heater until your existing one fails, leaving little time to look for a water heater that is efficient and meets your needs. There are a lot of technologies available and the most efficient water heaters are also the hardest to find and the most expensive to purchase. So it pays to think about your options now:

| Storage | Demand (Tankless) | Heat Pump | Indirect | Integrated |

Storage Water Heaters

These are by far the most common type of water heater in the U.S. today. Ranging in size from 20 to 80 gallons (or larger) and fueled by electricity, natural gas, propane, or oil, storage water heaters transfer heat from a burner or coil to water in an insulated tank. Because heat is lost through the flue (except in electric models) and through the walls of the storage tank, energy is consumed even when no hot water is being used.

New energy-efficient gas-fired storage water heaters are a good, cost-effective replacement option for your current water heater if you have a gas line in your house. They have higher levels of insulation around the tank and one-way valves where pipes connect to the tank, substantially reducing standby heat loss. Keep an eye out for the price to come down for newer super-efficient "condensing" and "near-condensing" gas water heaters, which save much more energy compared to traditional models but are currently niche products. For safety as well as energy efficiency, fuel-burning water heaters should be installed with sealed combustion ("direct-vented" or "power-vented). Sealed combustion means that outside air is brought in directly to the water heater and exhaust gases are vented directly outside, keeping combustion totally separate from the house air.

Gas Storage Recommendations
(Typical 40-gallon tank)
Electric Storage Recommendations
(Typical 50-gallon tank)
  1. Look for a minimum Energy Factor (EF): 0.63 (Highest available is 0.67)
  2. Ask for a direct-vented (sealed combustion) model.
  1. If you have an existing gas line, look into installing a gas water heater or consider a heat pump water heater.
  2. If you must stick with an electric resistance water heater, the most efficient models start at EF 0.93 and will save about 3% relative to EF 0.90.

Demand Water Heaters

Tankless water heaters do not contain a storage tank like conventional water heaters. A gas burner or electric element heats water only when there is a demand for hot water. Hot water never runs out, but the flow rate (gallons of hot water per minute) may be limited. By eliminating standby losses from the tank, energy consumption can be reduced by 10-15%. Before rushing out to buy a demand water heater, be aware that they are not appropriate for every situation. Here are some of the factors to consider:

  • Do you use hot water efficiently? Have you installed modern, low-flow faucets and showerheads? Tankless water heaters perform much better when coupled with efficient uses.
  • Consider your water distribution system. If the hot water uses in your home are relatively close together, with short hot water lines between them, a tankless system may work for you. In many U.S. homes, water uses are widely spaced at opposite ends of the house. If this is the case in your home, a tankless system may not meet your needs.
  • If you have installed high efficiency fixtures and your water lines are not too long, consult an experienced contractor to find out if your gas supply is adequate and proper venting is feasible.
  • Finally, residential wiring generally will not support a tankless electric water heater with large enough capacity to serve multiple uses. If you rely on electricity to heat your water, a tankless system is unlikely to meet your needs. At most, an electric unit may be appropriate for small applications, such as a remote bathroom without a bath tub.

Heat Pump Water Heaters

If you currently have a standard electric resistance water heater, models that use a heat pump are more efficient because the electricity is used for moving heat from one place to another rather than for generating the heat directly.  The heat source is outside air or air in the basement or room where the unit is located. Heat pump water heaters are not very common at this time. They are available with built-in water tanks called integral units, or as add-ons to existing hot water tanks. A heat pump water heater uses one-third to one-half as much electricity as a conventional electric resistance water heater. In warm climates they may do even better, but there are few sources for these products. Several manufacturers have discontinued their lines of heat pump water heaters due to lack of consumer and contractor awareness. Below is a current list of manufacturers.

Product Name Manufacturer Website Phone
Air Tap Beyond Pollution, Inc. 866-903-8835
E-Tech Water Heaters Applied Energy Recovery Systems 770-734-9696
Nyletherm Nyle International 207-942-2865
Hot Water Generator Trevor-Martin 704-799-1570
(Under development) Aqua Products 800-849-4264

Indirect Water Heaters

If you use a boiler, ask your contractor about the feasibility of installing an indirect water heater. These use your boiler as the heat source by circulating hot water from the boiler through a heat exchanger in a well-insulated water heater tank. In the less common furnace-based systems, water in a heat exchanger coil circulates through the furnace to be heated, then through the water storage tank. An indirect water heater is one of the best options because it eliminates the tremendous flue losses associated with gas-fired storage water heaters but without the hassles and extra costs of tankless gas water heaters. When used with a modern, high-efficiency boiler, these energy savings hold true even in the summer when your boiler isn't needed for heat. These systems can be purchased in an integrated form, incorporating the boiler or furnace and water heater with controls, or as separate components. Gas, oil, and propane-fired systems are available.

The efficiency of a combination water and space heating system is indicated by it combined appliance efficiency rating (CAE). The higher the number, the more energy efficient. Combination appliance efficiency ratings vary from 0.59 to 0.90. Look for CAE of 0.85 or higher. The manufacturers listed below sell indirect or fully integrated boiler/storage tank combinations.

Product Name Manufacturer Website Phone
Dunkirk or Utica HL ECR International 315-797-1310
System 2000 Energy Kinetics 800-323-2066
check markOr simply ask your plumber or heating system contractor about installing an indirect tank.

Integrated Water Heaters

These combined units feature a powerful water heater that provides space heating as a supplemental end-use. Heated water from the water heater tank passes through a heat exchanger in a central handler to heat air which is then blown into the home’s duct system. As with indirect water heaters, look for CAE of 0.85 or higher.

Product Name Manufacturer Website Phone
Polaris (CAE 0.90) American Water Heater 800-456-9805


Minimize Operating Costs

Even if you aren’t going to buy a new water heater, you can save a lot of energy and money with your existing system by following a few simple suggestions.

  • Conserve Water. Your biggest opportunity for savings is to use less hot water. In addition to saving energy (and money), cutting down on hot water use helps conserve dwindling water supplies, which in some parts of the country is a critical problem. A family of four each showering five minutes a day can use about 700 gallons per week—a three-year drinking water supply for one person! Water-conserving showerheads and faucet aerators can cut hot water use in half. That family of four can save 14,000 gallons of water a year and the energy required to heat it.
  • Insulate Your Existing Water Heater. If your electric water heater was installed before 2004, installing an insulating jacket is one of the most effective do-it-yourself energy-saving projects, especially if your water heater is in an unheated space. The insulating jacket will reduce standby heat loss—heat lost through the walls of the tank—by 25–40%, saving 4–9% on your water heating bills. Water heater insulation jackets are widely available for around $10. Always follow directions carefully when installing an insulation jacket.
  • Insulate Hot Water Pipes. Insulating your hot water pipes will reduce losses as the hot water is flowing to your faucet and, more importantly, it will reduce standby losses when the tap is turned off and then back on within an hour or so. A great deal of energy and water is wasted waiting for the hot water to reach the tap. Even when pipes are insulated, the water in the pipes will eventually cool, but it stays warmer much longer than it would if the pipes weren’t insulated.
  • Lower the Water Heater Temperature. Keep your water heater thermostat set at the lowest temperature that provides you with sufficient hot water. For most households, 120°F water is fine (about midway between the “low” and “medium” setting). Each 10°F reduction in water temperature will generally save 3–5% on your water heating costs. When you are going away on vacation, you can turn the thermostat down to the lowest possible setting, or turn the water heater off altogether for additional savings. With a gas water heater, make sure you know how to relight the pilot if you’re going to turn it off while away.



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